Penumbra Q1 2025 Earnings Report

Penumbra EPS Results

• Actual EPS: $0.83
• Consensus EPS: $0.66
• Beat/Miss: Beat by +$0.17
• One Year Ago EPS: $0.41

Penumbra Revenue Results

• Actual Revenue: $324.14 million
• Expected Revenue: $315.72 million
• Beat/Miss: Beat by +$8.42 million
• YoY Revenue Growth: +16.30%

Penumbra Announcement Details

• Quarter: Q1 2025
• Date: 4/23/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, April 23, 2025
• Conference Call Time: 4:30PM ET

Penumbra (NYSE:PEN), together with its subsidiaries, designs, develops, manufactures, and markets medical devices in the United States and internationally. The company offers peripheral products, including the Indigo System for power aspiration of thrombus in the body; Lightning Flash, a mechanical thrombectomy system; Lightning Bolt 7, an arterial thrombectomy system; and CAT RX. It also provides access products, including guide catheters and the Penumbra distal delivery catheters under the Neuron, Neuron MAX Select, BENCHMARK, BMX96, BMX81, DDC, SENDit, and PX SLIM brands; Penumbra System, an integrated mechanical thrombectomy system comprising reperfusion catheters and separators, the 3D Revascularization Device, aspiration tubing, and aspiration pump under the Penumbra RED, JET, ACE, Max, 3D Revascularization Device, and Penumbra ENGINE brands; and neuro embolization coiling systems that includes the Penumbra Coil 400, a detachable coil that provides an alternative for the treatment of aneurysms and other complex lesions, as well as Penumbra SMART COIL, a detachable coil to treat patients with a wide range of neurovascular lesions; and POD400 and PAC400 brands. In addition, the company provides peripheral embolization products, such as Ruby Coil System consisting of detachable coils for peripheral applications; Penumbra LANTERN Delivery Microcatheter, a low-profile microcatheter with a high-flow lumen; POD (Penumbra Occlusion Device) System, a single device solution; and Packing Coil, a complementary device for use in other peripheral embolization products. Further, it offers an immersive 3D computer-based technology platform under the real immersive system brand; and neurosurgical tools, such as Artemis Neuro Evacuation Device for surgical removal of fluid and tissue from the ventricles and cerebrum. The company sells its products through direct sales organizations and distributors. Penumbra, Inc. was incorporated in 2004 and is headquartered in Alameda, California.

Penumbra Q1 2025 Earnings Call Transcript

Key Takeaways

• Penumbra reported Q1 revenue of $324.1 million, up 16.3% year-over-year (16.9% on a constant currency basis), driven by 25% growth in U.S. Thrombectomy and 42% growth in its VTE franchise.
• Gross margin expanded by 160 basis points to 66.6% with operating income of $40.4 million (12.4% of revenue), and management remains on track to exceed a 70% gross margin by the end of 2026.
• Key product innovations include FDA clearance of Ruby XL for larger peripheral embolization, strong early adoption of the Red 72 “Silver Label” aspiration catheter, and anticipation for the Thunderbolt neurovascular system.
• The company ended the quarter with $378.8 million in cash and marketable securities, zero debt, and generated $38.7 million of sequential cash flow despite investing $10.7 million in an upcoming Costa Rica manufacturing facility.
• 2025 guidance was reiterated at 12–14% total revenue growth, while U.S. Thrombectomy guidance was raised to 20–21%, and gross and operating margin expansion is expected even after removing roughly $5 million of China revenue from the forecast.

Presentation

[Operator]

Thank you. I would now like to introduce Ms. Cecilia Furlong, Business Development and Investor Relations for Penumbra. Ms. Furlong, you may begin your conference.

[Cecilia Furlong, Director - Business Development & Investment Relations at Penumbra]

Thank you, operator, and thank you all for joining us on today's call to discuss Penumbra's earnings release for the first quarter of twenty twenty five. A copy of the press release and financial tables, which includes a GAAP to non GAAP 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 ks for the year ended 12/31/2024 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 ks 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.

[Cecilia Furlong, Director - Business Development & Investment Relations at Penumbra]

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 and gross margin are presented on a GAAP basis, while 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 operating expenses and operating income exclude amortization of acquired intangible assets of $2,400,000 and non recurring litigation related expenses of $4,800,000 in the first quarter of twenty twenty four, and adjusted EBITDA excludes such nonrecurring litigation related expenses, stock compensation expense, depreciation and amortization, provision for income taxes and interest income expenses. Adam Elsleser, Penumbra's Chairman and CEO, will provide a business update.

[Cecilia Furlong, Director - Business Development & Investment Relations at Penumbra]

Maggie Yuen, our Chief Financial Officer, will then discuss our financial results for the first quarter of twenty twenty five. 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 Elsleyser.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Thank you, Cecilia. Good afternoon. Thank you for joining Penumbra's first quarter twenty twenty five conference call. In the first quarter, we generated total revenue of $324,100,000 representing underlying year over year growth of 16.3% on a reported basis and 16.9% on a constant currency basis. Our first quarter performance reflected continued momentum across our core U.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

S. Thrombectomy business with the clinical benefits of our differentiated and proprietary CAVT technology helping us further enhance our strong market position. First quarter U. S. Thrombectomy revenue increased 25% year over year to $187,900,000 with our US VTE franchise once again leading the business with total year over year growth of 42%.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Our arterial and stroke businesses also delivered strong growth as those products continue to take share from open surgery and competitive stroke catheters, respectively. Our strong top line results, coupled with our focus on delivering profitable growth and an expanding profitability profile, resulted in another solid quarter of operating cash flow. In the first quarter, gross margin of 66.6% expanded 160 basis points over the prior year period, while operating income of $40,400,000 or 12.4% of revenue increased five fifty basis points over the year ago period. We remain on track and are well positioned to achieve a gross margin profile of over 70% by the end of twenty twenty six. I'd like to address the question of proposed or enacted tariffs and the current macro backdrop.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

We currently manufacture a % of our products in The United States in our manufacturing facilities in Alameda and Roseville, California. In addition, approximately three quarters of our raw materials and components are currently sourced in The United States. We're also engaged in a regular ongoing process of optimizing our supply chain, which includes, among other things, the strategic onshoring of certain materials that are not currently sourced in The United States. In the quarter, sales from The US accounted for 79.2 percent of total revenue. Regarding China specifically, there was only $5,000,000 included in our original forecast for the balance of the year, which we are now excluding given the current macro environment.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Turning to our US peripheral business. In the quarter, we delivered strong sequential expansion from the fourth quarter in the total number of VTE patients treated with our technology. Our strong first quarter results underscore underscore Flash two point o's durable growth and momentum in VTE with two point o's demonstrated value proposition continuing to drive conversions from anticoagulation lytics and other mechanical thrombectomy platforms to CAVT for both PE and DVT. The recent addition of Lightning Bolt 12 to the portfolio further augments our competitive positioning with Bolt twelve contributions exceeding expectation in its first full quarter on the market. Our US arterial business also delivered a solid first quarter with a combination of continued strong growth in BOLT seven and ramping ahead of expectations contributions from BOLT 6X, together driving physician conversion from open surgery or the use of lytics to CABT.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Continuous and rapid innovation is a key tenet of our strategy and a strong competitive differentiator. Our first priority is continuing to enhance and expand the reach of our proprietary CABT portfolio. We view our forthcoming new products as significant, and we believe they will continue to drive a paradigm shift in how clot is addressed and treated. That said, we will also invest in further innovation across our embolization and access portfolios. In mid March, we received FDA clearance for Ruby XL, a new larger sized diagnostic catheter compatible peripheral coil.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Ruby XL will further augment our existing peripheral embolization portfolio, expanding our market leadership into larger vessel anatomies. Rubi XL will be utilized to address conditions such as pelvic congestion, endoleaks, and tips varices, to name a few. FDA clearance of Rubi XL came earlier than we expected, so we have commenced an expedited inventory build to support a market launch in either late q two or early q three in order to quickly meet the high interest in the product we have seen from physicians to date. As we further expand our product portfolio, we will strategically invest in our commercial team in a measured way to support and enhance focus on the large market opportunities we're addressing, positioning our commercial team for success. We continue to expand and leverage our market access initiatives to increase awareness around CABT's clinical as well as health economic benefits.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

At the SIR annual scientific meeting in Nashville at the March, '2 additional retrospective analyses focused on DVT and ALI management with CAVT were presented. Relative to anticoagulation and open surgery for the treatment of DVT and ALI, respectively, these analyses demonstrated CABT's ability to reduce hospital length of stay as well as improve the rate of patient discharge to the home setting, a positive for both the patients treated with CABT as well as for the health care systems. The health economic data that are part of these studies is being shared with hospital executives. We are in the early stages of leveraging our our market access initiatives to highlight CBT's myriad benefits versus alternative interventional options as well as anticoagulation. We will continue to invest in and grow our body of clinical evidence and build upon our efforts to drive further adoption of our CAVD technology and reach the substantial number of patients globally who suffer from clot burden anywhere in the body.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Shifting to our neurovascular business, our US Stroke Thrombectomy franchise delivered another solid quarterly performance with the clinical and procedural benefits of our market leading aspiration portfolio supporting volume growth ahead of our expectations and the market. The commercial introduction late in the first quarter of our next generation red 72 catheter, nicknamed Silver Label, was met with significant physician enthusiasm. Silver Label has seen strong interest, adoption, and utilization to date with our r and and d team's continued focus on technology innovation delivering a meaningful enhancement in trackability. With Silver Label, we are continuing to move the mechanical aspiration field forward and raise the bar for catheter trackability, while with Thunderbolt, we see an additional meaningful opportunity to address and improve the speed with which clot is extracted in a safe and simple procedure, further expanding our already dominant market leadership position.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Regarding our THUNDER trial, in

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

the first quarter of twenty twenty five, we submitted the clinical data to the FDA for review. We will provide additional future updates as appropriate and remain excited to introduce CAVT to the neurovascular field. We entered 2025 with significant momentum across our business that sustained into the first quarter of the year led by our CAVT portfolio and its strong value proposition. Our focus on continuous innovation, generation of high quality clinical and health economic data, and strategic investments in our commercial team positions us to deliver durable growth alongside increasing profitability and expand upon our position as the leading global thrombectomy company. I'll now turn the call over to Maggie to go over our financial results for the first quarter of twenty twenty five.

[Maggie Yuen, Chief Financial Officer at Penumbra]

Thank you, Adam. Good afternoon, everyone. Today, I will discuss the financial results for the first quarter of twenty twenty five. Financial results for revenue and gross margin are on a GAAP basis, while operating expenses and operating income are 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.

[Maggie Yuen, Chief Financial Officer at Penumbra]

For the first quarter ended 03/31/2025, our total revenues were $324,100,000 an increase of 16.3% reported and 16.9% in constant currency compared to the first quarter of twenty twenty four. Our geographic mix of sales for the first quarter twenty twenty five was 79.2% U. S. And 20.8 international. Our U.

[Maggie Yuen, Chief Financial Officer at Penumbra]

S. Region reported growth of 22.5% driven by 25% growth in our thrombectomy franchise compared to the same period last year. Our international regions decreased 2.5% reported and 0.1% in constant currency, primarily due to a decline in China revenue of $6,700,000 compared to the same period last year, partially offset by an increase of $5,000,000 in all other international regions. The sequential growth in our total revenue of 2.7% was primarily driven by an increase in U. S.

[Maggie Yuen, Chief Financial Officer at Penumbra]

Thrombectomy revenue and an increase in EMEA revenue, offset by a decline in China revenue of $5,400,000 compared to the fourth quarter of twenty twenty four. Moving to revenue by products. Revenue from our global thrombectomy business grew to 226,500,000 in the first quarter of twenty twenty five, an increase of 20.7% reported and 21.2% in constant currency compared to the same period last year, which was primarily driven by growth in our U. S. Thrombectomy business of 25%.

[Maggie Yuen, Chief Financial Officer at Penumbra]

Our international thrombectomy business increased by 3.3%, including a decline in China revenue of $4,700,000 Excluding the impact to the China region, our international thrombectomy revenue grew by 18.2% when compared to the same period last year. Given the macroeconomic conditions with China, we expect to continue to have year over year headwinds from our China business for the second quarter of twenty twenty five. Revenue from our Embolization and Access business was $97,600,000 in the first quarter of twenty twenty five, an increase of 7.3% reported and 8.1% in constant currency, primarily driven by an increase in The US. Gross margin for the first quarter of twenty twenty five is 66.6% compared to 65% for the first quarter of twenty twenty four, which represents a 160 basis point improvement driven by favorable thrombectomy product mix across our regions and strong productivity improvements. Looking forward into Q2 twenty twenty five, we will continue to expect higher thrombectomy product mix offset by higher manufacturing investment to support new product launches, including, as Adam previously mentioned, a one quarter expediting cost for Ruby XL, resulting in our gross margin in Q2 twenty twenty five similar to or slightly lower than Q1 twenty twenty five.

[Maggie Yuen, Chief Financial Officer at Penumbra]

As we move into the second half of twenty twenty five, we expect to see sequential gross margin expansion. Now on to our non GAAP operating expenses, non GAAP operating income and margin and adjusted EBITDA. Total operating expense for the quarter was $175,500,000 or 54.2% of revenue compared to 161,800,000 or 58.1% of revenue for the same quarter last year. Our research and development expenses for Q1 twenty twenty five were $22,100,000 or 6.8% of revenue compared to twenty four point six million dollars or 8.8% of revenue for Q1 twenty twenty four, which reflects savings of $4,500,000 due to our immersive business wind down, offset by continued investment in product development. SG and A expenses for Q1 twenty twenty five were 153,500,000 or 47.3% of our revenue for Q1 twenty twenty five compared to $137,200,000 or 49.2% of revenue for Q1 twenty twenty four, which is primarily driven

[Maggie Yuen, Chief Financial Officer at Penumbra]

from

[Maggie Yuen, Chief Financial Officer at Penumbra]

our continued investment in commercial and market access team, partially offset by our savings due to the wind down of Immersive business. As expected, SG and A in Q1 twenty twenty five includes higher seasonality expenditures for payroll taxes and our annual sales meeting. As we continue to invest in the right sales levers, we are pleased to see leverage of our G and A expenditures this quarter. We recorded operating income of $40,400,000 or 12.4% of revenue compared to an operating income of $19,300,000 or 6.9 percent of revenue for the same period last year. We posted adjusted EBITDA of $59,600,000 or 18.4% of total revenue compared to $36,300,000 or 13.5% in the first quarter last year.

[Maggie Yuen, Chief Financial Officer at Penumbra]

Turning to cash flow and balance sheet. We ended the first quarter of twenty twenty five with cash, cash equivalents and marketable securities balance of $378,800,000 and no debt, which is an increase of $38,700,000 sequentially, driven by strong operating profitability and includes our initial capital expenditure investment in Costa Rica of $10,700,000 which is not currently scheduled to come online until 2027. We expect positive operating cash flow trends to continue in 2025 and beyond. And now I'd like to turn the call over to Jason to discuss our 2025 guidance.

[Jason Mills, Executive Vice President of Strategy at Penumbra]

Thank you, Maggie, and good afternoon, everyone. Consistent with our guidance philosophy communicated on our last call and notwithstanding our removing revenue from China from our forecast, we are reiterating our total revenue guidance range for the year of 12% to 14% year over year growth. For our U. S. Thrombectomy business, we are raising our guidance to growth in the range of 20% to 21% year over year.

[Jason Mills, Executive Vice President of Strategy at Penumbra]

Additionally, we reiterate our expectations for gross margin and operating margin expansion for 2025. This concludes our prepared remarks. Operator, we can now open the call to questions.

[Operator]

Your first question comes from the line of Robbie Marcus with JPMorgan.

[Robert Marcus, Analyst at JPMorgan Chase]

Great. Congrats on a nice quarter. Thanks for taking the question. Maybe to start really nice U. S.

[Robert Marcus, Analyst at JPMorgan Chase]

Thrombectomy growth. You called out the 42% VTE. I was hoping you could give us a little more color maybe on stroke versus peripheral and some of the market trends you're seeing in the two different markets.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Yes. Well, first of all, you for the comment on the VTE business. As you know, that's been the second quarter in a row where we've seen that type of growth sort of wave, is moving through here. As it relates to the other businesses, you know, we're we're sort of highlight. We're not gonna break out every segment.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Obviously, it sort of gets complicated quarter by quarter, but we do believe our stroke business grew significantly above the market based on volume this quarter. As you know, we did launch toward the end of the quarter the red the new red '72, which saw a significant interest and early uptick, at the end of the quarter. And it's really been a great position for us to be ready for Thunderbolt. Lots and lots of talk out there, excitement about it. And, obviously, the two most important parts about those stroke procedures is, one, you have to be able to get the catheter there, safely and quickly.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

With this new catheter, I think, in that size category, we are, without a doubt, sort of the market leader on that side. And then to be able to get it out really quickly, I think Thunderbolt, will will show that benefit. So I think our stroke business is in pretty great shape. On the arterial side, as I said in the prepared remarks, we were sort of right where we had hoped to be, if not a touch ahead on some of the newer products, how fast they've been up and sort of taken on by physicians.

[Robert Marcus, Analyst at JPMorgan Chase]

Great. Maybe just a quick follow-up again down the P and L EPS performance was very nice in the quarter. If I look it's not just I mean you had gross margin upside, you had SG and A improvement. I would say the biggest delta versus the Street and the way we were thinking about it was on R and D. So maybe I'll lump them together here.

[Robert Marcus, Analyst at JPMorgan Chase]

How are you thinking are you thinking you're more maybe at the top end of the operating margin commentary given the first quarter performance? I know it's tough to raise after just one quarter. And how are you thinking about R and D going forward? Thanks a lot.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Let me let me address the r and d question, and then Maggie, can sort of talk to where we fit, in in the the yearly sort of cadence, if you will. R and d, the the specific spend on r and d, as you know, is never sort of a linear spend. There are certain things that happen at certain times in in the process, and, and so it's not been a linear spend. Some of that also, reflects sort of the anniversarying of immersive health care. So so that's why you, I think, partly see it, you know, lower, because we're now sort of into the comparisons without having Immersive Health Care in there.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

But, Maggie, you can talk to sort of the cadence throughout the rest of the year.

[Maggie Yuen, Chief Financial Officer at Penumbra]

Yeah. I think I think, Adam, you pointed out right and also pointed out in the prepared remarks of the estimated roughly $10,000,000 of per quarter savings from the immersive business wind down, about half of them was were realized in the r and d line. So proportionally on a year over year basis, especially as a percent of revenue, that's when you see the the improvement. But you can look at it as a relatively baseline going forward with continued investment. And, also, if you compare to last quarter, you'll see this is the trend going forward.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Yeah. Let me just make the the obvious point. We called out r and d and how amazing innovation has been over the many years we've been around. We're not shying away from investing in r and d. I think, you know, we we spent some time in the prepared remarks talking about that.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

We're gonna continue to invest where appropriate on products that that need to be made to continue to make removing clot better and better and on the embolization access side. So there's a a robust pipeline. It happened to be a quarter based on a couple of those things that were slightly lower.

[Robert Marcus, Analyst at JPMorgan Chase]

Great. Good quarter. Thanks.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Thank you.

[Operator]

Your next question is from the line of Larry Biegelsen with Wells Fargo.

[Analyst]

Hi, it's Lynn calling in for Larry. Thanks for taking the questions and nice start to the year. First question relates to Thunderbolt. Would you expect a normal FDA review for that product? And can you talk about what are the key metrics you believe physicians will look at to compare versus other catheters, first pass effect, procedure time, etcetera?

[Analyst]

And I have a follow-up.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Yeah. So the the first part of the question is, you know, it's submitted as a five ten k. You know, the clinical data is really what they're looking at. They'd obviously looked at a lot of the all the other aspects of it beforehand. One never does know.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Sorry. I I don't wanna having predicted particularly on that product before, I I think I'm gonna stay disciplined and not predict again timing of it. But so far, there there is certainly nothing that has come up that is surprising. The the metrics that were were sort of measured about on the submission is obviously the the primary, the primary and secondary endpoints, sort of how do we do the sort of very typical things. Then the other things that you've mentioned, like first pass effect and all all are obviously captured and will be a relevant part of the discussion.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

So so, obviously, we believe we should be doing well against those expectations. That that sort of goes without saying. What I think is different on top of those, so it's not instead of, is something that really hasn't been discussed before, which is not just procedure time, but the the metric of of how long does the device, when it's engaged in whatever form, take to get the clot out because that's the different. The catheters have already been on the market, versions of them, obviously, for for many, many years. So we're really now looking at the mechanism of the CAB technology, and that's again, that will be something that will be more of a gut check on on physicians, as they they start to understand that and see it.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

But I think, obviously, the first phase will be just the traditional, metrics that you already outlined.

[Analyst]

That's helpful. Thanks. And for my follow-up, you know, we've heard reports of Salesforce disruption since, since the Stryker and Ari deal. Just wanted to hear kind of what you're seeing on the ground and how that may be affecting the dynamics in the market. Thank you.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

You know, organizations you know, people move around. Certainly, it's been that way when there's a merger. You know, sometimes that happens, sometimes it doesn't. I I can tell you that the that we we're pretty confident that we are taking significant share, you know, we're not because of the merger, but rather because, to be honest and not, you know, sort of snotty about it, we just have the better product. And as more and more people talk about it, that word-of-mouth spreads from doctor to doctor.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

We're seeing people come on board. And I don't think it's because of the merger. I think it's because we have the better product.

[Operator]

Your next question is from the line of Pito Chickering with Deutsche Bank.

[Pito Chickering, Analyst at Deutsche Bank]

Hey, good afternoon guys. Thanks for taking my questions. Just circling back to guidance here. So the only change here you guys had is that you removed $5,000,000 of revenue from China that you had before that you're now not assuming that's being offset with the additional growth from US thrombectomy. Is that what we should be taking away?

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Yeah. So the that that we are definitely taking that out of our expectations because and, it's a relatively small amount, compared to past years, but that was sort of what we've been talking about for the last few quarters around China. Jason, do you wanna add a comment?

[Jason Mills, Executive Vice President of Strategy at Penumbra]

Yeah. The way I would frame it, Pito, and thank you for the question, is I think the the relative difference between the q one results and the q one consensus expectations was around 8 or $9,000,000. The amount we're talking about in China, which is the vast majority of which is in the second quarter, is around $5,000,000. And so the, you know, the the net increase, you know, there is is $4,000,000 if you just look at the first quarter performance and what we said about China at this point. So and and that is that obviously is happening, that outperformance mostly in The United States and in US Thrombectomy.

[Pito Chickering, Analyst at Deutsche Bank]

Okay. Great. And then can you talk about what you're seeing in the, you know, looking at national markets in thrombectomy outside of China, it looks pretty strong this quarter. Where is that strength coming from? And are you seeing any changes to reimbursements for your products in any new markets?

[Pito Chickering, Analyst at Deutsche Bank]

And should we see that growth continuing as these China headwinds fade? Thank you.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Yeah. So thank you for for for noticing that and seeing that. Where we have CABT, we are definitely seeing, growth, for the same reasons we're seeing it in The US. Obviously, as a ratio of our total revenue, it's a smaller percentage. The US is, you know, now approaching 80% of our revenue.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

So that's gonna provide an outsized amount of growth. Obviously, at a time when our products are made in The US and sold in The US, that's probably not the worst timing for that. But we're CABT is working in in countries around the world where they can afford it and pay for it. We're getting some real traction there. I think that will continue.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

I think we'll add additional countries over, the course of time, and we're pretty excited about that. That being said, I think I've said bunch. US will outgrow that, just because of the the the ability to do, the size of that opportunity in The US, the reimbursement, the data that we're now talking about in our market access, all of those things, I think, will mean for the next couple of years, the US, will drive a lot of this growth. I think the other parts of the the world will be great opportunities as they come now, but really probably play a bigger role, you know, in future years.

[Pito Chickering, Analyst at Deutsche Bank]

Yep. Thanks so much.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Thank you.

[Operator]

Your next question is from the line of Margaret Kaczor with William Blair.

[Macauley Kilbane, Equity Research Associate at William Blair]

Hey, everyone. This is McCulley on for Margaret tonight. Thanks for taking our questions. Understand the priority here is getting Thunderbolt approved before you start to discuss that launch timing. But if we look back to when Flash and Bolt were first approved and similarly having to go through the vax here for 6x and 12, just wondering if the market access initiatives has reduced the time around that process at all?

[Macauley Kilbane, Equity Research Associate at William Blair]

And if not, has it at least taken some of the load off of your commercial team so they can focus more on the converting physicians rather than, again, some of that kind of more burdensome administrative processes?

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Yeah. That that's a great question. On the vascular side, obviously, I think we sorta have that down. Some of that was hiring an appropriate number of reps, which, you know, we're we have done, that allowed us to have the the manpower and the capacity to do that. We were sort of caught, a little flat footed, just because this year, new number of new accounts.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

On the neuro side, as it relates to Thunderbolt, we don't really have that issue. We've, you know, been covering, all of the neuro counts pretty comfortably. We can get there. We've been launching products, you know, over and over again for many years. We've never sort of raised the question of vaxx.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

And I think the argument around Thunderbolt will be fairly compelling, in a hospital setting. So, I I don't think vaxx will be the issue. Obviously, we have to go through it. That's always a gating item, but it won't be the thing that, I think, you know, isn't built into our expectations. And I think we just have a better handle on it because we have a lot more history with that whole wide range of accounts.

[Macauley Kilbane, Equity Research Associate at William Blair]

Great. That that makes sense there. And then maybe as a follow-up, just wanna ask on the arterial strength. You mentioned the demand and increasing contribution, obviously, from both seven and 6x. So I guess maybe for Jason, wondering if you can at least directionally frame where growth was in the quarter compared to either U.

[Macauley Kilbane, Equity Research Associate at William Blair]

S. Throm or that VTE growth? Ultimately, should we expect for the remainder of the year here?

[Jason Mills, Executive Vice President of Strategy at Penumbra]

Yeah. I can start and then Adam can jump in. Arterial, has been a strength of our, US business. It remained, a strength of our US business in the first quarter. And Adam, in his prepared remarks, talked to you about why.

[Jason Mills, Executive Vice President of Strategy at Penumbra]

It is really the products in CABT, Bolt seven and Bolt six x, which is, you know, the first full quarter on the market, both doing very, very well in a in a an underpenetrated patient population still. So we expect to continue to see, strong arterial growth, within our US Thrombectomy franchise.

[Macauley Kilbane, Equity Research Associate at William Blair]

That's great. Thanks again.

[Operator]

Your next question is from the line of Bill Pawlick with Canaccord.

[Bill Plovanic, Managing Director & Equity Research Medical Technology Analyst at Canaccord Genuity - Global Capital Markets]

Great. Thanks. Good evening. Thanks for taking my questions. Just if I could, as we talk about Lightning Bolt and seven kind of going in, just curious, you know, as you look at growth in those products and you look at the volume versus ASPs, I mean, our understanding is as you get 6x, you're also pairing that with Sendit as we get into BTK.

[Bill Plovanic, Managing Director & Equity Research Medical Technology Analyst at Canaccord Genuity - Global Capital Markets]

And just wondering what type of pricing versus volume benefit are you seeing? And we're in the early stages of this. I mean, is this something where, you know, six x with Sendit is gonna be magnitude double, triple of what you're getting per case, than the standard catheter today? And then I have a follow-up.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Yeah. So the first of all, most of the our growth this past quarter was volume, not price at all. When you look at six x primarily, those are cases we weren't doing beforehand. Those are cases that were being done with open surgery because of the size of the artery. So that's, you know obviously, there the price is you know, it's just volume.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

It's new cases. There's really little difference between six x and seven. And so there's the it you're not going from, oh, I used to use seven. Now I use six x. It costs a little more.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

The vast majority of this is is obviously volume, and we called that out in the prepared script.

[Bill Plovanic, Managing Director & Equity Research Medical Technology Analyst at Canaccord Genuity - Global Capital Markets]

Okay. And then just any update on coronary? You know, is getting the CABT technology in the coronary?

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Yeah. It's a it's a good question. You know, coronary has continued to be a great business. Those who use it, regularly, obviously, think it's changed their practice dramatically. The question really is is it necessary, in the coronary arteries?

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Clot's very different typically. There are always exceptions. But if you remember way back to the cheetah study, that happened a number of years ago, the the time for that product to remove the clot was this, you know, a a really short, like, couple of minutes, a little over one minute, a minute and a half, I think, is the exact number. So so what can we add to that case right now? And and even a a setup time that adds a minute or two to it, might, you know, be be not as good.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

So we're gonna continue to look at that. There are some, you know, exceptions that in the coronary. We're having something that that is effective at getting more chronic or harder clot out, but it really, as a general rule, the product we have is doing a really, really good job in the corner. So, obviously, that's continuing to be a great business. It isn't growing anywhere near, you know, all these years later at the same rate the other ones are.

[Bill Plovanic, Managing Director & Equity Research Medical Technology Analyst at Canaccord Genuity - Global Capital Markets]

Yes. And then if I could, just on tariffs, it just sounds like at the end of the day, not really an impact for you given where you manufacture and where you source from. Yet it just seems and I it's kind of redundant, but given the significant outperformance of the first quarter, the the guide is, at least on the especially in an operating margin basis or operating profitability basis, seems super conservative. And I'm just wondering what is kind of driving that.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Yeah. I think you just said it. I think you just said it. We're we we we have, recent experience of getting over our skis. It's the early in the year, you know, just the first quarter, and we're gonna stick to our conservative approach.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

I think you got it.

[Bill Plovanic, Managing Director & Equity Research Medical Technology Analyst at Canaccord Genuity - Global Capital Markets]

Thank you.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Thank you.

[Operator]

Your next question is from the line of Travis Stead with Bank of America.

[Travis Steed, Managing Director - Equity Research at Bank of America]

Hey. Thanks for taking the question. Sure. Wanted to follow-up a little bit on Ruby XL new product, maybe markets that we're not as familiar with. Can you kind of help us understand the product and maybe the market opportunity?

[Travis Steed, Managing Director - Equity Research at Bank of America]

Is it something measured in tens of millions or a hundred million plus opportunity?

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Yeah. You know, the let me first describe the product. It's built on our same, fundamental platform, of our all of our peripheral coils, which are generally larger diameter, softer, longer so that you can you can just have more control and fill the space that you're filling much faster and much more completely. The softness allows it to have better packing density. So we're taking that platform, having a bigger coil now from a diameter standpoint, length, and and and so on so that we can do that in areas where you don't typically use coils.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Or if you do, you're using, you know, sort of coils that don't have those same properties of being super soft and extra long. It's a little early for us. You know, let's do our first cases first once we get product, and then we'll start to be able to give you a better sense of how broad this will go. If you can indulge us just a little time to get our first cases done, I will be happy to try to, in future calls, size that market a little more for you.

[Travis Steed, Managing Director - Equity Research at Bank of America]

Great. That's helpful. That's that's all I had.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Sure. Thank you.

[Operator]

Your next question is from the line of Ryan Zimmerman with BTIG.

[Ryan Zimmerman, Managing Director & Medical Technology Analyst at BTIG]

I guess two for me. You are making these efforts in Costa Rica. Arguably, you're right. You're in the right spot. You're not seeing an impact from tariff dynamics.

[Ryan Zimmerman, Managing Director & Medical Technology Analyst at BTIG]

You've made some investment, right? Do your plans change at all in terms of your you know, expansion into Costa Rica, using that as a, you know, stepping stone to a broader international effort? I know this is, you know, everything's in flux, but I'm just curious if kind of the the market dynamics have caused you to take a pause and think about that a little more differently.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Yeah. No. It's, it's a great question. I'm glad you you asked it. So the the answer is that that project is underway.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

You know, we signed a a contract for the the land and and the facility's gonna be built and all of that stuff. It's it's a several year process, you know, before it would be online. It would be coming online sometime in 2027. So too early to decide, you know, what one you know, which way one goes. If we're in a situation where tariffs are back to normal and it's no longer the topic that it is right now, then it would be the obvious next place that we expand.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

We'll bring some of our products there that that might have slightly higher margins being made in The US, and we'll get some significant margin benefit there as well. The pace of being able to expand there is is pretty quick, couple of years till we we can be up and running, if you will. If we're not in a different situation and we're still in a situation where tariffs are governing a lot of our decision making, then we have a facility outside The US that can, in effect, supply the rest of the international market without the risk of tariffs for product that we're sending from here. So we have a lot of flexibility by doing that. And to be honest, you know, having manufacturing in more than one general location, albeit our two plants are, you know, couple hours away, they're still in the same state, is obviously, I think, prudent for us to do.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

So either way, we can pivot, and it just gives us a lot of flexibility in a couple of years to decide what to do.

[Ryan Zimmerman, Managing Director & Medical Technology Analyst at BTIG]

Okay. And then the follow-up, there was a new drug approved, a new thrombolytic agent, in March, I believe, offers about a single five second IV bolus as opposed to maybe some of the slower drugs like Activase? And I'm I'm specifically talking about neurovascular right now, Adam, as as you're probably aware. I'm just wondering whether you see this impacting thrombectomy demand in the near term as it's rolled out and physicians maybe are a little more apt to try it in the face of, you know, what could be, you know, some of your technology?

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Yeah. I think we're really talking about different, patients. You know, there are patients that, don't have, clot, you know, that that have sort of lacunar strokes way deeper in the brain, where catheters don't get even the more the smaller distal catheters, where a drug like that would be a huge benefit. I have heard nobody, you know, even noninterventional neurologists, talking about going backwards and using drug in its early stages to see if it's better than thrombectomy at this point. I just haven't heard that.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

It's more logical and more likely that it's for way distal strokes where catheters don't fit at all.

[Ryan Zimmerman, Managing Director & Medical Technology Analyst at BTIG]

Okay. Thank you, Adam.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Yeah. Thank you.

[Operator]

Your next question is from the line of Colm Teethmarsh with Morgan Stanley.

[Kallum Titchmarsh, Analyst at Morgan Stanley]

Great. Thanks for taking the question, guys. A couple of quick ones from me, and I'll ask them both upfront. Just on arterial, specifically, just looking for a bit more clinical color on

[Kallum Titchmarsh, Analyst at Morgan Stanley]

the early rollout of 6x, the

[Kallum Titchmarsh, Analyst at Morgan Stanley]

key bits of feedback you received on those BTK cases and how willing have the docs been to switch up treatment methods? And then just secondly on Thunderbolt, obviously, your current data for distal clot thrombectomy isn't great, albeit more than skewed. Is there any kind of technological factor that would enable modulated aspiration to better target distal clots than existing tech today? Thanks a lot.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Yeah. So, a couple of good questions. Let's start on arterial, and sort of how that that's going. Look. Arterials, you know, we're competing against open surgery.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

And so if you can get the clot out, in a matter of a minute or two of device time or three minutes compared to open surgery, you're gonna win over those physicians. And it's the predictability of it. With modulated aspiration six x, it's it's it's just that much more predictable. It happens. It's fast.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

You're going to start to have that word-of-mouth, and we saw that happen. There's a lot of discussion about it, a lot of excitement about it. And I think over you know, again, these things happen in waves. You know, you don't just get everyone at once. You know, this it's not a it's not like that where you have, you know, a giant seminal clinical trial or you have, you know, a a reimbursement or a guideline change.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

This is word-of-mouth. What do I do now? What is someone else doing? Should I try it? I did.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Oh, wow. That's good. And word-of-mouth builds, and it comes in waves. And we've seen that obviously on the VTE front where we've had two quarters of this sort of wave, and we're onboarding folks for the next round of, you know, of conversions, and that's an exciting moment. And the same thing on the arterial side, where it's happening, because the product just works, and it works, in smaller vessels.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

It works in the larger ones with seven, and I think we'll see that. As it relates to sort of Thunderbolt going more distal, you know, Thunderbolt right now is paired with in the trial with our 72 or 68 and our 62. So 62 certainly can go a little more distal. When you really go into the places where you're not on label, which is the m three, you know, you're on label in m two where you can use our current technology. When you're going into places where you're not on label, which some of those distal trials that you'd stentriever showed, it's a different story.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

And there the forty three has done a really good job. Clot tends, as you get smaller and smaller, to sometimes you know, many times be a a little less challenging to get out if you can just get the catheter there. So we'll we'll wait and see. We haven't made any final decisions on on how small you can use thund how small of a catheter you can use Thunderbolt with, and is there a a benefit as you go for smaller and smaller. But we'll let you know.

[Kallum Titchmarsh, Analyst at Morgan Stanley]

Great. Thanks, Adam.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Thank you.

[Operator]

Your next question is from the line of Richard Newitter with Truist.

[Richard Newitter, Managing Director at Truist Securities]

Thanks for taking the questions. Congrats on the quarter. Maybe just the first one on US Stroke. I know you guys have been at or close to 20% growth for US neuro thrombectomy in the last few quarters. I know you have a tougher comp year over year this quarter, but is it fair to assume that you were in that ballpark?

[Richard Newitter, Managing Director at Truist Securities]

Or maybe you could benchmark us to what the market rate is that you're asking.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

So, you know, it is a couple of times, Richard, you know, everyone wants to know the specific numbers. And we're just gonna go down this really tough path, of course, of, you know, number by number, quarter by quarter, and it's it's not gonna be helpful. You know, we we obviously called out, you know, VTE because of just the, you know, sort of the prominence of that growth and the effect that it had and the sizes of that market. Stroke, as I've said, we did really well. It's we clearly grew above the market.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

The market, as you know, has been growing at a as a a small clip, but it's been, you know, not the same kind of growth that we've seen on the the the arterial side or venous side. And it was clear just from our own data looking at places that are doing cases that used to not doing cases. You know, we didn't really lose anybody, and we saw a significant, group of new physicians, sort of convert over. So, I think we're doing pretty well on the stroke side.

[Richard Newitter, Managing Director at Truist Securities]

Okay. I I guess if if you can share what maybe a rough estimate of The US market is, and then I'll just provide my follow-up now. You know, I'm not asking whether or not it's in guidance. I'm I'm guessing the answer is no, but you've got a number of new launches that are coming. 1Q has all been volume growth.

[Richard Newitter, Managing Director at Truist Securities]

Shouldn't should there be an opportunity for price as a tailwind or incremental driver in the second half from these new products? And if you care to share whether or not you're factoring any of that into guidance. Thanks.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Yeah. Well so the the big thing that we've talked about, obviously, is Thunderbolt isn't in the guidance until we get approved, then we'll obviously add it. We've said that, before. Thunderbolt's the product that probably has, you know, the most obvious price for us. It's it's actually ironically, if you look at the vast majority of what people are doing, whether they're using stentrivers and, you know, expensive guide catheters and all that kind of stuff, we're actually not gonna be more expensive on a per case basis.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

But for us, we'll get a price better fit for the use of Thunderbolt. So so that's that's true. The larger question about raising price, you know, some maybe you weren't asking this, but I I've, in case you were, you know, in response to this moment in time, lots of companies we compete with are raising their prices, and that's how they're seeing their growth. They're just saying my product now cost x, and and that is their growth. It's not volume growth.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

It's not market growth. In fact, in some of the cases, it's a decline but covered over by raising prices. That's not something that's something that hospitals are all talking about right now. I've been brought into some of those conversations, and it's you know, everyone's hearing about it. We have not done that, and it, provides us because we have lots of growth coming from volume, you know, new cases.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

And that really does in times when things are tough, you know, not doing that is a big deal, and people remember that in a positive way for a long time. So I just wanted to make sure that was clear that it that we're not increasing our price.

[Operator]

Your next question is from the line of Matthew O'Brien with Piper Sandler. Next question is from Matthew O'Brien with Piper Sandler. Mister O'Brien, please make sure your line is unmuted.

[Matt O'Brien, Analyst at Piper Sandler Companies]

Hello?

[Jason Mills, Executive Vice President of Strategy at Penumbra]

Hello. We got you now.

[Matt O'Brien, Analyst at Piper Sandler Companies]

You got me now? Okay. It's weird I wasn't on mute. So the peripheral number, again, Adam, super strong. Can you just talk a little bit about what you're seeing in the marketplace in terms of the growth of that product on the PE side of things?

[Matt O'Brien, Analyst at Piper Sandler Companies]

Sorry. Flash 2.9 specifically, but PE side, DVT side of things. Are you seeing an inflection anywhere specifically? I don't know if it's on one side or the other. And, you know, are you starting to see that that penetration conversion away from Lytics may be accelerating?

[Matt O'Brien, Analyst at Piper Sandler Companies]

And then I do have a follow-up.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Yeah. I mean, just to give some sort of context, we obviously had a larger percentage of the market in DBT when in PE when we did a couple you know, two quarters ago. So by definition, a bigger percentage of this growth is coming in PE, but we're still seeing it in dbt as well. And, again, it really is it's not coming from Lytics as much, albeit, you know, there's always gonna be somebody here and there, but the vast majority is really coming from other people, you know, other mechanical products. And, again, not to sort of be flippant or smart, but CVT is just better.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

It's you know, you're using a computer to actuate the valve. It works a lot faster. We've, you know, sort of shared what that looks like. And as more and more people understand that, they hear it, they hear their friends, they go to meetings, they're talking about it, It brings people in. SIR had, you know, dozens and dozens of folks who haven't ever used our product come up to us and want to engage in a conversation where in the past that wasn't something they wanted to do, and and we're seeing that across the board.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Again, it's a better product, and and we're not gonna rest on our laurels. I I talked about that in the prepared remarks. Innovation is gonna continue, with a priority focus on these CABT products so that we stay ahead, and we continue to make getting clot out more and more routine with these patients. So that's what happens, and these things happen in waves. You know, they're not linear.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

I gotta repeat, you know, that over and over again. That's not code for anything other than that's just a process. There's a a process that happens when people talk to each other and then convert. It's a great moment. It's a lot of fun to have people who, many, many years, have been skeptical now be approaching us and be the ones primarily calling us versus us calling them.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

It's a testament to the extraordinary r and d work and, frankly, you know, the patience and and, frankly, dedication that our commercial team has to their customers.

[Matt O'Brien, Analyst at Piper Sandler Companies]

Got it. Okay. Appreciate that. And then question for Maggie, and I'm sure Jason's gonna shut this down. But but just that gross margin improvement in the quarter was again kind of eye popping.

[Matt O'Brien, Analyst at Piper Sandler Companies]

Peripheral is doing really well. I'm assuming those have some really good gross margins to them. Can we potentially get to 70% gross margins a little bit earlier than the kind of end of next year? I know it's still a long way to go. But I mean, can we start touching that that kind of number, you know, even late this year or maybe Q2 of next year?

[Matt O'Brien, Analyst at Piper Sandler Companies]

Thank you.

[Maggie Yuen, Chief Financial Officer at Penumbra]

Yeah. No. Thanks for the question. It's a little premature to talk about it, but I think everything is on the right track. I mean, you can get our our projection on this year's sequential improvement similar to last year.

[Maggie Yuen, Chief Financial Officer at Penumbra]

So it's a similar phasing of how our improvement in product mix have an impact of our gross margin. But at the same time, I also pointed out that in the second quarter, due to some accelerating investment in Ruby XL, try to optimize our manufacturing process. Our margin may be a little bit flat in the second quarter compared to the first quarter, but, it's just a timing on the investment and that we are still on the right track. Thank you.

[Operator]

Your final question comes from the line of David Ruskov with Baird.

[David Rescott, Senior Research Analyst at Baird]

Can I be heard?

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Hello?

[Operator]

Your line is open.

[David Rescott, Senior Research Analyst at Baird]

Can you hear me?

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Yes. We can. Hi, David.

[David Rescott, Senior Research Analyst at Baird]

Oh, hey. Great. Thanks for taking the questions, and congrats on the the quarter here. Adam, I think last quarter you talked more about an invested focus on some of the embolization businesses in The U. S.

[David Rescott, Senior Research Analyst at Baird]

I'm wondering if you could maybe expand on kind of what your thoughts are there and and where you think the benefit could be and and and if that's something that can help you get back to maybe, more stable embolization growth. And if so, what do you kind of peg that normalized market growth at?

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Yeah. Thanks, David. It's a it's a really good question. On we we've talked about it a couple times. The investment is in two areas.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

One, obviously, in our on the innovation side, we've been working on new embolization technologies. Ruby XL is, you know, one of them that that is there to solve a unique, and and and pretty significant issue. And and if the product works once we get into the clinic with it the way we anticipate and expect, I think it will be a pretty helpful and significant product and and certainly add to the growth. The other area that we're investing in is I've talked about making sure the commercial team has the capacity to focus. You know, we have a lot of products, and a vascular rep who's selling a a suite now of embolization tools with yet another one to launch and then a suite of CVT tools.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Sometimes they're different customer bases. That's a lot to do, and we need those teams to focus. So we'll give you more information about that probably in upcoming quarters of what that really means at a specific level. But those are the two areas so that both the Enbo team you know, the Enbo group can focus, if you will, the the thrombectomy can be on focus. And that to me is is critical because, otherwise, you're just running around, and you're not able to do it all.

[David Rescott, Senior Research Analyst at Baird]

Okay. Great. Maybe on the, the the medium kind of vessel, segment in the stroke side, I think we're maybe three or four months past that data. Wondering if you have any updated thoughts on what that market could be or could be post the data we saw. I mean, some of the checks that we've had, while not a positive for the total thrombectomy market, seems to suggest that maybe the aspiration market could see a benefit from what those trials are read out to be.

[David Rescott, Senior Research Analyst at Baird]

So curious on any updated thoughts on that and whether or not maybe Thunderbolt could play a role in that market. Thank you.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Yeah. So, that's a great question. So it's, it's pretty clear that if you're going pretty distal, you know, into the m three and so on, with the stentriever, you shouldn't do that. That was you know, to be honest, you know, I I think for folks who have focused on aspiration, you know, as a company the whole time, that was fairly obvious. There's data, you know, recently published, that, with our red 43, showing a very different, result in more distal vessels.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

So I think I think you're right. If you're if you're gonna do it, you should be doing it, with an appropriate sized aspiration catheter. I think there's, so I think that that's there's a benefit for aspiration in in that area. As it relates to Thunderbolt, the question is is still open. How small of a catheter can benefit with the idea of modulated aspiration.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

Right now, we do have Thunderbolt on red 62. That was part of our trial. So that's not as obviously as small as 43, but it certainly can go to sort of the midsized vessels. You know, those are not terms of art. Everyone has slightly different definitions.

[Adam Elsesser, Co-Founder, Chairman, President & CEO at Penumbra]

But but if it's 62 fits, you know, it it's proven to be a very effective tool in in the trial. So with Thunderbolt. So I think we're positioned really well to be able to help all of those patients ultimately where the catheter can fit. And that's something we've always been doing, we're going to continue to do it.

[Operator]

This concludes the Q and A portion of today's conference call. I will now turn today's call over to Cecilia Furlong for closing remarks.

[Cecilia Furlong, Director - Business Development & Investment Relations at Penumbra]

Thank you, operator. On behalf of our management team, thank you all again for joining us today and for your interest in Penumbra. We look forward to updating you on our second quarter call.

[Operator]

This concludes today's conference call. You may now disconnect.

Participants

Executives

• Cecilia Furlong, Director - Business Development & Investment Relations
• Adam Elsesser, Co-Founder, Chairman, President & CEO
• Maggie Yuen, Chief Financial Officer
• Jason Mills, Executive Vice President of Strategy

Analysts

• Robert Marcus, Analyst at JPMorgan Chase
• Analyst
• Pito Chickering, Analyst at Deutsche Bank
• Macauley Kilbane, Equity Research Associate at William Blair
• Bill Plovanic, Managing Director & Equity Research Medical Technology Analyst at Canaccord Genuity - Global Capital Markets
• Travis Steed, Managing Director - Equity Research at Bank of America
• Ryan Zimmerman, Managing Director & Medical Technology Analyst at BTIG
• Kallum Titchmarsh, Analyst at Morgan Stanley
• Richard Newitter, Managing Director at Truist Securities
• Matt O'Brien, Analyst at Piper Sandler Companies
• David Rescott, Senior Research Analyst at Baird