Good afternoon. My name is Chris, and I'll be your conference operator today. At this time, I'd like to welcome everyone to Penumbra's Fourth Quarter and Year End 2021 Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator instructions] I would like to introduce miss Jee Hamlyn-Harris Investor Relations for Penumbra, Miss Hamlyn-Harris, you may begin your conference.

Thank you, operator and thank you all for joining us on today's call to discuss Penumbra's earnings release for the fourth quarter and year end 2021. A copy of the press release and financial tables, which includes a GAAP to non-GAAP reconciliation can be viewed under the Investors tab on our company website at www.penumbrainc.com. During the course of this conference call, the company will make forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding our financial performance, commercialization, clinical trials, regulatory status, quality compliance and business trends. Actual results could differ materially from those stated or implied by our forward-looking statements due to certain risks and uncertainties, including those referenced in our 10-K for the year ended December 31, 2021 which is schedule to be filed with the SEC on February 22, 2022. 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, including but not limited to the impact of the COVID-19 pandemic on our business, results of operations and financial conditions. 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 20 minutes. Adam Elsesser, Penumbra's Chairman and CEO, will provide a business update; Maggie Yuen, our Chief Financial Officer, will then discuss our financial results for the fourth quarter and full year and Jason Mills, our Executive Vice President of Strategy, will discuss our 2022 guidance. With that, I would like to turn over the call to Adam Elsesser.

Thank you, Jee. Good afternoon, everybody. Thank you for joining Penumbra's fourth quarter and yearend 2021 conference call. Our total revenues for the fourth quarter were $204 million, a year-over-year increase of 22.2% as reported and 23% in constant currency and a 7.3% sequential increase from the third quarter. For the full year 2021, our total annual revenues were $747.6 million, which represented growth of 33.4% over full year 2020. In the fourth quarter, we achieved record revenue in both our neuro and vascular businesses. Also, we started making progress toward our goal of building a safe and secure healthcare platform using immersive computing to help a significant number of patients. In the early part of this first quarter of 2022, we navigated the same macro challenges that every company in our field is seeing, including severe staffing issues, particularly in hospitals, supply constraints, rising inflation and other COVID related challenges. That said, our team is stronger than ever and able to take on important work necessary to help the millions of patients that reside within the six large under penetrated markets for serving. During the last two years of the pandemic, the Penumbra team delivered several new paradigm changing products to our physician customers, and we continue to invest significantly in new innovation within each of these markets, as well as in production to ensure a steady supply chain as possible. These investments matter to the long term growth and profitability for our business and we are also excited about several new important products we expect to bring to our customers within neurovascular and immersive healthcare later this year. Now I'd like to spend a few minutes discussing our team's execution during the fourth quarter. Let's start with vascular. We reported global vascular growth of 30.4% year-over-year to $113.6…

Thank you, Adam. Good afternoon, everyone. Today I will discuss our financial results for the fourth quarter and full year of 2021. Financial results on this call for revenue and growth margin are on a GAAP basis while operating expenses, including research and development and SG&A and operating income on a non-GAAP basis, which excludes non-recurring and one-time expenses. Our reconciliation of GAAP to non-GAAP financial measures is provided in our posted press release. For the fourth quarter ended December 31, 2021, our total revenues were $204 million an increase of 22.2% reported and 23% in constant currency compared to the fourth quarter of 2020 and sequential growth of 7.3% over the third quarter of 2021. Our geographic mix of sales in the quarter were 70.8% US and 29.2% international, US and international reported growth of 23.7% and 18.8% respectively compared to the same period in 2020. Moving to revenue by franchise, revenue from vascular business grew to $113.6 million in the fourth quarter of 2021, an increase of 30 point [audio gap] compared to the same period last year. Compared to prior quarter, revenue from vascular business grew by 7.7% driven by growth across US and all international regions in both peripheral embolization and thrombectomy products. Revenue from our neuro business was $90.4 million in the fourth quarter of 2021, an increase of 13.3% reported and 14.1% in constant currency compared to the same period a year ago with strong growth in US neuro thrombectomy and international neuro access volume. Gross margin in the fourth quarter of 2021 was 61.5% compared to 56.5% in the fourth quarter of 2020 and 63.1% compared to our last quarter. The fourth quarter of 2020 included negative 900 basis point impact associated with product returns. Fourth quarter 2021 gross margin was lower than…

Thank you, Maggie and good afternoon, everybody. We are introducing revenue guidance for full year 2022 in the range of $860 million to $875 million, representing 15% to 17% growth over full year 2021 revenue of $747.6 million. The short term macro challenges to which Adam referred in his remarks were a factor in the first several weeks of this quarter as is seen by other companies in our field. Looking forward, we expect to launch new important products that will contribute to our neuro and vascular businesses toward the latter part of this year. In sum, we expect strong sequential revenue growth and also expect our quarterly revenue growth versus year ago periods to accelerate as we move through 2022, starting within the guidance growth range at the lower end and exiting toward the higher end. Overall consistent with our approach to setting guidance in the past, our 2022 revenue guidance represents our current views on our markets, timing of new product launches and other relevant inputs. I will now turn the call back to Adam for closing remarks.

Thank you, Jason. Maggie and Jee, I would like to conclude our prepared marks today with two key points. First, Penumbra is in one of the strongest positions it has ever been in. We have six large underpenetrated markets, world-class technology and more innovation on the way. We acknowledge from past experience that the work ahead is hard and will take time, but the benefit to patients of opening up these new large markets is incredibly strong and our team is committed to these challenges. Second, I'd like to end today by applauding our physician customers, the nurses and technicians, administrators and the entire staff and their hospitals. Obviously, the work they've done throughout the pandemic is amazing. However, we understand that the past month and a half with the severe staffing shortages in hospitals has tested even the strongest. All of our fatigue with the pandemic has not made it easier. I want you all to know that we admire your dedication, compassion and of course, just playing hard work. Thank you for what you've done and I hope the months ahead, bring a return to a more normalized schedule. Thank you. Now, thank you for your attention on the call today and we'd like to open the call to questions. Operator, please go ahead.

[Operator instructions] Our first question is from Robbie Marcus with JPMorgan. Your line is open.

Oh, great. Thanks for taking the question and congrats on a good quarter. Adam, you mentioned new product launches in 2022. I lost track of how many times you said it, but a lot in both stroke and vascular or neuro and vascular. I was hoping you could give us a little bit of color around the impact, the magnitude of these launches and little finer point on when in the year we might start to see them.

Yeah, it's a great question. Let me, without giving away things that it's premature to give away for obvious reasons, let me sort of calibrate what we've talked about in neuro, we've obviously talked about Thunderbolt review trial. We said we have other things coming in the rest of that portfolio. So I want that to be understood. We're excited about constantly innovating in the other parts of our business, as well as in stroke. On the vascular side, it really comes down to the way we've always thought about our businesses, which is we continue to think about this bases that we're in and how to make the products better and better and better. And we are very excited about some of the innovations that's coming. We think it will make the procedures, particularly in thrombectomy easier, faster, more complete and that's the goal to move this field to the point where physicians can look at these patients that have clots, whether it's on their arterial side, DBT and PE and even in the coronary and just say, let's just take it out and not have to think about it as some bigger question around trade-offs. So that's been our quest for many year and these innovations fit within that very, very well.

Great. and just a quick follow up Adam, you had the CHEETAH study late last year in coronary. You're grown really well in vascular. How should we think about the impact of coronary and any size of what it was in the quarter and how to think about it going into 2022 would be helpful. Thanks.

Yes, so we haven't quantified the dollar per se, other than to say the first and most obvious starting point is for the physicians that are still using manual aspiration in light of the CHEETAH data. That seems like the first obvious starting point given how good that data was and really in comparison. So that folks who are already believing that aspiration is necessary in those patients and then after that, of course we'll move to the next group who may want to use aspiration, but have been reluctant, but have looked at the CHEETAH date and believed that it is as compelling as we believe in other customers believe. To answer the other part of your question, obviously we really had a part of a quarter with the CHEETAH data out there. It wasn't a full quarter but there's no question that it had an impact we did, if you just were to look at the change from the beginning to the end, there was a change, but we expect that to continue throughout the year.

Thanks a lot

Our next question is from Larry Biegelsen with Wells Fargo. Your line is open.

Hey guys, thanks for taking the question. Hey, two for me, one on, hey Adam. Two for me, one on Thunderbolt one on Real. Adam, we've done a bunch of checks on Thunderbolt and docstor seem pretty excited about the concept. So my questions are, what changed to lead you to do a study before approval, any color on the trial design? How long do you think it'll take to do the trial and file? It wasn't clear from your comments earlier if you were including that in the 2022 launches and I had one follow up.

Okay. Well, there's like six questions, so let me try to answer them all and hopefully I'll get the gist of it. So we've been working with the FDA. Obviously I'm not yet prepared to lay out the exact trial design and the specific of timing. But as I said, in the past and I want to very clearly reiterate, this is, we are really a good position right now in stroke. The Red series is doing really well, and it's obviously a foundational part of using Thunderbolt. And so the ability to continue to bring that technology throughout this year to our customers, I think is an important part of the strategy. And then when the trial is over and, and again, I'll, as soon as I can give you a more direct estimate on the timing, we'll bring that to the table as well. But even without that, and again, I'm incredibly excited about the work our team has done with that product, we have a lot of really strong runway with the Red series and the reaction continues to be pretty extraordinary. So, I think we're, as I think pretty clearly alluded to in a really, really strong position with our stroke franchise. When you add Thunderbolt on top of that, which is not really included in this year's expectations, it just makes, it even better, and you said you had a follow-up.

Yeah. So Thunderbolt is not included in the 2022 launches. Is that what you just said?

That's right.

Okay. Thank you. And then on Real, Adam, any metrics you can share with us on the progress? To date, you haven't shared anything on placements or anything like that and what's the guidance assume for Real in 2022? Thanks for taking the questions.

Yeah. So we are not focusing on a Real as a big source of revenue in 2022. So that's just not part of the way we're thinking about that business. In the next year or so, our focus is on building the platform itself and then working to have the conversations with the folks in the channel who would be using the Real system for their patients, as well as the third party developers who we want to host on the platform. So what we're going to try to do as best we can, and really we'll look to do this in this second half of the year, start to give some updates when we can about how those conversations are going both with the users of the product and the third party developers. And that really is the best way to measure whether we're doing this the way we had anticipated or not. So again, and not focusing on the short term revenue, as much as using this year, as I think we've said a couple of times as a building block to build this really first ever platform in immersive healthcare.

Thank you, Adam.

Of course. Thank you.

Our next question is from bill Bill Plovanic with Canaccord Genuity. Your line is open.

Great. Thanks. Good evening. Two questions. The first is just on guidance, as we think about the first quarter and the level of impact that Omicron is having on a lot of folks, just how should we think about it? Is this something where, it's significant impact to January and so we're looking at a flattish quarter up down. How should we really think about Q1 is my first question?

Yeah. let me, I'll give you sort of a quick larger thought and Jason, can you give more specifics to the second you part of the question. We called it out, as you know, we've done I think a really pretty good job in our company navigating COVID over the last couple of years. And there's no question that this round in January, particularly in the first part or January, the staffing issues particularly were very different, and we've said that before, and that was true. There just weren't people able to be working at the same levels that is necessary. That being said, that feels resolved business is very strong. But I'll let Jason address this specifics to this this quarter as best we can.

Yeah, so, thanks for the question. And so we had an extraordinarily strong fourth quarter record quarter. If not for that record, I would expect that the first quarter would also -- would've been a record quarter. So we expect that sequentially from the first to the fourth quarter, we will see sequential growth in accelerating year over year growth in the first quarter, given, what Adam talked about with respect to those first several weeks, we would expect the quarter in the first quarter to be down sequentially and then accelerating thereafter.

Great. Thank for that. And then just a bigger picture thought, vascular has done very well for you. We've seen a lot of other players starting to eye up this vertical, whether it be through acquisitions or new product launches. Just, philosophically or how do you think about this as we move forward because it's almost like we're going from a two, three player market to all of a sudden this is going to get pretty crowded over the next 12 to 24 months?

Yeah. So first of all I'll start with the most obvious but important to say. I am really actually quite happy to see more and more people believing in this space, caring about it and wanting to help really a huge number of patients that need better technology and better treatment than they've been getting. So the validation that comes from other companies getting into this space I think is really important and I think it will help speed up the adoption of single session therapy. So that's important. As it relates to our ability to stay ahead and keep innovating and compete, we've done this for a while, as you know, we've done it in stroke for many, many years. And given where we are, we're starting at a totally different spot with Lightning than we did before in stroke. And we think we can even go further than that as I alluded to both in my prepared remarks and, and in the question. So, I think we're in a really good spot. We know the technologies that are out there. We feel good about where we are. And I think we as a Company will stay in a really good place that being said again, it's great to see the attention being given to these patients. And I think that only helps us.

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

Hi everyone. This is Brandon on for Margaret. Thanks for taking the question I wanted to focus first on, Hey guys, on just on the guidance last year you had you, or in 2021, you had really outperformed the original guidance you gave can appreciate that COVID may be limited the visibility you have, but it seems like, you, last year you had a little bit of a conservative guide and outperformed. And then Adam, you had used the word accelerate a lot in the prepared remarks. So as we're moving into the next year, I'm just curious how you're thinking about how you framed up the '22 revenue guidance maybe compared to how you did it in '21 and what that could mean for potential upside as a move through the year?

Yeah. well, let me start with, sort of reiterating how we think about guidance. We try to do -- provide guidance in the most accurate form possible. So we take everything we know of, almost a year out from the end of it and do a I think a pretty good job of planning and figuring out how things are going to go, including, new products and so on. And that's how we did the guidance at the beginning of 2021. And that's how we're doing it now. Obviously we were fortunate in 2021 and we did outperform that it would be premature, look back here from where we are today and discuss that. But I think it's the same exact metrics that we've used in the past. And Jason, do you want to add anything?

Yeah, I mean, Brandon, thanks for the question. Maybe just a little bit of context, obviously in 2020 the revenue was impacted for everybody by COVID right. And 2021, a little less though and the increase in revenue just on a dollar amount term in 2021 was well over a $100 million notwithstanding a great 2021, we are expecting to, at even the low point of guidance, over a $100 million of incremental dollar revenue. And as we talked about, we have innovation about which we are excited, for both the neuro and vascular businesses, as well as what we expect in Immersive Healthcare. With that we have not included to some extent in this guidance, including Thunderbolt, as Adam mentioned to earlier question. So we feel really good about where the business is and where the, the guidance is, but as Adam mentioned, it factors in the contribution that we expect from those products that we anticipate having throughout the year.

Okay. Thanks. And then we talked a little bit about international product launches coming up. Can you may be right-size us on, on which of your latest products like the red and Lightning catheters are launched international already, already, and if not, which countries might be coming throughout the year, when we can expect those and just remind us where I think your international, your direct international?

Not yet in Japan but again, excited to eventually bring it there as well.

Our next question is from city group. Your line is open.

Hi, this is Anthony on for Joanne, thank you for taking our question. Just a quick one, the milestone related to Thunderbolt. Can you just give some more detail around what that was related to, or what those milestones were? Thanks.

Yeah, so it it's there was an understanding with the person who helped invent and work on that product, that once we got through a certain milestone with working with the FDA, we would make this payment that's the last payment. The only payment there is, again, very similar to what happened with Lightning a couple of years ago. I think if you go back and you can look at it, forget the exact quarter, but we did something very similar. So it's, it's like that.

Thanks.

Yeah, of course. Thank you

[Operator Instructions]. [audio gap]

Thanks for taking the question and congrats on the strong end to the year. I want to start on, I guess, guidance for full year 2022. I know that neuro thrombectomy had the recall on the early part of 2021 and so counts. They're a little bit easy -- easier you gave for 2023. And, should we be thinking about, whether or not there's any strength or, or acceleration specifically within each of those segments?

Yeah, it's a great question. So, the way we look at our business is, and the way we are talking about it, I think shows that, we have six large under penetrated markets, five in the interventional space that are going to drive our growth. This year, obviously Immersive Healthcare is more an investment for future growth. And hopefully in a few year will be talking a lot about that driving growth, but in the short term we're looking at the five areas in interventional that, that are under penetrated. And then the -- the sixth being the[indiscernible] the embolization business in peripheral that is continuing to grow. It's just not really under are penetrated. We just continue to do well and take, share all of them matter to our Company's success. And I hope that we made that pretty clear. We're investing in all of them. We all have in each one of them sort of world class technology right now, whether it's in stroke or in coronary with cataracts and the CHEETAH data, obviously, and PE and DBT and on the arterial side. So it, it really isn't we're not looking at any particular one. They might slightly vary quarter by quarter based on, the way certain conversations go with sales reps and hospitals, but it really is all of those that are going to drive our growth this year and, and into the future. And then hopefully add the, the other large market in Immersive Healthcare on top of it. So again not to belabor it all, all of it is part of our success thing. Jason, if you want to add to that.

Yeah. the only thing got to add David is we're on really strong footing in both neuro and vascular businesses. So those five interventional markets that Adam referred to four of them as are on the vascular side and then stroke on the -- on the neuro side. They're, they're all going to contribute to our growth in 2022, and even beyond 2022 in a significant way. But obviously the, the numbers are just, four of and vascular, and one of them on the neuro side for 2022 is something to consider.

Okay. That's, that's helpful. Adam, you mentioned that RED series catheters had, had equipped the, or eclipsed the, the peak sales in 2019 from, from the prior catheter line. I guess, what do you think has been the biggest driver of that, and then, when you think about that kind of in the context of market share versus or sorry, market growth versus overall share recap, I guess, how should we think about those in the context of just the overall strength within the RED series catheter since that launch? Thank you.

Yeah. It's a great question. So I think for us in 2021 a lot of that was growth came from market share. There was some growth in the market we think, but again, as I talked about in the past, so much of that work is yet to really re-engage everyone's ready, everyone wants to and they, wave after wave last year, sort of kept people from doing some of the work necessary. So with a little luck, we'll see that change in 2022 and know from talking to customers there there's a lot of interest. They want to see it grow. They want to see more people treated, but a lot of our gain happened through share in 2021. And I think that will be true going forward as well. I think there's more share to keep gaining why, the, the first part of the question was, why, or, what caused that. These are just really extraordinary tools. The RED series is some of the best work we've ever done. I'm incredibly proud of our R&D team and the innovation that they brought to it, especially given the circumstances following 2020 couldn't be prouder. And, that is a incredibly important product. Again, it's not only important today by itself. But it is foundational for the future. Given that it, it is part of, would be used with after that during the study and after the study,

There are no further questions at this time, Ms. Hamlin?

Thank you, operator. On behalf of our management team, I thank you all again for joining us today and feel interested in Penumbra. We look forward to updating you on our first quarter call.

This concludes today's conference call. You may now disconnect.