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) is a global healthcare company specializing in the development and manufacture of innovative medical devices that address neurovascular and peripheral vascular conditions. The company focuses on products designed to improve patient outcomes in acute ischemic stroke, aneurysm treatment and peripheral thrombectomy. Penumbra’s technologies are used by interventional neuroradiologists, neurosurgeons and interventional cardiologists in hospitals and clinics around the world.

At the core of Penumbra’s portfolio is its mechanical thrombectomy platform, which includes aspiration catheters and accessory devices engineered to remove blood clots in acute stroke cases. The company also offers embolization coil systems and flow-diversion devices for the treatment of cerebral aneurysms and vascular lesions. In its peripheral vascular line, Penumbra markets aspiration thrombectomy systems and small-vessel clot retrieval tools designed for limb salvage and treatment of pulmonary embolism.

Founded in 2004 by engineer Arani Bose, Penumbra launched its first commercial thrombectomy product in 2007 and has since expanded into new geographies and indications. The company maintains its headquarters in Alameda, California, with additional operations in Europe and Asia Pacific. Over the years, Penumbra has invested in R&D facilities and regulatory approvals to support product launches across more than 100 countries.

Under the leadership of President and Chief Executive Officer Adam Elsesser, Penumbra continues to advance its pipeline of next-generation devices, focusing on catheter design, clot visualization and real-time feedback technologies. The company collaborates with academic institutions and clinical specialists to refine procedural techniques and drive evidence generation in stroke and vascular care.

Penumbra Q1 2025 Earnings Call Transcript

Key Takeaways

• In Q1 Penumbra generated $324.1 million in revenue, up 16.3% year-over-year (16.9% constant currency), with U.S. thrombectomy sales up 25% and its VTE franchise growing 42%.
• Gross margin expanded to 66.6% (up 160 bps) and operating income reached 12.4% of revenue, as management targets a >70% gross margin by end of 2026.
• The company reiterated 2025 revenue guidance of 12–14% growth, removed ~$5 million of China revenue from its forecast and raised U.S. thrombectomy growth guidance to 20–21%.
• Penumbra secured FDA clearance for Ruby XL, introduced its Silver Label Red 72 catheter and Lightning Bolt 12, underscoring its continuous innovation in thrombectomy and embolization.
• The balance sheet remains strong with $378.8 million in cash, no debt, robust operating cash flow and ongoing investment in a Costa Rica manufacturing facility set to go online by 2027.

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, Senior Vice President and Head of Investor Relations at Penumbra Inc]

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 2025. 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-K for the year ended December 31, 2024, filed with the SEC.

[Cecilia Furlong, Senior Vice President and Head of Investor Relations at Penumbra Inc]

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 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.

[Cecilia Furlong, Senior Vice President and Head of Investor Relations at Penumbra Inc]

Non-GAAP operating expenses and operating income exclude amortization of acquired intangible assets of $2.4 million and non-recurring litigation-related expenses of $4.8 million in the first quarter of 2024, and adjusted EBITDA excludes such 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 first quarter of 2025, 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.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

Thank you, Cecilia. Good afternoon. Thank you for joining Penumbra's first quarter 2025 conference call. In the first quarter, we generated total revenue of $324.1 million, 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.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 $187.9 million, with our U.S. VTE franchise once again leading the business with total year-over-year growth of 42%. Our arterial and stroke businesses also delivered strong growth as those products continue to take share from open surgery and competitive stroke catheters, respectively.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

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 $40.4 million, or 12.4% of revenue, increased 550 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 2026. I'd like to address the question of proposed or enacted tariffs and the current macro backdrop. We currently manufacture 100% 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.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

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 U.S. In the quarter, sales from the U.S. accounted for 79.2% of total revenue. Regarding China specifically, there was only $5 million included in our original forecast for the balance of the year, which we are now excluding given the current macro environment. Turning to our U.S. 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 Flash 2.0's durable growth and momentum in VTE, with 2.0's demonstrated value proposition continuing to drive conversions from anticoagulation, lytics, and other mechanical thrombectomy platforms to CAVT for both PE and DVT.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

The recent addition of Lightning Bolt 12 to the portfolio further augments our competitive positioning, with Bolt 12 contributions exceeding expectation in its first full quarter on the market. Our U.S. arterial business also delivered a solid first quarter, with a combination of continued strong growth in Bolt 7 and ramping ahead of expectations contributions from Bolt 6X, together driving physician conversion from open surgery or the use of lytics to CAVT. 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 CAVT 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.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

In mid-March, we received FDA clearance for Ruby XL, a new, larger-sized diagnostic catheter-compatible peripheral coil. Ruby XL will further augment our existing peripheral embolization portfolio, expanding our market leadership into larger vessel anatomies. Ruby XL will be utilized to address conditions such as pelvic congestion, endoleaks, and TIPS varices, to name a few. FDA clearance of Ruby XL came earlier than we expected, so we have commenced an expedited inventory build to support a market launch in either late Q2 or early Q3 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.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

We continue to expand and leverage our market access initiatives to increase awareness around CAVT's clinical as well as health economic benefits. At the SIR Annual Scientific Meeting in Nashville at the end of March, two 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 CAVT'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 CAVT as well as for the healthcare 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 market access initiatives to highlight CAVT's myriad benefits versus alternative interventional options as well as anticoagulation.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

We will continue to invest in and grow our body of clinical evidence and build upon our efforts to drive further adoption of our CAVT technology and reach the substantial number of patients globally who suffer from clot burden anywhere in the body. Shifting to our neurovascular business, our U.S. 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&D teams' continued focus on technology innovation delivering a meaningful enhancement in trackability.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

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. Regarding our Thunder trial, in the first quarter of 2025, 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.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

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 2025.

[Maggie Yuen, CFO at Penumbra Inc]

Thank you, Adam. Good afternoon, everyone. Today, I will discuss the financial results for the first quarter of 2025. 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 our reconciliation of GAAP to non-GAAP financial measures are provided in our posted press release. For the first quarter ended March 31, 2025, our total revenues were $324.1 million and an increase of 16.3% reported and 16.9% in constant currency compared to the first quarter of 2024. Our geographic mix of sales for the first quarter of 2025 was 79.2% U.S. and 20.8% international. Our U.S. region reported growth of 22.5%, driven by 25% growth in our thrombectomy franchise compared to the same period last year.

[Maggie Yuen, CFO at Penumbra Inc]

Our international regions decreased 2.5% reported and 0.1% in constant currency, primarily due to a decline in China revenue of $6.7 million compared to the same period last year, partially offset by an increase of $5 million in all other international regions. The sequential growth in our total revenue of 2.7% was primarily driven by an increase in U.S. thrombectomy revenue and an increase in EMEA revenue, offset by a decline in China revenue of $5.4 million compared to the fourth quarter of 2024. Moving to revenue by products, revenue from our global thrombectomy business grew to $226.5 million in the first quarter of 2025, 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%. Our international thrombectomy business increased by 3.3%, including a declining China revenue of $4.7 million.

[Maggie Yuen, CFO at Penumbra Inc]

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 2025. Revenue from our embolization and access business was $97.6 million in the first quarter of 2025, an increase of 7.3% reported and 8.1% in constant currency, primarily driven by an increase in the U.S. Gross margin for the first quarter of 2025 is 66.6% compared to 65% for the first quarter of 2024, which represents a 160 basis point improvement driven by favorable thrombectomy product mix across our regions and strong productivity improvements.

[Maggie Yuen, CFO at Penumbra Inc]

Looking forward into Q2 2025, 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 2025 similar to or slightly lower than Q1 2025. As we move into the second half of 2025, we expect to see sequential gross margin expansion. Now onto our non-GAAP operating expenses, non-GAAP operating income and margin, and adjusted EBITDA. Total operating expense for the quarter was $175.5 million or 54.2% of revenue compared to $161.8 million or 58.1% of revenue for the same quarter last year.

[Maggie Yuen, CFO at Penumbra Inc]

Our research and development expenses for Q1 2025 were $22.1 million or 6.8% of revenue compared to $24.6 million or 8.8% of revenue for Q1 2024, which reflects savings of $4.5 million due to our immersive business wind down, offset by continued investment in product development. SG&A expenses for Q1 2025 were $153.5 million or 47.3% of our revenue for Q1 2025 compared to $137.2 million or 49.2% of revenue for Q1 2024, which is primarily driven from our continued investment in the commercial and market access team, partially offset by our savings due to the wind down of immersive business. As expected, SG&A in Q1 2025 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&A expenditures this quarter.

[Maggie Yuen, CFO at Penumbra Inc]

We recorded operating income of $40.4 million or 12.4% of revenue compared to an operating income of $19.3 million or 6.9% of revenue for the same period last year. We posted adjusted EBITDA of $59.6 million or 18.4% of total revenue compared to $36.3 million or 13.5% in the first quarter last year. Turning to cash flow and balance sheet, we ended the first quarter of 2025 with cash, cash equivalents, and marketable securities balance of $378.8 million and no debt, which is an increase of $38.7 million sequentially driven by strong operating profitability and includes our initial capital expenditure investment in Costa Rica of $10.7 million, which is not currently scheduled to come online until 2027. We expect positive operating cash flow trends to continue in 2025 and beyond. Now I'd like to turn the call over to Jason to discuss our 2025 guidance.

[Jason Mills, EVP of Strategy at Penumbra Inc]

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%-14% year-over-year growth. For our U.S. thrombectomy business, we are raising our guidance to growth in the range of 20%-21% year-over-year. 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]

Thank you. At this time, I would like to remind everyone, in order to ask a question, press star followed by the number one on your telephone keypad. We'll pause for a moment to compile the Q&A roster. Your first question comes from the line of Robbie Marcus at JPMorgan.

[Robert Marcus, Managing Director and Senior Analyst at JPMorgan]

Oh, great. Congrats on a nice quarter. Thanks for taking the question.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

Of course.

[Robert Marcus, Managing Director and Senior Analyst at JPMorgan]

Maybe to start, really nice U.S. 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, Chairman and CEO at Penumbra Inc]

Yeah. First of all, thank 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. The sort of wave is moving through here. As it relates to the other businesses, we sort of highlight. We're not going to break out every segment. Obviously, it sort of gets complicated quarter by quarter. 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 new RED 72, which saw significant interest and early uptick at the end of the quarter. It's really been a great position for us to be ready for Thunderbolt. Lots and lots of talk out there, excitement about it.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

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. With this new catheter, I think in that size category, we are, without a doubt, sort of the market leader on that side. To be able to get it out really quickly, I think Thunderbolt will show that benefit. 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 sort of taken on by physicians.

[Robert Marcus, Managing Director and Senior Analyst at JPMorgan]

Great. Maybe just a quick follow-up. Again, down the P&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&A improvement. I would say the biggest delta versus the street and the way we were thinking about it was on R&D. Maybe I'll lump them together here. 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. How are you thinking about R&D going forward? Thanks a lot.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

Yeah. Let me address the R&D question, and then Maggie can sort of talk to where we fit in the yearly sort of cadence, if you will. R&D, the specific spend on R&D, as you know, is never sort of a linear spend. There are certain things that happen at certain times in the process, and so it's not been a linear spend. Some of that also reflects sort of the anniversary of immersive healthcare. That's why I think partly see it lower because we're now sort of into the comparisons without having immersive healthcare in there. Maggie can talk to sort of the cadence throughout the rest of the year.

[Maggie Yuen, CFO at Penumbra Inc]

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

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

Yeah. Let me just make the obvious point. We called out R&D and how amazing our innovation has been over the many years we've been around. We're not shying away from investing in R&D. I think we spent some time in the prepared remarks talking about that. We're going to continue to invest where appropriate on products that need to be made to continue to make removing clot better and better and on the embolization access side. There is a robust pipeline. It happened to be a quarter based on a couple of those things that were slightly lower.

[Robert Marcus, Managing Director and Senior Analyst at JPMorgan]

Great. Good quarter. Thanks.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

Thank you.

[Operator]

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

[Lawrence Biegelsen, Senior Medical Technology Analyst at Wells Fargo]

Hi. It's Lay 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? 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, etc.? I have a follow-up.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

Yeah. The first part of the question is it's submitted as a 510(k). The clinical data is really what they're looking at. They'd obviously looked at a lot of all the other aspects of it beforehand. One never does know. I don't want to have been predicted particularly on that product before. I think I'm going to stay disciplined and not predict again timing of it. So far, there is certainly nothing that has come up that is surprising. The metrics that were sort of measured about on the submission is obviously the primary and secondary endpoints, sort of how do we do the sort of very typical things. The other things that you've mentioned, like first pass effect, and all are obviously captured and will be a relevant part of the discussion. Obviously, we believe we should be doing well against those expectations.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

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 metric of how long does the device, when it's engaged in whatever form, take to get the clot out? Because that's the difference. The catheters have already been on the market, versions of them, obviously, for many, many years. So we're really now looking at the mechanism of the CAV technology. And again, that will be something that will be more of a gut check on physicians as they start to understand that and see it. But I think, obviously, the first phase will be just the traditional metrics that you already outlined.

[Lawrence Biegelsen, Senior Medical Technology Analyst at Wells Fargo]

That's helpful. Thanks. For my follow-up, we've heard reports of sales force disruption since the Stryker and Inari deal. Just wanted to hear kind of what you're seeing on the ground and how that's maybe affecting the dynamics in the market. Thank you.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

Organizations, people move around. Certainly, it's been that way when there was a merger. Sometimes that happens. Sometimes it doesn't. I can tell you that we're pretty confident that we are taking significant share, not because of the merger, but rather because, to be honest and not sort of snotty about it, we just have the better product. As more and more people talk about it, that word of mouth spreads from doctor to doctor. We're seeing people come on board. 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, Director and Senior Equity Research Analyst at Deutsche Bank]

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

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

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

[Jason Mills, EVP of Strategy at Penumbra Inc]

Yeah. The way I would frame it, Pete, and thank you for the question, is I think the relative difference between the Q1 results and the Q1 consensus expectations was around $8 million or $9 million. The amount we're talking about in China, which is the vast majority of which is in the second quarter, is around $5 million. The net increase there is $4 million if you just look at the first quarter performance and what we said about China at this point. That obviously is happening, that outperformance mostly in the United States and U.S. thrombectomy.

[Pito Chickering, Director and Senior Equity Research Analyst at Deutsche Bank]

Okay. Great. Can you talk about what you're seeing in the international markets in thrombectomy outside of China? It looked pretty strong this quarter. Where is that strength coming from? Are you seeing any changes to reimbursements for your products in any new markets? Should we see that growth continuing as these China headwinds fade? Thank you.

[Jason Mills, EVP of Strategy at Penumbra Inc]

Yeah. Thank you for sort of noticing that and seeing that. Where we have CAVT, we are definitely seeing growth for the same reasons we're seeing it in the U.S. Obviously, as a ratio of our total revenue, it's a smaller percentage. The U.S. is now approaching 80% of our revenue. That's going to provide an outsized amount of growth. Obviously, at a time when our products are made in the U.S. and sold in the U.S., that's probably not the worst timing for that. CAVT is working 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. I think we'll add additional countries over the course of time. We're pretty excited about that. That being said, I think I've said a bunch, U.S.

[Jason Mills, EVP of Strategy at Penumbra Inc]

will outgrow that just because of the ability to the size of that opportunity in the U.S., 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 U.S. will drive a lot of this growth. I think the other parts of the world will be great opportunities as they come now, but really probably play a bigger role in future years.

[Bill Plovanic, MD and Senior Equity Research Analyst at Canaccord]

Yep. Thanks so much.

[Jason Mills, EVP of Strategy at Penumbra Inc]

Thank you.

[Operator]

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

[Mark McKinley, CFA at William Blair]

Hey, everyone. This is McKinley on for Margaret tonight. Thanks for taking our questions. I understand the priority here is getting Thunderbolt approved before you start to discuss that launch timing. 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 have reduced the time around that process at all. 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, Chairman and CEO at Penumbra Inc]

Yeah. That's a great question. On the vascular side, obviously, I think we sort of have that down. Some of that was hiring an appropriate number of reps, which we have done that allowed us to have the manpower and the capacity to do that. We were sort of caught a little flat-footed just because of this year's number of new accounts. On the neuro side, as it relates to Thunderbolt, we don't really have that issue. We've been covering all of the neuro accounts pretty comfortably. We can get there. We've been launching products over and over again for many years. We've never sort of raised the question of VAX. I think the argument around Thunderbolt will be fairly compelling in a hospital setting. I don't think VAX will be the issue. Obviously, we have to go through it.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

That's always a gating item, but it won't be the thing that I think isn't built into our expectations. I think we just have a better handle on it because we have a lot more history with that whole wide range of accounts.

[Mark McKinley, CFA at William Blair]

Great. That makes sense there. Maybe as a follow-up, just want to ask on the Arterial strength. You mentioned the demand and increasing contribution, obviously, from both 7 and 6X. I guess maybe for Jason, wondering if you can at least directionally frame where growth was in the quarter compared to either U.S. throm or that VT growth, and ultimately, what should we expect for the remainder of the year here?

[Jason Mills, EVP of Strategy at Penumbra Inc]

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

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

It is really the products and CAVT, Bolt 7 and Bolt 6X, which is the first full quarter on the market, both doing very, very well in an underpenetrated patient population still. We expect to continue to see strong arterial growth within our U.S. thrombectomy franchise.

[Mark McKinley, CFA at William Blair]

That's great. Thanks again.

[Operator]

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

[Bill Plovanic, MD and Senior Equity Research Analyst at Canaccord]

Great. Thanks. Good evening. Thanks for taking my questions. Just if I could, as we talk about Lightning Bolt 6X and 7 kind of going in, just curious, 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. I mean, just wondering, what type of pricing versus volume benefit are you seeing? We're in the early stages of this. I mean, is this something where 6X with SendIt is going to be magnitude, double, triple of what you're getting per case than the standard catheter today? I have a follow-up.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

Yeah. First of all, most of our growth this past quarter was volume, not price at all. When you look at 6X primarily, those are cases we were not doing beforehand. Those are cases that were being done with open surgery because of the size of the artery. Obviously, the price is just volume. It is new cases. There is really little difference between 6X and 7. You are not going from, "Oh, I used to use 7. Now I use 6X. It costs a little more." The vast majority of this is obviously volume. We called that out in the prepared script.

[Bill Plovanic, MD and Senior Equity Research Analyst at Canaccord]

Okay. Any update on coronary? Getting the CAVT technology into coronary?

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

Yeah. It's a good question. 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? Clots are very different typically. There are always exceptions. If you remember way back to the CHEETA study that happened a number of years ago, the time for that product to remove the clot was really short, like a couple of minutes, a little over one minute, a minute and a half, I think, the exact number. What can we add to that case right now? Even a setup time that adds a minute or two to it might be not as good. We're going to continue to look at that.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

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

[Bill Plovanic, MD and Senior Equity Research Analyst at Canaccord]

Yeah. 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 it's kind of redundant, but given the significant outperformance of the first quarter, the guide is, at least especially on an operating margin basis or operating profitability basis, seems super conservative. I'm just wondering what is kind of driving that?

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

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

[Bill Plovanic, MD and Senior Equity Research Analyst at Canaccord]

Thank you.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

Thank you.

[Operator]

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

[Travis Steed, MD and Equity Research of Medical Technology at Bank of America]

Hey, thanks for the question. I 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? Is this something measured in tens of millions or a hundred million-plus opportunity?

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

Yeah. Let me first describe the product. It's built on our same fundamental platform of all of our peripheral coils, which are generally larger diameter, softer, longer, so that 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. We're taking that platform, having a bigger coil now from a diameter standpoint, length, and so on, so that we can do that in areas where you don't typically use coils, or if you do, you're using sort of coils that don't have those same properties of being super soft and extra long. It's a little early for us. 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.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

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, MD and Equity Research of Medical Technology at Bank of America]

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

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

Sure. Thank you.

[Operator]

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

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

Hey, thanks for taking our questions. I guess two for me. You are making these efforts in Costa Rica. Arguably, you're in the right spot. You're not seeing an impact from tariff dynamics. You've made some investment, right? Do your plans change at all in terms of your expansion into Costa Rica, using that as a stepping stone to a broader international effort? I know this is everything's in flux, but I'm just curious if kind of the market dynamics have caused you to take a pause and think about that a little more differently.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

Yeah. No, it's a great question. I'm glad you asked it. The answer is that that project is underway. We signed a contract for the land, and the facility is going to be built and all of that stuff. It's a several-year process. Before it would be online, it would be coming online sometime in 2027. Too early to decide 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. We'll bring some of our products there that might have slightly higher margins being made in the U.S., and we'll get some significant margin benefit there as well.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

The pace of being able to expand there is pretty quick, a couple of years till 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 U.S. that can in effect supply the rest of the international market without the risk of tariffs for product that we're sending from here. We have a lot of flexibility by doing that. To be honest, having manufacturing in more than one general location, albeit our two plants are a couple of hours away, they're still in the same state, is obviously, I think, prudent for us to do. 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 and Medical Technology Analyst at BTIG]

Okay. 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. I'm specifically talking about neurovascular right now, Adam, 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 what could be some of your technology.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

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

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

Okay. Thank you, Adam.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

Yeah. Thank you.

[Operator]

Your next question is from the line of Clayton Marsh with Morgan Stanley.

[Clayton Marsh, VP 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 the early rollout of 6X, the key bits of feedback you received on those BTK cases and how willing have the docs been to switch up treatment methods. Just secondly on Thunderbolt, obviously, your current data for distal clot thrombectomy isn't great, albeit more sensed skew. 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, Chairman and CEO at Penumbra Inc]

Yeah. A couple of good questions. Let's start on arterial and sort of how that's going. Look, arterials, we're competing against open surgery. 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 going to win over those physicians. It's the predictability of it. With modulated aspiration 6X, it's just that much more predictable. It happens. It's fast. You're going to start to have that word of mouth. We saw that happen. There's a lot of discussion about it, a lot of excitement about it. I think over again, these things happen in waves. You don't just get everyone at once. It's not like that where you have a giant seminal clinical trial or you have a reimbursement or a guideline change. This is word of mouth.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

What do I do now? What is someone else doing? Should I try it? I did. Oh, wow, that's good. Word of mouth builds. It comes in waves. We have seen that obviously on the VTE front where we have had two quarters of this sort of wave, and we are onboarding folks for the next round of conversions. That is an exciting moment. The same thing on the arterial side is happening because the product just works. It works in smaller vessels. It works in the larger ones with seven. I think we will see that. As it relates to Thunderbolt going more distal, Thunderbolt right now is paired in a trial with our 72, our 68, and our 62. Sixty-two certainly can go a little more distal.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

When you really go into the places where you're not on label, which is the M3, you're on label in M2 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 stint treatment showed, it's a different story. And the 43 has done a really good job. Clot tends as you get smaller and smaller to sometimes, many times be a little less challenging to get out if you can just get the catheter there. So we'll wait and see. We haven't made any final decisions on how small you can use how small of a catheter you can use Thunderbolt with, and is there a benefit as you go smaller and smaller. But we'll let you know.

[Clayton Marsh, VP at Morgan Stanley]

Great. Thanks, Adam.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

Thank you.

[Operator]

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

[Richard Newitter, MD and Senior Equity Research Analyst at Truist Securities]

Thanks for taking the questions. Congrats on the quarter. Maybe just the first one on U.S. stroke. I know you guys have been at or close to 20% growth for U.S. neuro-thrombectomy 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? Or maybe you could benchmark us to what the market rate is that you're at?

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

Yeah. A couple of times, Richard, everyone wants to know the specific numbers. We're just going to go down this really tough path, of course, of number by number, quarter by quarter, and it's not going to be helpful. We obviously called out VTE because of just sort of the prominence of that growth and the effect that it had and the size of that market. Stroke, as I've said, we did really well. We clearly grew above the market. The market, as you know, has been growing at a small clip, but it's been not the same kind of growth that we've seen on the arterial side or venous side. It was clear just from our own data looking at places that are doing cases that used to not doing cases.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

We didn't really lose anybody, and we saw a significant group of new physicians sort of convert over. I think we're doing pretty well on the stroke side.

[Richard Newitter, MD and Senior Equity Research Analyst at Truist Securities]

Okay. I guess if you can share what maybe a rough estimate of the U.S. market is, and then I'll just provide my follow-up now. I'm not asking whether or not it's in guidance. 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. Should there be an opportunity for price as a tailwind or incremental driver in the second half from these new products? If you care to share whether or not you're factoring any of that into guidance, thanks.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

Yeah. The big thing that we've talked about obviously is Thunderbolt isn't in the guidance until we get approved. We'll obviously add it. We've said that before. Thunderbolt's the product that probably has the most obvious price for us. It's actually, ironically, if you look at the vast majority of what people are doing, whether they're using stent retriever and expensive guide catheters and all that kind of stuff, we're actually not going to be more expensive on a per-case basis, but for us, we'll get a price benefit for the use of Thunderbolt. That's true. The larger question about raising price, maybe you weren't asking this, but in case you were, in response to this moment in time, lots of companies we compete with are raising their prices. That's how they're seeing their growth.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

They're just saying, "My product now costs X." That is their growth. It's not volume growth. It's not market growth. In fact, in some of the cases, it's a decline, but covered over by raising prices. That's something that hospitals are all talking about right now. I've been brought into some of those conversations, and everyone's hearing about it. We have not done that, and it provides us because we have lots of growth coming from volume, new cases. That really does, in times when things are tough, not doing that is a big deal. People remember that in a positive way for a long time. I just wanted to make sure that was clear that we're not increasing our price.

[Operator]

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

[Matthew O'Brien, Principal and Senior Research Analyst at Piper Sandler]

Hello?

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

Hello. We got you now.

[Matthew O'Brien, Principal and Senior Research Analyst at Piper Sandler]

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? Sorry, Flash 2.0 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. Are you starting to see that penetration and conversion away from lytics maybe accelerating? I do have a follow-up.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

Yeah. I mean, just to give some sort of context, we obviously had a larger percentage of the market in DVT and PE when we did a couple two quarters ago. By definition, a bigger percentage of this growth is coming in PE, but we're still seeing it in DVT as well. Again, it really is, it's not coming from lytics as much, albeit there's always going to be somebody here and there, but the vast majority is really coming from other people, other mechanical products. Again, not to sort of be flippant or smart, but CAVT is just better. You're using a computer to actuate the valve. It works a lot faster. We've sort of shared what that looks like.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

As more and more people understand that, they hear it, they hear their friends, they go to meetings, they are talking about it, it brings people in. SIR had dozens and dozens of folks who have not ever used our product come up to us and want to engage in a conversation where in the past, that was not something they wanted to do. We are seeing that across the board. Again, it is a better product. We are not going to rest on our laurels. I talked about that in the prepared remarks. Innovation is going to continue with a priority focus on these CAVT products so that we stay ahead and we continue to make getting clot out more and more routine with these patients. That is what happens. These things happen in waves. They are not linear. I have to repeat that over and over again.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

That's not code for anything other than that's just a process. There's 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 for many, many years have been skeptical now be approaching us and be the ones primarily calling us versus us calling them. It's a testament to the extraordinary R&D work and, frankly, the patience and, frankly, dedication that our commercial team has to their customers.

[Matthew O'Brien, Principal and Senior Research Analyst at Piper Sandler]

Got it. Okay. Appreciate that. Then question for Maggie, and I'm sure Jason's going to shut this down, but just that gross margin improvement in the quarter was, again, kind of eye-popping. Peripheral's 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 that's still a long way to go, but I mean, could we start touching that kind of number even late this year or maybe Q2 of next year? Thank you.

[Maggie Yuen, CFO at Penumbra Inc]

Yeah. 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 look at our projection on this year's sequential improvement similar to last year. It's a similar phasing of how our improvement in product mix has an impact on our gross margin. At the same time, I also pointed out that in the second quarter, due to some accelerating investment in Ruby XL, trying 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 timing on investment, and we are still on the right track. Thank you.

[Operator]

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

[David Rescott, Senior Research Analyst covering Medical Technology at Baird]

Can I be heard?

[David Rescott, Senior Research Analyst covering Medical Technology at Baird]

Hello.

[Operator]

Your line is open.

[David Rescott, Senior Research Analyst covering Medical Technology at Baird]

Can you hear me?

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

Yes, we can. Hi, David.

[David Rescott, Senior Research Analyst covering Medical Technology at Baird]

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

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

Yeah. Thanks, David. It's a really good question. We've talked about it a couple of times. The investment is in two areas. One, obviously, on the innovation side, we've been working on new embolization technologies. Ruby XL is one of them that is there to solve a unique and pretty significant issue. 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 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. We have a lot of products. A vascular rep who's selling a suite now of embolization tools with yet another one to launch and then a suite of CAVT tools. Sometimes there are different customer bases.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

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

[David Rescott, Senior Research Analyst covering Medical Technology at Baird]

Okay. Great. Maybe on the medium kind of vessel segment and 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 read out to be. I am curious on any updated thoughts on that and whether or not maybe Thunderbolt could play a role in that market. Thank you.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

Yeah. That's a great question. It's pretty clear that if you're going pretty distal into the M3 and so on with a stent retriever, you shouldn't do that. That was, to be honest, I think for folks who have focused on aspiration as a company the whole time, that was fairly obvious. There's data recently published with our RED 43 showing a very different result in more distal vessels. I think you're right. If you're going to do it, you should be doing it with an appropriate-sized aspiration catheter. I think there's a benefit for aspiration in that area. As it relates to Thunderbolt, the question is still open how small of a catheter can benefit with the idea of modulated aspiration. Right now, we do have Thunderbolt on RED 62. That was part of our trial.

[Adam Elsesser, Chairman and CEO at Penumbra Inc]

That is not obviously as small as 43, but it certainly can go to sort of the mid-sized vessels. Those are not terms of art. Everyone has slightly different definitions. If a 62 fits, it has proven to be a very effective tool in the trial with Thunderbolt. I think we are positioned really well to be able to help all of those patients ultimately where the catheter can fit. That is something we have always been doing, and we are going to continue to do it.

[Operator]

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

[Cecilia Furlong, Senior Vice President and Head of Investor Relations at Penumbra Inc]

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, Senior Vice President and Head of Investor Relations
• Maggie Yuen, CFO
• Adam Elsesser, Chairman and CEO
• Jason Mills, EVP of Strategy

Analysts

• Richard Newitter, MD and Senior Equity Research Analyst at Truist Securities
• Travis Steed, MD and Equity Research of Medical Technology at Bank of America
• Ryan Zimmerman, Managing Director and Medical Technology Analyst at BTIG
• Mark McKinley, CFA at William Blair
• David Rescott, Senior Research Analyst covering Medical Technology at Baird
• Clayton Marsh, VP at Morgan Stanley
• Matthew O'Brien, Principal and Senior Research Analyst at Piper Sandler
• Pito Chickering, Director and Senior Equity Research Analyst at Deutsche Bank
• Lawrence Biegelsen, Senior Medical Technology Analyst at Wells Fargo
• Bill Plovanic, MD and Senior Equity Research Analyst at Canaccord
• Robert Marcus, Managing Director and Senior Analyst at JPMorgan