10-Q 1 pen-20220930.htm 10-Q pen-20220930
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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, 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 October 20, 2022, the registrant had 37,978,504 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, 2022December 31, 2021
Assets
Current assets:
Cash and cash equivalents$54,844 $59,379 
Marketable investments129,583 195,496 
Accounts receivable, net of allowance for credit losses of $656 and $2,092 at September 30, 2022 and December 31, 2021, respectively
189,006 133,940 
Inventories320,304 263,504 
Prepaid expenses and other current assets29,888 29,155 
Total current assets723,625 681,474 
Property and equipment, net64,082 58,856 
Operating lease right-of-use assets174,684 131,955 
Finance lease right-of-use assets34,114 36,276 
Intangible assets, net83,360 90,618 
Goodwill165,426 166,388 
Deferred taxes62,827 65,698 
Other non-current assets13,483 12,985 
Total assets$1,321,601 $1,244,250 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$25,365 $13,421 
Accrued liabilities101,672 99,796 
Current operating lease liabilities9,417 8,267 
Current finance lease liabilities1,878 1,713 
Total current liabilities138,332 123,197 
Non-current operating lease liabilities180,897 137,045 
Non-current finance lease liabilities25,325 26,523 
Other non-current liabilities3,295 3,558 
Total liabilities347,849 290,323 
Commitments and contingencies (Note 10)
Stockholders’ equity:
Common stock38 37 
Additional paid-in capital947,040 910,614 
Accumulated other comprehensive (loss) income(13,353)(2,630)
Retained earnings40,027 45,906 
Total stockholders’ equity973,752 953,927 
Total liabilities and stockholders’ equity$1,321,601 $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 September 30,Nine Months Ended September 30,
2022202120222021
Revenue$213,678 $190,117 $625,917 $543,579 
Cost of revenue78,351 70,205 229,137 193,644 
Gross profit135,327 119,912 396,780 349,935 
Operating expenses:
Research and development 21,320 16,734 61,443 52,548 
Sales, general and administrative 108,573 94,397 334,088 264,831 
Total operating expenses 129,893 111,131 395,531 317,379 
Income from operations5,434 8,781 1,249 32,556 
Interest (expense) income, net(43)138 (162)917 
Other expense, net(2,356)(1,137)(4,323)(3,021)
Income (loss) before income taxes3,035 7,782 (3,236)30,452 
Provision for (benefit from) income taxes5,306 (249)2,643 3,196 
Consolidated net (loss) income$(2,271)$8,031 $(5,879)$27,256 
Net loss attributable to non-controlling interest (819) (2,661)
Net (loss) income attributable to Penumbra, Inc.$(2,271)$8,850 $(5,879)$29,917 
Net (loss) income attributable to Penumbra, Inc. per share:
Basic$(0.06)$0.24 $(0.16)$0.82 
Diluted$(0.06)$0.24 $(0.16)$0.80 
Weighted average shares outstanding:
Basic37,918,452 36,617,961 37,778,362 36,532,822 
Diluted37,918,452 37,611,355 37,778,362 37,592,095 

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 September 30,Nine Months Ended September 30,
2022202120222021
Consolidated net (loss) income$(2,271)$8,031 $(5,879)$27,256 
Other comprehensive loss, net of tax:
Foreign currency translation adjustments, net of tax(2,812)(1,356)(7,013)(3,188)
Net change in unrealized losses on available-for-sale securities, net of tax(383)(66)(3,710)(446)
Total other comprehensive loss, net of tax(3,195)(1,422)(10,723)(3,634)
Consolidated comprehensive (loss) income$(5,466)$6,609 $(16,602)$23,622 
Net loss attributable to non-controlling interest (819) (2,661)
Comprehensive (loss) income attributable to Penumbra, Inc.$(5,466)$7,428 $(16,602)$26,283 

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 — — — — 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 
Issuance of common stock99,921 — 1,725 1,725 — 1,725 
Shares held for tax withholdings(11,737)— (1,887)— — (1,887)— (1,887)
Stock-based compensation— — 9,365 — — 9,365 — 9,365 
Other comprehensive loss— — — (3,195)— (3,195)— (3,195)
Net loss— — — (2,271)(2,271)— (2,271)
Balance at September 30, 202237,968,291 $38 $947,040 $(13,353)$40,027 $973,752 $ $973,752 








Penumbra, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
5

(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, 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 
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,
 20222021
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net (loss) income
$(5,879)$27,256 
Adjustments to reconcile consolidated net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization17,880 10,655 
Stock-based compensation27,381 24,101 
Inventory write-downs2,051 2,309 
Deferred taxes2,804 809 
Other879 1,685 
Changes in operating assets and liabilities:
Accounts receivable(57,357)(6,963)
Inventories(62,317)(45,812)
Prepaid expenses and other current and non-current assets(1,958)(7,096)
Accounts payable13,090 (1,189)
Accrued expenses and other non-current liabilities6,165 9,803 
Proceeds from lease incentives263 3,214 
Net cash (used in) provided by operating activities(56,998)18,772 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable investments (107,125)
Proceeds from sales of marketable investments1,180 2,000 
Proceeds from maturities of marketable investments60,713 97,967 
Purchases of property and equipment(15,736)(13,088)
Other (150)
Net cash provided by (used in) investing activities46,157 (20,396)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercises of stock options6,293 2,191 
Proceeds from issuance of stock under employee stock purchase plan7,998 7,354 
Payment of employee taxes related to vested stock(6,968)(10,521)
Payments of finance lease obligations(1,299)(1,056)
Other(137)(93)
Net cash provided by (used in) financing activities5,887 (2,125)
Effect of foreign exchange rate changes on cash and cash equivalents419 369 
NET DECREASE IN CASH AND CASH EQUIVALENTS(4,535)(3,380)
CASH AND CASH EQUIVALENTS—Beginning of period59,379 69,670 
CASH AND CASH EQUIVALENTS—End of period$54,844 $66,290 
NONCASH INVESTING AND FINANCING ACTIVITIES:
Right-of-use assets obtained in exchange for operating lease obligations$51,495 $100,178 
Right-of-use assets obtained in exchange for finance lease obligations$278 $1,113 
Purchase of property and equipment funded through accounts payable and accrued liabilities$1,847 $4,839 
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for amounts included in the measurement of operating lease liabilities$13,017 $6,214 
Cash paid for income taxes$2,503 $933 

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. 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 September 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 nine months ended September 30, 2022 and 2021, and the condensed consolidated statements of cash flows for the nine months ended September 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 September 30, 2022, the results of its operations for the three and nine months ended September 30, 2022 and 2021, the changes in its comprehensive income (loss) and stockholders’ equity for the three and nine months ended September 30, 2022 and 2021, and its cash flows for the nine months ended September 30, 2022 and 2021. The results for the three and nine months ended September 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 fiscal 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 nine months ended September 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, intangibles, 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
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.


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, 2022 and December 31, 2021 (in thousands):
September 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
U.S. treasury$14,477 $ $(569)$ $13,908 
U.S. agency and government sponsored securities7,001  (223) 6,778 
U.S. states and municipalities28,130  (679) 27,451 
Corporate bonds84,280  (2,834) 81,446 
Total$133,888 $ $(4,305)$ $129,583 
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 September 30, 2022, the total amortized cost basis of the Company’s impaired available-for-sale securities exceeded its fair value by $4.3 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 nine months ended September 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.
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, 2022 and December 31, 2021 (in thousands):
September 30, 2022
Less than 12 months12 months or moreTotal
Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
U.S. treasury$13,908 $(569)$ $ $13,908 $(569)
U.S. agency and government sponsored securities2,866 (129)3,912 (94)6,778 (223)
U.S. states and municipalities20,778 (467)5,803 (212)26,581 (679)
Corporate bonds65,326 (1,895)16,120 (939)81,446 (2,834)
Total$102,878 $(3,060)$25,835 $(1,245)$128,713 $(4,305)
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 September 30, 2022 (in thousands):
September 30, 2022
 Amortized CostFair Value
Due in less than one year$48,276 $47,495 
Due in one to five years85,612 82,088 
Total$133,888 $129,583 
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.
10

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 September 30, 2022 or December 31, 2021. During the nine months ended September 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 September 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 September 30, 2022 and December 31, 2021 (in thousands):
 As of September 30, 2022
 Level 1Level 2Level 3Fair Value
Financial Assets
Cash equivalents:
Money market funds$8,797 $ $ $8,797 
Marketable investments:
U.S. treasury13,908   13,908 
U.S. agency and government sponsored securities 6,778  6,778 
U.S. states and municipalities 27,451  27,451 
Corporate bonds 81,446  81,446 
Total$22,705 $