10-Q 1 pen-20210930.htm 10-Q pen-20210930
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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 September 30, 2021
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. o 
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 October 21, 2021, the registrant had 37,358,765 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)
September 30, 2021December 31, 2020
Assets
Current assets:
Cash and cash equivalents$66,290 $69,670 
Marketable investments200,637 195,162 
Accounts receivable, net of allowance for credit losses of $2,119 and $2,198 at September 30, 2021 and December 31, 2020, respectively
120,074 114,608 
Inventories258,316 219,527 
Prepaid expenses and other current assets22,670 18,735 
Total current assets667,987 617,702 
Property and equipment, net56,632 48,169 
Operating lease right-of-use assets133,552 41,192 
Finance lease right-of-use assets36,845 38,065 
Intangible assets, net9,490 10,639 
Goodwill7,911 8,372 
Deferred taxes49,454 50,139 
Other non-current assets11,370 8,705 
Total assets$973,241 $822,983 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$13,679 $14,109 
Accrued liabilities93,222 85,795 
Current operating lease liabilities7,531 4,697 
Current finance lease liabilities1,627 1,331 
Total current liabilities116,059 105,932 
Non-current operating lease liabilities138,169 44,183 
Non-current finance lease liabilities26,775 27,066 
Other non-current liabilities7,635 8,014 
Total liabilities288,638 185,195 
Commitments and contingencies (Note 9)
Stockholders’ equity:
Common stock36 36 
Additional paid-in capital621,457 598,299 
Accumulated other comprehensive (loss) income(1,093)2,541 
Retained earnings70,539 40,622 
Total Penumbra, Inc. stockholders’ equity690,939 641,498 
Non-controlling interest(6,336)(3,710)
Total stockholders’ equity684,603 637,788 
Total liabilities and stockholders’ equity$973,241 $822,983 
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 September 30,Nine Months Ended September 30,
2021202020212020
Revenue$190,117 $151,076 $543,579 $393,514 
Cost of revenue70,205 60,153 193,644 149,652 
Gross profit119,912 90,923 349,935 243,862 
Operating expenses:
Research and development 16,734 34,923 52,548 70,594 
Sales, general and administrative 94,397 76,158 264,831 210,465 
Total operating expenses 111,131 111,081 317,379 281,059 
Income (loss) from operations8,781 (20,158)32,556 (37,197)
Interest income, net138 413 917 820 
Other (expense) income, net(1,137)14 (3,021)(1,130)
Income (loss) before income taxes7,782 (19,731)30,452 (37,507)
(Benefit from) provision for income taxes(249)(9,855)3,196 (15,618)
Consolidated net income (loss)$8,031 $(9,876)$27,256 $(21,889)
Net loss attributable to non-controlling interest(819)(1,061)(2,661)(2,539)
Net income (loss) attributable to Penumbra, Inc.$8,850 $(8,815)$29,917 $(19,350)
Net income (loss) attributable to Penumbra, Inc. per share:
Basic$0.24 $(0.24)$0.82 $(0.54)
Diluted$0.24 $(0.24)$0.80 $(0.54)
Weighted average shares outstanding:
Basic36,617,961 36,207,716 36,532,822 35,568,591 
Diluted37,611,355 36,207,716 37,592,095 35,568,591 

See accompanying notes to the unaudited condensed consolidated financial statements
3

Penumbra, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(unaudited)
(in thousands)
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Consolidated net income (loss)$8,031 $(9,876)$27,256 $(21,889)
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments, net of tax(1,356)2,257 (3,188)1,970 
Net change in unrealized losses on available-for-sale securities, net of tax(66)(59)(446)455 
Total other comprehensive (loss) income, net of tax(1,422)2,198 (3,634)2,425 
Consolidated comprehensive income (loss)$6,609 $(7,678)$23,622 $(19,464)
Net loss attributable to non-controlling interest(819)(1,061)(2,661)(2,539)
Comprehensive income (loss) attributable to Penumbra, Inc.$7,428 $(6,617)$26,283 $(16,925)

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, 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 
Issuance of common stock113,760  1,178 1,178 35 1,213 
Shares held for tax withholdings(13,459)— (3,533)— — (3,533)— (3,533)
Stock-based compensation— — 6,938 — — 6,938 — 6,938 
Other comprehensive loss— — — (1,422)— (1,422)— (1,422)
Net income (loss)— — — 8,850 8,850 (819)8,031 
Balance at September 30, 202136,669,903 $36 $621,457 $(1,093)$70,539 $690,939 $(6,336)$684,603 

5

Penumbra, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(unaudited)
(in thousands, except share amounts)
Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossRetained Earnings Total Penumbra, Inc. Stockholders’ EquityNon-Controlling InterestTotal Stockholders’ Equity
SharesAmount
Balance at December 31, 201935,001,581 $35 $430,659 $(2,324)$57,522 $485,892 $(279)$485,613 
Issuance of common stock81,485  396 — — 396 — 396 
Shares held for tax withholdings(12,058)— (2,105)— — (2,105)— (2,105)
Stock-based compensation— — 6,774 —  6,774  6,774 
Cumulative effect adjustment(1)
— — — — (1,198)(1,198)— (1,198)
Other comprehensive loss— — — (2,251)— (2,251)— (2,251)
Net income (loss)— — — — 1,425 1,425 (537)888 
Balance at March 31, 202035,071,008 $35 $435,724 $(4,575)$57,749 $488,933 $(816)$488,117 
Issuance of common stock68,153  667 — — 667 124 791 
Issuance of common stock under employee stock purchase plan41,590 — 5,945 — — 5,945 — 5,945 
Issuance of common stock upon underwritten public offering, net of issuance cost865,963 1 134,758 — — 134,759 — 134,759 
Shares held for tax withholdings(10,304)— (1,768)— — (1,768)— (1,768)
Stock-based compensation  5,740 —  5,740 — 5,740 
Other comprehensive income— — — 2,478 — 2,478 — 2,478 
Net loss— — — — (11,960)(11,960)(941)(12,901)
Balance at June 30, 202036,036,410 $36 $581,066 $(2,097)$45,789 $624,794 $(1,633)$623,161 
Issuance of common stock284,443  3,208 — — 3,208 — 3,208 
Shares held for tax withholdings(21,735)— (4,764)— — (4,764)— (4,764)
Stock-based compensation — 5,785 — — 5,785 — 5,785 
Other comprehensive income — — 2,198 — 2,198 — 2,198 
Net loss — — — (8,815)(8,815)(1,061)(9,876)
Balance at September 30, 202036,299,118 $36 $585,295 $101 $36,974 $622,406 $(2,694)$619,712 
(1) Cumulative effect adjustments relate to the adoption of Accounting Standard Update (“ASU”) No. 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.
.See accompanying notes to the unaudited condensed consolidated financial statements

6

Penumbra, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
 Nine Months Ended September 30,
 20212020
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income (loss)
$27,256 $(21,889)
Adjustments to reconcile consolidated net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization10,655 9,433 
Stock-based compensation24,101 17,486 
Inventory write-downs2,309 2,280 
Deferred taxes809 (16,637)
Impairment of intangible asset
 2,500 
Other1,685 3,200 
Changes in operating assets and liabilities:
Accounts receivable(6,963)(7,443)
Inventories(45,812)(39,940)
Prepaid expenses and other current and non-current assets(7,096)(6,006)
Accounts payable(1,189)(229)
Accrued expenses and other non-current liabilities9,803 26,086 
Proceeds from lease incentives3,214  
Net cash provided by (used in) operating activities18,772 (31,159)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable investments(107,125)(120,014)
Proceeds from sales of marketable investments2,000 7,188 
Proceeds from maturities of marketable investments97,967 42,966 
Purchases of property and equipment(13,088)(21,003)
Other(150)(3,060)
Net cash used in investing activities(20,396)(93,923)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock upon underwritten public offering, net of issuance cost 134,759 
Proceeds from exercises of stock options2,191 4,395 
Proceeds from issuance of stock under employee stock purchase plan7,354 5,945 
Payment of employee taxes related to vested stock(10,521)(8,637)
Payments of finance lease obligations(1,056)(3,071)
Payment of acquisition-related obligations (683)
Other(93)(248)
Net cash (used in) provided by financing activities(2,125)132,460 
Effect of foreign exchange rate changes on cash and cash equivalents369 (42)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS(3,380)7,336 
CASH AND CASH EQUIVALENTS—Beginning of period69,670 72,779 
CASH AND CASH EQUIVALENTS—End of period$66,290 $80,115 
NONCASH INVESTING AND FINANCING ACTIVITIES:
Right-of-use assets obtained in exchange for operating lease obligations$100,178 $1,086 
Right-of-use assets obtained in exchange for finance lease obligations$1,113 $1,624 
Purchase of property and equipment funded through accounts payable and accrued liabilities$4,839 $1,517 
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for amounts included in the measurement of operating lease liabilities$6,214 $5,649 

See accompanying notes to the unaudited condensed consolidated financial statements
7

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.
2. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying condensed consolidated balance sheet as of September 30, 2021, the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive income (loss), and the condensed consolidated statements of stockholders’ equity for the three and nine months ended September 30, 2021 and 2020, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2021 and 2020 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, 2020 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 September 30, 2021, the results of its operations for the three and nine months ended September 30, 2021 and 2020, the changes in comprehensive income (loss) and stockholders’ equity for the three and nine months ended September 30, 2021 and 2020, and the cash flows for the nine months ended September 30, 2021 and 2020. The results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 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, 2020, 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 nine months ended September 30, 2021, 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, 2020.
The condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and its majority-owned subsidiary. The portion of equity and consolidated net income not attributable to the Company is considered non-controlling interest and is classified separately in the condensed consolidated financial statements. Any subsequent changes in the Company’s ownership interest while the Company retains its controlling interest in its majority-owned subsidiary will be accounted for as equity transactions. 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 devices, and
8

Penumbra, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
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.
Recently Adopted Accounting Standards
On January 1, 2021, the Company adopted ASU No. 2019-12, Income Taxes— Simplifying the Accounting for Income Taxes (“ASU 2019-12”). This new standard removes certain exceptions for recognizing deferred taxes of foreign investments, the incremental approach to performing intraperiod allocation, and calculating income taxes for year-to-date interim period losses when such losses exceed anticipated full year losses. The standard also adds guidance to reduce complexity in certain areas, including accounting for franchise taxes that are partially based on income, transactions with a government that result in a step up in goodwill tax basis, enacted tax law changes impact during interim periods, and allocation of taxes to members of a consolidated group which are not subject to tax. The adoption of ASU 2019-12 did not have a material impact on the consolidated financial statements during the nine months ended September 30, 2021.
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 September 30, 2021 and December 31, 2020 (in thousands):
September 30, 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 $20,277 $2 $(1)$ $20,278 
U.S. treasury7,489 1  — 7,490 
U.S. agency and government sponsored securities8,561 5 (4) 8,562 
U.S. states and municipalities42,167 93 (8) 42,252 
Corporate bonds121,883 227 (55) 122,055 
Total$200,377 $328 $(68)$ $200,637 
December 31, 2020
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 $4,242 $4 $ $ $4,246 
U.S. agency and government sponsored securities7,846 11   7,857 
U.S. states and municipalities47,934 162 (1) 48,095 
Corporate bonds134,298 669 (3) 134,964 
Total$194,320 $846 $(4)$ $195,162 
As of September 30, 2021, the total amortized cost basis of the Company’s impaired available-for-sale securities exceeded its fair value by a nominal amount. The Company reviewed its impaired available-for-sale securities and concluded that the decline in fair value was not related to credit losses and is recoverable. Accordingly, during the three and nine months ended September 30, 2021 no allowance for credit losses was recorded and instead the unrealized losses are reported as a component of accumulated other comprehensive (loss) income.
9

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 September 30, 2021 and December 31, 2020 (in thousands):
September 30, 2021
Less than 12 months12 months or moreTotal
Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
Commercial paper$6,993 $(1)$ $ $6,993 $(1)
U.S. agency and government sponsored securities4,008 (4)  4,008 (4)
U.S. states and municipalities12,168 (8)  12,168 (8)
Corporate bonds26,945 (55)  26,945 (55)
Total$50,114 $(68)$ $ $50,114 $(68)
December 31, 2020
Less than 12 months12 months or moreTotal
Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
U.S. states and municipalities$1,408 $(1)$ $ $1,408 $(1)
Corporate bonds12,552 (3)  12,552 (3)
Total$13,960 $(4)$ $ $13,960 $(4)
The following table presents the contractual maturities of the Company’s marketable investments as of September 30, 2021 (in thousands):
September 30, 2021
 Amortized CostFair Value
Due in less than one year$85,376 $85,523 
Due in one to five years115,001 115,114 
Total$200,377 $200,637 
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.
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.
10

Penumbra, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
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 September 30, 2021 or December 31, 2020. During the nine months ended September 30, 2021 and 2020, 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 September 30, 2021 or December 31, 2020.
The following tables set forth the Company’s financial assets measured at fair value by level within the fair value hierarchy as of September 30, 2021 and December 31, 2020 (in thousands):
 As of September 30, 2021
 Level 1Level 2Level 3Fair Value
Financial Assets
Cash equivalents:
Money market funds$25,373 $ $ $25,373 
Marketable investments:
Commercial paper 20,278  20,278 
U.S. treasury7,490   7,490 
U.S. agency and government sponsored securities 8,562  8,562 
U.S. states and municipalities 42,252