Penumbra, Inc.

Good afternoon. My name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to Penumbra's fourth quarter 2024 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 one. Thank you. I would like to introduce Miss 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 fourth quarter and full year 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, 2024, which is scheduled to be filed with the SEC on February 18, 2025. 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 10K 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, Q4 2024 and full year 2024 financial results are on a non-GAAP basis. Non-GAAP revenue, gross profit, gross margin, operating income, and operating margin exclude a $5.8 million reserve pertaining to Italian payback legislation. In addition, the full year 2024 non-GAAP operating expenses, operating income, and operating margin exclude expenses associated with immersive healthcare impairment charges of $76.9 million, wind down of immersive healthcare business expenses of $5 million, non-recurring litigation expenses of $4.8 million, and amortization of finite lived and tangible assets of $4.8 million. The corresponding GAAP measures and reconciliation of GAAP to non-GAAP financial measures are provided in our posted press release. Adjusted EBITDA for Q4 2024 and full year 2024, respectively, excludes the Italian payback reserve, one-time immersive healthcare impairment charges, immersive healthcare wind-down expenses, non-recurring litigation-related expenses, stock compensation expense, depreciation and amortization, provision for 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 fourth quarter and full year 2024. And Jason Mills, our executive vice president of strategy, will discuss our 2025 guidance. With that, I would like to turn over the call to Adam Elsesser.

Thank you, Cecilia. Good afternoon. Thank you for joining Penumbra's fourth quarter and full year 2024 conference call. In the fourth quarter, we generated revenue of $321.3 million when excluding the Italian payback adjustment, representing underlying year-over-year growth of 12.9% on an adjusted basis and 13% on a constant currency basis. Our U.S. thrombectomy business continued to lead our growth with our comprehensive and proprietary CAVT portfolio delivering another dominant performance, gaining momentum throughout the quarter and exiting the year in a strong position. Fourth quarter U.S. thrombectomy sales increased 27.3% year over year to $180.6 million, with our U.S. VTE franchise delivering robust year over year revenue growth of 41%. The balance of our U.S. thrombectomy franchise continued to perform very well in line with our expectations. Our fourth quarter capped an overall solid 2024 performance with full year revenue increasing 13.4% year over year to over $1.2 billion, and our U.S. thrombectomy business delivering revenue of $646.7 million, 26.8% increase versus 2023. During the year, we evolved and expanded our commercial team, concentrated enhanced our focus on our interventional business via our exit from immersive healthcare, and invested in generating high-quality clinical and health economic data to further support and highlight CAVT's value, all while continuing to prioritize innovation. We introduced nine new products to the U.S. commercial market, including the new CAVT products, Flash 2.0, Lightning Bolt 6X with Trax, and Lightning Bolt 12. Internationally, we expanded CAVT's footprint into Europe and additional OUS geographies and took steps to optimize our geographic presence to support long-term growth and profitability. At the same time, 2024 also demonstrated the strong profitability profile of our business. In the fourth quarter, gross margin of 67.4% expanded 170 basis points over the prior year period, while operating income of 48.6 million, or 15.1% of revenue, increased 200 basis points over the prior year period. In the quarter, we generated $49.1 million in operating cash. Looking forward, we are on track to achieve a gross margin profile over 70% by the end of 2026, which is consistent with the timeline we previously communicated and we expect operating margin expansion to outpace gross margin expansion for the foreseeable future. In addition, we recently signed a contract to build a manufacturing facility in Costa Rica for efficiently expanding our manufacturing capacity. Therefore, we are well positioned, leveraging favorable product mix shift, operating efficiencies, and discipline spend to continue to increase our profitability and operating cash flow going forward. Turning to our U.S. peripheral business, Lightning Flash 2.0 continued to lead overall growth in the fourth quarter with its competitive benefits versus analog technologies, namely the speed and safety with which Flash 2.0 removes blood clots in VTE patients driving expanded physician interest and adoption, as well as broader and deeper account penetration. In the quarter, we also commenced the commercial rollout of Lightning Bolt 12, introducing our proprietary modulated aspiration technology to the venous anatomy and larger arteries, offering the latest generation CAVT solution for these vessel sizes. Initial feedback has been very positive, and we look forward to continuing to roll out the technology on a broader scale in 2025. Overall, our US VTE franchise continued to gain momentum and market share throughout the fourth quarter, with December representing our highest month of VTE procedure volumes ever. In our US arterial business, Lightning Bolt 7 delivered another strong performance, supporting sequential growth acceleration in our arterial franchise. Lightning Bolt 6X provided initial contributions in the fourth quarter, with Bolt 6X's commercial introduction expanding our arterial-focused CAVT portfolio's reach to smaller vessels, including arteries that are below the knee. While early feedback on Bolt 6X and our increasingly comprehensive arterial CAVT portfolio is positive, And looking to 2025, we view a meaningful opportunity for the combination of BOLT7 and BOLT6X to accelerate physician conversion from open surgery or the use of lytics to CAVT. Similar to our venous business, in December, we treated more patients in the US suffering from arterial clot than in any prior month. The proprietary mechanism of our CAVT technology consistently removes blood clots faster and safer than analog technology. That said, we are in the early stages of reaching and treating the over 800,000 patients annually in the U.S. who suffer from VTE and arterial clot, as well as the even greater number of patients internationally with venous and arterial clot burden. To further expand CABT's reach and ability to treat a greater number of patients, we commenced what we refer to as our market access initiatives. These initiatives are focused on increasing awareness, not only of CAVT's clinical benefits, but also of the economic benefit to hospital systems. This past November, during a late-breaking session at the VIVA conference in Las Vegas, Dr. Parag Patel presented the first public view of some of the results of our market access initiatives. The retrospective outcomes analysis presented by Dr. Patel looked at intermediate risk PE patients treated with either CAVT or anticoagulation, catheter-directed lytics, or other forms of mechanical thrombectomy. The data demonstrated that compared to other treatment modalities, treatment with CAVT resulted in a reduction in composite complications. as well as a significant improvement in the economics for hospitals. We intend to continue to update our analysis to reflect the benefits of our latest generation CAVT technologies and look forward to highlighting FLASH 2.0's outcomes in the future. Looking ahead, we are scheduled to present additional datasets focused on CAVT's utilization in DVT and arterial patients at a major medical conference in the next few months. Shifting to our neurovascular business, our U.S. stroke thrombectomy business once again posted strong results with revenue accelerating versus the third quarter. For the full year, our market-leading FDA-cleared aspiration portfolio, led by Red72 with our proprietary SEDA technology, And Red 43, alongside Red 62, Red 68, and Red 72, grew nearly 20% versus 2023, well ahead of underlying U.S. stroke market growth. We entered 2025 as the dominant market leader, and looking forward, we are preparing to bring Thunderbolt, our proprietary CAVT technology, to the neurovascular field. Follow-up in our thunder trial completed as expected in late December, and we will provide additional future updates as appropriate. We have seen the benefits our proprietary bolt technology delivers to patients with peripheral vascular clot, specifically the speed with which the technology can extract a range of clot morphologies in a safe and simple procedure. We are excited to bring this technology to the neurovascular field, ushering in a new chapter in the treatment of stroke and further enhancing our market-leading position in the field of stroke thrombectomy. We enter 2025 with significant momentum behind our CAVT technology portfolio. With CAVT, we are driving a shift from analog to digital. We are positioning our organization to be able to intensely focus on the meaningful thrombectomy opportunity ahead for CAVT while also augmenting our leadership position in both embolization and access through additional innovation and commercial focus. As we demonstrate in 2024, we will continue to drive gross margin expansion and operating efficiencies and deliver increasing profitability while investing aggressively in innovation, clinical and health economic data, and our commercial team to expand and strengthen our position as the world's leading thrombectomy company. I'll now turn the call over to Maggie to go over our financial results for the fourth quarter and full year of 2024.