Penumbra Inc. ((PEN)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Penumbra Inc. recently held its earnings call, revealing a generally positive sentiment thanks to robust growth and profitability in its U.S. thrombectomy business. This growth is being driven by product innovation and strategic expansion, despite some international revenue challenges, particularly in China. Costs associated with exiting the Immersive Healthcare sector also had a slight dampening effect on the overall performance. However, the strong domestic growth and future strategic initiatives overshadowed these setbacks, painting an optimistic picture for investors.
Strong Revenue Growth
Penumbra reported impressive financial results for the fourth quarter of 2024, with revenue reaching $321.3 million. This marks a year-over-year growth of 12.9% on an adjusted basis and 13% on a constant currency basis. The full-year revenue increased by 13.4%, exceeding $1.2 billion. These figures underscore the company’s strong market position and ability to generate consistent growth.
U.S. Thrombectomy Business Performance
The U.S. thrombectomy segment was a key driver of Penumbra’s success, with sales surging 27.3% year-over-year to $180.6 million in the fourth quarter. The company’s U.S. VTE franchise also delivered a remarkable 41% revenue growth over the previous year. For the full year, the U.S. thrombectomy business achieved revenue of $646.7 million, reflecting a 26.8% increase compared to 2023, showcasing the effectiveness of Penumbra’s strategic focus on this segment.
Product Innovation and Expansion
Product innovation played a significant role in Penumbra’s success, as the company introduced nine new products to the U.S. market, including the Flash 2.0 and Lightning Bolt 12. Additionally, Penumbra expanded the footprint of its CAVT products into Europe and other international geographies, reinforcing its commitment to growth and diversification.
Profitability and Margin Expansion
Penumbra achieved a gross margin of 67.4% in the fourth quarter, representing a 170 basis point expansion over the previous year. Operating income also improved, reaching $48.6 million or 15.1% of revenue, and the company generated $49.1 million in operating cash. These improvements highlight Penumbra’s focus on enhancing profitability and operational efficiency.
Future Growth Strategy
Looking ahead, Penumbra has signed a contract to build a new manufacturing facility in Costa Rica to expand its manufacturing capacity. The company aims to achieve a gross margin profile of over 70% by the end of 2026, with operating margin expansion expected to outpace gross margin growth. These strategic moves position Penumbra for sustained long-term growth.
International Revenue Decline
Despite strong domestic performance, Penumbra faced challenges internationally, with international revenue decreasing by 9.4% on an adjusted basis and 9.1% in constant currency. This decline was primarily due to a significant reduction in revenue from China, totaling $15.4 million in the fourth quarter.
Impact of Immersive Healthcare Exit
Penumbra’s decision to exit the Immersive Healthcare sector incurred expenses, including $76.9 million in impairment charges and $5 million in wind-down costs for the full year 2024. These expenses impacted the company’s financials but were part of a strategic decision to streamline operations.
Italian Payback Legislation
During the fourth quarter, Penumbra recorded a $5.8 million reserve related to Italian payback legislation, which had an impact on the company’s financial results. This legislative issue is one of the external factors affecting Penumbra’s international operations.
Forward-looking Guidance
In its forward-looking guidance, Penumbra expressed optimism, projecting revenue growth between 12% and 14% for 2025. The U.S. thrombectomy business is expected to grow by 19-20%, underlining its role as a key growth driver. Additionally, Penumbra aims to achieve a gross margin exceeding 70% by the end of 2026, supported by the expansion of its manufacturing capacity through a new facility in Costa Rica.
In summary, Penumbra’s earnings call highlighted strong growth and profitability, particularly in its U.S. thrombectomy business. Despite challenges in international revenue and costs from strategic exits, the company’s domestic performance and forward-looking strategies paint a positive outlook. Investors can take confidence in Penumbra’s commitment to innovation and expansion, positioning it well for future growth.
