10-Q 1 pen-20220630.htm 10-Q pen-20220630
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____ to _____         
Commission File Number: 001-37557
Penumbra, Inc.
(Exact name of registrant as specified in its charter)
Delaware05-0605598
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)

One Penumbra Place
Alameda, CA 94502
(Address of principal executive offices, including zip code)

(510) 748-3200
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, Par value $0.001 per sharePENThe New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes: ☒    No:  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes:  ☒    No:  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes:    No:  ☒
As of July 21, 2022, the registrant had 37,888,366 shares of common stock, par value $0.001 per share, outstanding.




FORM 10-Q
TABLE OF CONTENTS
 
Page



PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
Penumbra, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands)
June 30, 2022December 31, 2021
Assets
Current assets:
Cash and cash equivalents$58,234 $59,379 
Marketable investments146,135 195,496 
Accounts receivable, net of allowance for credit losses of $862 and $2,092 at June 30, 2022 and December 31, 2021, respectively
187,389 133,940 
Inventories295,883 263,504 
Prepaid expenses and other current assets30,320 29,155 
Total current assets717,961 681,474 
Property and equipment, net63,458 58,856 
Operating lease right-of-use assets177,423 131,955 
Finance lease right-of-use assets34,743 36,276 
Intangible assets, net86,162 90,618 
Goodwill165,779 166,388 
Deferred taxes68,404 65,698 
Other non-current assets13,970 12,985 
Total assets$1,327,900 $1,244,250 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$23,096 $13,421 
Accrued liabilities111,405 99,796 
Current operating lease liabilities9,297 8,267 
Current finance lease liabilities1,806 1,713 
Total current liabilities145,604 123,197 
Non-current operating lease liabilities183,155 137,045 
Non-current finance lease liabilities25,654 26,523 
Other non-current liabilities3,472 3,558 
Total liabilities357,885 290,323 
Commitments and contingencies (Note 10)
Stockholders’ equity:
Common stock38 37 
Additional paid-in capital937,837 910,614 
Accumulated other comprehensive (loss) income(10,158)(2,630)
Retained earnings42,298 45,906 
Total stockholders’ equity970,015 953,927 
Total liabilities and stockholders’ equity$1,327,900 $1,244,250 

See accompanying notes to the unaudited condensed consolidated financial statements
2

Penumbra, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except share and per share amounts)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Revenue$208,344 $184,258 $412,239 $353,462 
Cost of revenue74,309 65,572 150,786 123,439 
Gross profit134,035 118,686 261,453 230,023 
Operating expenses:
Research and development 19,559 17,738 40,123 35,814 
Sales, general and administrative 114,615 90,636 225,515 170,434 
Total operating expenses 134,174 108,374 265,638 206,248 
(Loss) income from operations(139)10,312 (4,185)23,775 
Interest (expense) income, net(72)299 (119)779 
Other expense, net(956)(408)(1,967)(1,884)
(Loss) income before income taxes(1,167)10,203 (6,271)22,670 
Provision for (benefit from) income taxes2,520 1,904 (2,663)3,445 
Consolidated net (loss) income$(3,687)$8,299 $(3,608)$19,225 
Net loss attributable to non-controlling interest (932) (1,842)
Net (loss) income attributable to Penumbra, Inc.$(3,687)$9,231 $(3,608)$21,067 
Net (loss) income attributable to Penumbra, Inc. per share:
Basic$(0.10)$0.25 $(0.10)$0.58 
Diluted$(0.10)$0.25 $(0.10)$0.56 
Weighted average shares outstanding:
Basic37,767,519 36,523,011 37,707,156 36,489,548 
Diluted37,767,519 37,582,348 37,707,156 37,564,881 

See accompanying notes to the unaudited condensed consolidated financial statements
3

Penumbra, Inc.
Condensed Consolidated Statements of Comprehensive (Loss) Income
(unaudited)
(in thousands)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Consolidated net (loss) income$(3,687)$8,299 $(3,608)$19,225 
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments, net of tax(3,333)863 (4,201)(1,832)
Net change in unrealized losses on available-for-sale securities, net of tax(853)(109)(3,327)(380)
Total other comprehensive (loss) income, net of tax(4,186)754 (7,528)(2,212)
Consolidated comprehensive (loss) income$(7,873)$9,053 $(11,136)$17,013 
Net loss attributable to non-controlling interest (932) (1,842)
Comprehensive (loss) income attributable to Penumbra, Inc.$(7,873)$9,985 $(11,136)$18,855 

See accompanying notes to the unaudited condensed consolidated financial statements

4

Penumbra, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(unaudited)
(in thousands, except share amounts)
Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive (Loss) IncomeRetained Earnings Total Penumbra, Inc. Stockholders’ EquityNon-Controlling InterestTotal Stockholders’ Equity
SharesAmount
Balance at December 31, 202137,578,483 $37 $910,614 $(2,630)$45,906 $953,927 $ $953,927 
Issuance of common stock103,984 1 1,102 — — 1,103 — 1,103 
Shares held for tax withholdings(14,243)— (3,181)— — (3,181)— (3,181)
Stock-based compensation— — 10,716 — — 10,716 — 10,716 
Other comprehensive loss— — — (3,342)— (3,342)— (3,342)
Net income (loss)— — — — 79 79 — 79 
Balance at March 31, 202237,668,224 $38 $919,251 $(5,972)$45,985 $959,302 $ $959,302 
Issuance of common stock158,735  3,466 — — 3,466  3,466 
Issuance of common stock under employee stock purchase plan66,098 — 7,998 — — 7,998 — 7,998 
Shares held for tax withholdings(12,950)— (1,900)— — (1,900)— (1,900)
Stock-based compensation— — 9,022 — — 9,022 — 9,022 
Other comprehensive loss— — — (4,186)— (4,186)— (4,186)
Net (loss)— — — — (3,687)(3,687) (3,687)
Balance at June 30, 202237,880,107 $38 $937,837 $(10,158)$42,298 $970,015 $ $970,015 
Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossRetained Earnings Total Penumbra, Inc. Stockholders’ EquityNon-Controlling InterestTotal Stockholders’ Equity
SharesAmount
Balance at December 31, 202036,414,732 $36 $598,299 $2,541 $40,622 $641,498 $(3,710)$637,788 
Issuance of common stock79,080 — 666 — — 666 — 666 
Shares held for tax withholdings(11,955)— (3,036)— — (3,036)— (3,036)
Stock-based compensation— — 7,093 — — 7,093 — 7,093 
Other comprehensive loss— — — (2,966)— (2,966)— (2,966)
Net income (loss)— — — — 11,836 11,836 (910)10,926 
Balance at March 31, 202136,481,857 $36 $603,022 $(425)$52,458 $655,091 $(4,620)$650,471 
Issuance of common stock67,547 — 312 — — 312 — 312 
Issuance of common stock under employee stock purchase plan35,221 — 7,354 — — 7,354 — 7,354 
Shares held for tax withholdings(15,023)— (3,952)— — (3,952)— (3,952)
Stock-based compensation  10,138 —  10,138 — 10,138 
Other comprehensive income— — — 754 — 754 — 754 
Net income (loss)— — — — 9,231 9,231 (932)8,299 
Balance at June 30, 202136,569,602 $36 $616,874 $329 $61,689 $678,928 $(5,552)$673,376 
See accompanying notes to the unaudited condensed consolidated financial statements
5

Penumbra, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
 Six Months Ended June 30,
 20222021
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net (loss) income
$(3,608)$19,225 
Adjustments to reconcile consolidated net (loss) income to net cash used in operating activities:
Depreciation and amortization11,655 7,022 
Stock-based compensation17,679 16,198 
Inventory write-downs1,573 1,951 
Deferred taxes(2,741)2,570 
Other(749)1,309 
Changes in operating assets and liabilities:
Accounts receivable(54,299)(22,898)
Inventories(36,051)(41,543)
Prepaid expenses and other current and non-current assets(2,460)(5,843)
Accounts payable9,024 (689)
Accrued expenses and other non-current liabilities15,658 5,020 
Proceeds from lease incentives230  
Net cash used in operating activities(44,089)(17,678)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable investments (32,939)
Proceeds from sales of marketable investments1,180 2,000 
Proceeds from maturities of marketable investments44,579 67,810 
Purchases of property and equipment(9,388)(7,286)
Other (150)
Net cash provided by investing activities36,371 29,435 
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercises of stock options4,568 978 
Proceeds from issuance of stock under employee stock purchase plan7,998 7,354 
Payment of employee taxes related to vested stock(5,081)(6,988)
Payments of finance lease obligations(858)(692)
Other(137)(93)
Net cash provided by financing activities6,490 559 
Effect of foreign exchange rate changes on cash and cash equivalents83 291 
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS(1,145)12,607 
CASH AND CASH EQUIVALENTS—Beginning of period59,379 69,670 
CASH AND CASH EQUIVALENTS—End of period$58,234 $82,277 
NONCASH INVESTING AND FINANCING ACTIVITIES:
Right-of-use assets obtained in exchange for operating lease obligations$51,191 $54,444 
Right-of-use assets obtained in exchange for finance lease obligations$89 $520 
Purchase of property and equipment funded through accounts payable and accrued liabilities$3,059 $2,236 
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for amounts included in the measurement of operating lease liabilities$8,458 $3,914 
Cash paid for income taxes$2,157 $689 

See accompanying notes to the unaudited condensed consolidated financial statements
6

Penumbra, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

1. Organization and Description of Business
Penumbra, Inc. (the “Company”) is a global healthcare company focused on innovative therapies. The Company designs, develops, manufactures and markets novel products and has a broad portfolio that addresses challenging medical conditions in markets with significant unmet need. The Company focuses on developing, manufacturing and marketing novel products for use by specialist physicians and other healthcare providers to drive improved clinical and health outcomes. The Company believes that the cost-effectiveness of our products is attractive to our customers.
2. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying condensed consolidated balance sheet as of June 30, 2022, the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive (loss) income, and the condensed consolidated statements of stockholders’ equity for the three and six months ended June 30, 2022 and 2021, and the condensed consolidated statements of cash flows for the six months ended June 30, 2022 and 2021 are unaudited. The unaudited condensed consolidated financial statements included herein have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The condensed consolidated balance sheet data as of December 31, 2021 was derived from the audited financial statements as of that date.
The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments of a normal recurring nature considered necessary to state fairly the Company’s financial position as of June 30, 2022, the results of its operations for the three and six months ended June 30, 2022 and 2021, the changes in comprehensive income (loss) and stockholders’ equity for the three and six months ended June 30, 2022 and 2021, and the cash flows for the six months ended June 30, 2022 and 2021. The results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022 or for any other future annual or interim period.
The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K. There have been no changes to the Company’s significant accounting policies during the six months ended June 30, 2022, as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and equity accounts; disclosure of contingent assets and liabilities at the date of the financial statements; and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to marketable investments, allowances for credit losses, the amount of variable consideration included in the transaction price, warranty reserve, valuation of inventories, useful lives of property and equipment, operating and financing lease right-of-use (“ROU”) assets and liabilities, income taxes, contingent consideration and other contingencies, among others. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other data. Actual results could differ from those estimates.
Segments
The Company determined its operating segment on the same basis that it uses to evaluate its performance internally. The Company has one business activity: the design, development, manufacturing and marketing of innovative medical products, and operates as one operating segment. The Company’s chief operating decision-maker, its Chief Executive Officer, reviews its consolidated operating results for the purpose of allocating resources and evaluating financial performance.
7

Penumbra, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)


3. Investments and Fair Value of Financial Instruments
Marketable Investments
The Company’s marketable investments have been classified and accounted for as available-for-sale. The following table presents the Company’s marketable investments as of June 30, 2022 and December 31, 2021 (in thousands):
June 30, 2022
Securities with net gains or losses in accumulated other comprehensive income (loss)    
Amortized CostGross Unrealized GainsGross Unrealized LossesAllowance
 for
 Credit Loss
Fair Value
Commercial paper $5,998 $ $(23)$ $5,975 
U.S. treasury14,473  (470) 14,003 
U.S. agency and government sponsored securities8,502  (189) 8,313 
U.S. states and municipalities30,130  (655) 29,475 
Corporate bonds90,952  (2,583) 88,369 
Total$150,055 $ $(3,920)$ $146,135 
December 31, 2021
Securities with net gains or losses in accumulated other comprehensive income (loss)
Amortized CostGross Unrealized GainsGross Unrealized LossesAllowance
 for
 Credit Loss
Fair Value
Commercial paper $20,286 $ $(10)$ $20,276 
U.S. treasury14,464  (77) 14,387 
U.S. agency and government sponsored securities11,553 1 (19) 11,535 
U.S. states and municipalities39,436 39 (89) 39,386 
Corporate bonds110,354 49 (491) 109,912 
Total$196,093 $89 $(686)$ $195,496 
As of June 30, 2022, the total amortized cost basis of the Company’s impaired available-for-sale securities exceeded its fair value by $3.9 million, which was primarily attributable to widening credit spreads and rising interest rates since purchase. The Company reviewed its impaired available-for-sale securities and concluded that the decline in fair value was not related to credit losses and that it is more likely than not that the entire amortized cost of each impaired security will be recoverable before the Company is required to sell them or when the security matures. Accordingly, during the three and six months ended June 30, 2022, no allowance for credit losses was recorded and instead the unrealized losses are reported as a component of accumulated other comprehensive (loss) income.
8

Penumbra, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The following tables present the gross unrealized losses and the fair value for those marketable investments that were in an unrealized loss position for less than twelve months or for twelve months or more as of June 30, 2022 and December 31, 2021 (in thousands):
June 30, 2022
Less than 12 months12 months or moreTotal
Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
Commercial paper$5,975 $(23)$ $ $5,975 $(23)
U.S. treasury14,003 (470)  14,003 (470)
U.S. agency and government sponsored securities8,313 (189)  8,313 (189)
U.S. states and municipalities26,953 (577)1,522 (78)28,475 (655)
Corporate bonds81,263 (2,322)7,106 (261)88,369 (2,583)
Total$136,507 $(3,581)$8,628 $(339)$145,135 $(3,920)
December 31, 2021
Less than 12 months12 months or moreTotal
Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
Commercial paper$16,977 $(10)$ $ $16,977 $(10)
U.S. treasury14,387 (77)  14,387 (77)
U.S. agency and government sponsored securities6,985 (19)  6,985 (19)
U.S. states and municipalities21,924 (89)  21,924 (89)
Corporate bonds85,513 (491)  85,513 (491)
Total$145,786 $(686)$ $ $145,786 $(686)
The following table presents the contractual maturities of the Company’s marketable investments as of June 30, 2022 (in thousands):
June 30, 2022
 Amortized CostFair Value
Due in less than one year$51,834 $51,254 
Due in one to five years98,221 94,881 
Total$150,055 $146,135 
Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The categorization of a financial instrument within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.
9

Penumbra, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The Company classifies its cash equivalents and marketable investments within Level 1 and Level 2, as it uses quoted market prices or alternative pricing sources and models utilizing market observable inputs.
The Company determined the fair value of its Level 1 financial instruments, which are traded in active markets, using quoted market prices for identical instruments.
Marketable investments classified within Level 2 of the fair value hierarchy are valued based on other observable inputs, including broker or dealer quotations or alternative pricing sources. When quoted prices in active markets for identical assets or liabilities are not available, the Company relies on non-binding quotes from its investment managers, which are based on proprietary valuation models of independent pricing services. These models generally use inputs such as observable market data, quoted market prices for similar instruments, historical pricing trends of a security as relative to its peers. To validate the fair value determination provided by its investment managers, the Company reviews the pricing movement in the context of overall market trends and trading information from its investment managers. In addition, the Company assesses the inputs and methods used in determining the fair value in order to determine the classification of securities in the fair value hierarchy.
The Company did not hold any Level 3 marketable investments as of June 30, 2022 or December 31, 2021. During the six months ended June 30, 2022 and 2021, the Company did not have any transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy. Additionally, the Company did not have any financial assets and liabilities measured at fair value on a non-recurring basis as of June 30, 2022 or December 31, 2021.
The following tables set forth the Company’s financial assets measured at fair value by level within the fair value hierarchy as of June 30, 2022 and December 31, 2021 (in thousands):
 As of June 30, 2022
 Level 1Level 2Level 3Fair Value
Financial Assets
Cash equivalents:
Commercial paper$ $4,389 $ $4,389 
Money market funds14,840   14,840 
Marketable investments:
Commercial paper 5,975  5,975 
U.S. treasury14,003   14,003 
U.S. agency and government sponsored securities 8,313  8,313 
U.S. states and municipalities 29,475  29,475 
Corporate bonds 88,369  88,369 
Total$28,843 $136,521 $ $165,364 
 As of December 31, 2021
 Level 1Level 2Level 3Fair Value
Financial Assets
Cash equivalents:
Money market funds$10,509 $ $ $10,509 
Marketable investments:
Commercial paper 20,276  20,276 
U.S. treasury14,387   14,387 
U.S. agency and government sponsored securities 11,535  11,535 
U.S. states and municipalities 39,386  39,386 
Corporate bonds 109,912  109,912 
Total$24,896 $181,109 $ $206,005 


10

Penumbra, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
4. Balance Sheet Components
Inventories
The following table shows the components of inventories as of June 30, 2022 and December 31, 2021 (in thousands):
 June 30, 2022December 31, 2021
Raw materials$75,484 $68,374 
Work in process33,902 18,678 
Finished goods186,497 176,452 
Inventories$295,883