[Starts Abruptly] Fourth Quarter and Year-End 2019. A copy of the press release and financial tables, which includes the GAAP to non-GAAP reconciliations 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 described in our 10-K for the year-ended December 31, 2019 which is scheduled to be filed with the SEC on February 25, 2020. 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, certain financial measures are presented on a non-GAAP basis. A reconciliation of GAAP to non-GAAP financial measures is provided in our posted press release. We anticipate the prepared comments on today's call will run approximately 18 minutes. Adam Elsesser, Penumbra's Chairman and CEO will provide an update from the fourth quarter and year-end followed by a review of the business. Maggie Yuen, our Chief Financial Officer will then discuss our fourth quarter and year-end financial results and Sri Kosaraju, our President will end with our 2020 revenue guidance and closing remarks. With that, I would like to turn over the call over to Adam Elsesser.

Thank you, Jee. Good afternoon and thank you for joining our fourth quarter and year-end 2019 conference call. Penumbra had a strong fourth quarter and finished 2019. Our total revenues for the fourth quarter of 2019 were $145.3 million, an increase of 20.3% as reported from the fourth quarter of 2018. We had operating income in the quarter of $10.6 million compared to $6.7 million for the same period last year. From a financial metric standpoint, 2019 was an exceptional year. Our total annual revenues were $547.4 million, which represented growth of 23% over last year, our gross profit growth was even greater at 27.2% and we ended the year generating $47.5 million in operating income. Our balance sheet continues to be in a strong position with over $189 million in cash, and no debt. Importantly, we made great progress in 2019 towards our mission of helping more and more patients around the world. On December 3, we held our first ever Investor Day, where we outlined several key themes that have been important to our success and which we believe will remain key to our future. I would like to take a moment to touch on three of those specific themes. The first is innovation. Since 2015, we have launched over 18 new products. Our ENGINE driving innovation is getting more powerful every year. Last year this continued with the launch of JET 7 with XTRA FLEX technology. This latest technology has been a significant step forward for Penumbra and for the field. In addition, we are confident in a strong upcoming pipeline and cadence of new technology launches in 2020 and beyond. The second theme is patient markets. We expanded the number of patients that can help, we can help in 2019. Within our vascular business, we gained…

Thank you, Adam. On a personal note, I want to take a moment to thank you and Sri for the appointment and opportunity to join the Penumbra family. My first few months at Penumbra have only added to my enthusiasm about the company and its future. In a short time, I've been part of our first Investor Day, our U.S. national sales meeting and my first year and close at the company, I've gone to meet many great terrific people and gotten better understanding of Penumbra’s positive collaborative environment. I'm looking forward to the next several years ahead. While the fourth quarter ended December 31, 2019 our total revenues were $145.3 million, an increase of 20.3% reported and 20.8% in constant currency compared to the fourth quarter of 2018. Our geographic mix of sales in the quarter were 66% U.S. and 34% international. Neuro and vascular represented 59% and 41% of sales respectively. Revenue from our vascular business grew to $59.8 million in the fourth quarter of 2019, an increase of 27.9% reported or 28.1% in constant currency compared to the same period last year. We saw strong sequential growth and our year-over-year comparison include the previously discussed launch of our peripheral embolization product in Japan in the fourth quarter of last year. Revenue from our neuro business grew to $85.4 million in the fourth quarter of 2019, an increase of 15.4% reported or 16.1% in constant currency compared to the same period a year ago. Our neuro growth was primarily driven by sales of our Penumbra system for ischemic stroke, which benefited from strong procedural volumes. Our gross profit in the quarter was $98.1 million or 67.6% of revenue compared to $78.7 million or 65.2% of revenue for the same quarter last year. Our total operating expense for the…

Thank you, Maggie. I would like to add how excited I am for you to join our team. It is a great compliment to our organization in many ways, and we’re already seeing the positive impact that you bring. Today, we’re introducing revenue guidance for the full-year 2020 in the range of $635 million to $645 million which represents 16% to 18% growth over last year. As it's been our past practice, our initial revenue guidance represents our latest views in our markets, timing of new product introductions, and other relevant conditions. For 2020, there are three significant factors to consider with our initial revenue guidance. The first factor is related to the expected launch of four new technologies across vascular and neuro, including the REAL system. These four launches are currently expected to have positive impact in the back half of 2020. The second factor in our guidance is Japan and relates to the recent discussions with our distributor partner regarding current market dynamics in stroke and our future market opportunities in the country. Reimbursement changes for the Penumbra System which came into effect in November will impact the current market. As background, reimbursement for the Penumbra System was first established in Japan almost a decade ago with our first stroke system. Since then, our system has evolved with better performance and the need for fewer ancillary devices such as separators. The recently updated reimbursement level represents a decline of roughly 40% and takes into account the latest data devices in today's stroke cases in which physicians are no longer using a separator. The third factor is the declining need for stent retrievers, with our latest stroke aspiration technologies. While our 3D revascularisation device is not a significant portion of our revenues, we believe this is a trend worth…

Certainly. [Operator Instructions] Your first question comes from the line of Jason Mills with Canaccord Genuity. Please go ahead.

Hi, folks, can you hear me okay?

Yes, hi, Jason.

Hi, good afternoon, Adam. So wanted to start with Sri left off on the guidance front, if we could sort of a broad question with maybe a couple of questions within it. Sri, understand the concept of accelerating growth through the year. Could you give us a sense as we model this around, let's say the midpoint of your guidance at 17% sort of what level the first half could look like relative to the second half? And also within that, how we should gate contribution, incremental contribution from the REAL system as the year progresses? And then I had one follow-up.

Yes, Jason, thanks for the guidance question. There are a couple components to this. And I'll reiterate a couple of things that we mentioned on the call, just to bring it home. The four launches are obviously in our view impactful and many of them will be new products with distinct new revenue streams, given that they come at the back half of the year, as it relates to the full-year there's very little contribution of those. We're not going to break out as we typically don't sort of the specific contributions of what those new product contribute, revenue contributions are particularly for REAL. So when you look at it, the real impact of Japan is sort of the Delta, if you will for how people think about our guidance compared to maybe what we've typically introduced at the beginning of the year. And that is pretty easy to quantify that lies entirely in neuro and mostly within stroke. In 2019, our Japanese business you can read in the filings was about $40 million. And as I highlighted, the reimbursement change of roughly 40% you can sort of do the math to understand what the delta is. And I just want to make one point to come back to something I mentioned about the new product introductions given, there's not a lot in 2020 that really means we're set up to see it in 2021 and accelerating growth as we go into 2021.

Okay, thank you, Sri. That's helpful. And then I guess there's follow up, one on stroke and one on peripheral thrombectomy, can you the panel is not out yet. So we'll get at this, I suppose when it comes out, but could you talk about the market and your position within the fourth quarter in stroke seemed like you saw maybe a bit of an uptick in both instances, both specifically and in general. And then on peripheral thrombectomy, I guess Adam specific to pulmonary embolism with the indication, how do you plan to address that market sort of prior to in your new product launch? And then how much more impact will you have in that market beyond or after that launch occurs later this year? Thank you for taking the questions.

Jason, maybe I'll start and Adam will add on to the response here. I think a lot of folks try to assess where are we versus the competitors who have already announced the results for the December quarter. If you look at the numbers for the fourth quarter, our neurovascular business grew 16.1% on a constant currency basis. I think that puts us at the highest, if not the high of the group in terms of neurovascular results. As it relates to the stroke market, I think it's also consistent with what our peers have described. As you recall in the third quarter, we mentioned that the market had a little bit of a pause. We saw that carry into the beginning of the fourth quarter, but we saw strong end to the year particularly in December, we're going to continue to watch the market as we go forward. I think our expectations on next year as a market are pretty much the same as how we led into this year a similar number of absolute patients. And as it relates to further on the stroke market and our technology, maybe I'll ask Adam to chime in.

Yes, Jason to sort of give you a sense. As you know I'm in the field a lot talking to customers and the reaction to our current JET 7 XTRA FLEX remains kind of remarkably strong. I mean, it's really is, as we alluded to the best tracking catheter we've ever had. And the results have been really kind of extraordinary. That being said, as we've said in the past, we're not done. And we think there are things that can be done to make that even better. One of those products we're confident will come this year. And then we're pretty excited about what will continue to develop. So all of the conversations that we have about the other parts of our business including our amazing vascular business and now REAL should not imply or take away anything from the pride and the excitement and the feelings we have about how we’re positioned within the stroke market. We can do both of those and I think our teams have proven that. As it relates to the other part of your question around our pulmonary embolism, our PE indication, it really, I think it's pretty simple. We’re pretty excited about the opportunity to openly talk to doctors and physicians about what this product can do. In PE cases, a lot of these cases are emergent and urgent patients in real crisis, and I think have shown with the data that came out of our trial, that we can really have an impact. The time of the procedure, as you know from the data is quite short and very compelling. And I think will have a big impact on people who haven't thought about our product for that indication until now and that that is something we actively are going after. That being said, we haven't alluded to and described what the new product will do or series of products will do. But one can assume that it will make that argument or make that point even better. And without going into any competitive advantage here, you can rest assured that it will be a lot of fun to launch the new ones as well.

Thank you for all that.

Your next question comes from the line of Robbie Marcus with JPMorgan. Please go ahead.

Great, and thanks for taking the question. Since the Analyst Day, I wanted to see since you've gotten out with REAL VR and started talking with people, have you gotten in and started to have conversations and what's been the feedback so far?

Yes, Robbie. Thank you. It's a great question. And I touched on this in the prepared remarks a little. We quantified it a little, we've had over 200 conversations in the acute hospital setting. This is starting with our current neuro customers and having them bring in their colleagues who do rehab in those acute settings. I've personally been in a number of those conversations. And our team has been doing this now for a little over a month plus, and I will tell you, the conversations have gone extraordinarily well. People understand this immediately. Our physicians understand it because they see that not every patient is totally fine after a stroke and that there's real work ahead excuse me ahead and that's really challenging sometimes and doesn't always turn out in a seamless way for some of these patients. But the real excitement is coming from the physical and occupational therapists themselves. Not only in the meetings in the hospital setting which I've been in, but also in the APTA meeting that I mentioned in Denver, where they really kind of get it pretty quickly. They recognize the work that they're already doing, but they understand the benefit of being in a full presence immersive environment where you can really use that tool to in a colloquial setting or word choice say trip to brain to do things that you can't do in the real world. And it's really rare that somebody doesn't get it pretty quickly. So as the year unfolds, we will give you more and more information around it. But in the early stages of this, there really hasn't been something that has tempered our enthusiasm.

Great and maybe just a follow-up on the guidance question path, I didn't hear it but Sri can you give us any color on neuro versus peripheral growth? I know you typically don't break it out but maybe just qualitatively, how to think about that. I think you talked about Japan and how to think about that which maybe wasn't fully baked into street models. But even still, the guidance range came in lower than most people were thinking. So any color you can add on that, people just want to get comfortable that it's, it's not losing share in the U.S. stroke or with new competitors becoming more public on the peripheral side, any color you could give us to just give more confidence in the underlying numbers would be great. Thanks.

Yes, that's a great, that's a great opportunity to kind of reiterate something that we added in our comments today, the Japan business we continue to have a lot of optimism over in the future, the market volumes for stroke are growing. So the price impact of the reimbursement changes really felt in one year in 2020. But we highlighted are the growth of our business outside of Japan. And if you take a step back and think about what we're talking about here, the progression of what we introduced at the Investor Day and talking about the four new product launches and the ability to add to growth. We said, what the guidance means is the rest of our business grows over 20% in 2020. Now, I also answered in Jason’s question that the timing of those launches because they're so weighted towards the back of the year. We don't really see a lot of that in 2020 which again tells you that we're set up for accelerating growth in 2021. So from an isolated perspective of 2020, yes, Japan is weighing on the growth. But if you think about sort of the long-term trajectory of our business and what we laid out at the Investor Day for 2023. I would say we're not only very much on track, but I think in today's call, it should come across that we feel even more confident in our ability to get there.

Great, thanks.

Your next question comes from the line of Bob Hopkins with Bank of America. Please go ahead.

Hi, thanks. And good afternoon. I want to come back to just understanding the guidance in Japan, because I felt like I left the Analyst Day with you guys saying, I think you preview this to a certain degree said it was only growing 5% in the first nine months and you said you didn't think it would grow in 2020. And so did something change from the Analyst Day to today in terms of your learnings and how big the reimbursement cut was? Or did I just misinterpret what you were saying at the Analyst Day?

Bob, it’s Adam. Let me try to address that as best I can. So, as it relates to Japan, we're sort of looking at our business in two categories right now. The first category is sort of our existing products that are in Japan. And maybe I should start, we have a great relationship with a very long time distributor in Japan. We worked with for many years, they distribute our stroke products and coils, primarily our peripheral coils. And those businesses, particularly stroke remain strong, but for this reimbursement issue. The second category and this is, I think not something we've talked about and in our prepared remarks, we address that we've had recent conversations. The second category is sort of new products that aren't in Japan. And we've agreed with our distributor partner that they'll continue to distribute our new interventional products like Indigo, which is not yet approved in Japan. But non-interventional products, like the REAL system, we will commercialize those directly. So there's a little bit of nuance there. And notwithstanding the short-term issues that we just outlined around reimbursement and all, we really still expect that we have significant opportunities with all our products, including REAL in the long-term in Japan.

I know that that's helpful color. But I'm just curious if some of the stuff happened after the Analyst Day because I really felt like I had the message on Japan at the Analyst Day and then and obviously again, it's not a big deal bigger picture, but I'm just kind of curious was this stuff that sort of was already well known at the Analyst Day or kind of happened afterwards?

Yes, the reimbursement thing was obviously very well known at the Analyst Day and I think we even mentioned it and used the same commentary about the magnitude of the reimbursement change. So I think the math on that is the math on that in December, and today what is different, if you call it different is that discussion were ongoing about sort of the next phase of products and I think that's what we're clarifying today. And that is new. And obviously from our perspective it's great for us and our partner in how we both look at the future together.

Okay. And then the other little thing I just want to ask you about real quickly in the 2020 guidance that you gave, appreciate your commentary on the U.S. stroke market from a patient perspective. And sorry if I missed this, but do you assume that your market share is basically stable and you basically grow in line with the numbers that you provided in terms of the number of new patients or do you assume share loss or share gains? Just want to get a sense for what's in there on U.S. stroke?

Yes, we like prior years haven’t sort of provided the detail on how we see our share moving, I think we try to give our best view of the market, which I think is getting a little bit harder to be honest to kind of be precise about. But I think we feel confident in that market view. I think the other thing we can say on the share part, we obviously have JET 7 XTRA FLEX out there for a little bit and the experience, I think is pretty well known. The additional technologies that we have coming in 2020 and beyond, I think is the other way to measure sort of our position, if you will, and we'll have to wait on those to provide more color. But just like we've done in prior years, Bob, the guidance takes into account, all of those factors and we don't necessarily try to guide on market share.

Okay, and do you assume any real sales in your guidance for this year, sorry just one last one.

Yes. So again, sorry to give you an unsatisfying response on this, about not breaking down the components. Just to go back to what Adam said, we are out talking to people about it. Obviously, we're learning a lot. It's a new sales cycle for us. I characterize what, I think we characterize the feedback to be I'd say on the better end, if not better than what we had expected when we went out with this exercise in our first few months. To characterize sales right now is a little premature. So the way that we’re planning to provide updates is a little bit more on the qualitative side, similar to what we provided today. And as we get closer to having revenue discussions and visibility, we're certainly going to provide that.

Okay, thanks so much.

Thanks Bob.

Your next question comes from the line of Larry Biegelsen with Wells Fargo. Please go ahead.

Hey, guys, thanks for taking the question. Now, I understand you will talk about share going forward but in the past, at least based on the Q4 results in the past, you've talked Penumbra stroke products being used in 60% to 65% of stroke procedures. So is that still the case through 2019. And as a follow-up to that, how are you seeing conversion to JET 7, are some customers or clinicians preferring to stick with ACE 68?

The first part of your question, Larry on the 60% to 65%. Yes, we very much still believe we're in that range. And just to make it really clear, I think not to misinterpret the guidance today. I think our confidence on our stroke business and what we have coming is the same if not better than where it's been before. And that can be evident in how we talk about our innovation pipeline. So I think the prospect of our ability with new technology and what it can do is the same if not better, and just to be clear, nothing about the guidance has any impact on how we view the rest of the business. This is purely about Japan in reimbursement.

And Larry?

Go ahead, sorry Adam.

Yes, sorry Larry. To address the JET 7 conversion question, the conversion is definitely continuing. And frankly, as we've indicated in the past, it's pretty sticky. There are some physicians that you know that this is a very personal sort of choice, people like different access tools, some use long sheets like our Neuronmax product, other use balloon guides, and that sometimes will impact their catheter choices based on what fits into those various access tools. So there may be certain physicians who don't convert for those reasons, which is fine. We think again as I've alluded to that as our tools continue to evolve this year and next, that we will provide compelling reasons for them to continue to reconsider their current techniques into sort of more and more modern techniques. We're pretty good at that. And our technology has done that for many years, as you know five years ago, we were talking about converting people from stent retrievers to aspiration and that conversion processes is well underway. So we think that there's room to continue to make those moves as our products evolve and frankly get easier to track and faster to remove clot, so which is the goal of the case.

Thanks for that. One on REAL, what I appreciate the earlier color, what about REAL is resonating most with the accounts you spoken to so far? And are there any kind of early barriers to adoption or tweaks you've had to make to the business model? Thanks for taking the questions.

Yes, Larry, I’m delighted to answer that question. That's a great question. The immediate, there's a sort of a layer of sort of aha moment that I've seen, pretty consistently. Again, I've been in a number of these conversations to really sort of get a feel for it. The first aha moment from all the therapists who see it is very simple, which is oh my god, this is a tool that will engage my patients that will take patients that many times are resistant to therapy, they're depressed. Their situation is very different than what it was just several days ago, before they've had an event. This is conversations in the acute hospital setting and we can engage them, we can gauge them very quickly in a way that we can't do if you will in the real world. And that's the first sort of magic reaction. After that when they start to understand what the system is doing in the scientific foundation, it just sort of cemented because then it all makes sense. So that's the pathway or the typical reaction that we've seen, and it's really powerful. And then to answer the final question about are there any sort of barriers or things that have made us tweak our financial model or business model? The answer is no, not yet.

Okay, perfect. Thanks for taking the questions.

Yes, thanks Larry.

Your next question comes from Margaret Kaczor with William Blair. Your line is open.

Hi, thanks for taking the question. This is Brandon on for Margaret. I wanted to focus first on the peripheral side and peripheral vascular, if I recall correctly from the analysts that you have think two new products slated to launch through 2020. So as you think about those new products, where do you think you'll see the most benefit from them? Do you think they can help open new accounts, maybe open new market opportunities, perhaps with different sizes can be used and do new procedures, or maybe just drive utilization? So how are you kind of thinking about those products especially as you think about 2020?

It's a great question, without really revealing what those products are yet, which as you know, I got to be careful for competitive reasons. The way we look at it is sort of all of the above if you will. As you know, we're in both the arterial side and the venous side as well as PE and the products are sort of slightly different that will be beneficial for those, those different vascular beds. And we think that the suite of tools that we will launch mid-year and end of the year will cover the entirety of those applications or as close to it as we can with this phase. And we think we can, they will do better. We think they will make the cases easier, faster, better, all the things that will begin to continue to compel physicians to realize that just removing the blood clot in an acute setting is better than dissolving it or macerating it and sending it throughout the rest of the body. And it's that journey that we think these new products will continue to help us do throughout the various vascular beds.

Got it, okay. That makes sense and sort of follow-up kind of thing in the peripheral side. The embolization side of the vascular businesses is a pretty meaningful business as well. And I feel like we give it a little less focus. So maybe can you just kind of talk about from a high level, what the market opportunity is there? I think in at medical conferences or even on some of your earnings calls, there have been wide varying use for those embolization coils. So how do you kind of size up that market? Where are you today in penetrating that market and how much do you have left to go going forward? Thanks.

Yes, Brandon, it's good question. We haven't yet quantified that market in terms of patients or cases. But let me sort of address it this way. So if you look at just the detachable coil market, that's a defined market. If you look at the larger market in which any tool, any embolization tool whether it's pushable coils, detachable coils, liquids, glues, foams and gels there is a lot of products that can be used, plugs. We view that opportunity where we can make a difference in all of those, where if you look at the reason we've succeeded, we have very unique offerings. Our products do not tend to look like other companies products there, bigger coils or softer coils, their coils that can stop in the middle of a high flow vessel and not run further down. These are very uniquely designed products. And I think that effort, that our amazing engineers have spent time doing is paying off because they're needed in the space and we're seeing that continue to grow. So I don't think we can quantify it as a scale of a market in quite the same size as the peripheral thrombectomy market. But it's still not insignificant and we do think there's growth left in it.

There are currently no further questions at this time, Ms. Hamlyn-Harris, I turn the call back over to you.

And with that, on behalf of our management, thank you again for joining us today and for your interest in Penumbra. We look forward to updating you on our first quarter call.

This concludes today’s conference call. Thank you for joining. You may now disconnect.