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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, 2024
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 filer☒Accelerated filer☐
Non-accelerated filer☐Smaller 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 16, 2024, the registrant had 38,379,199 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, 2024December 31, 2023
Assets
Current assets:
Cash and cash equivalents$280,476 $167,486 
Marketable investments10,548 121,701 
Accounts receivable, net of allowance for credit losses of $3,329 and $3,169 at September 30, 2024 and December 31, 2023, respectively
176,051 201,768 
Inventories393,413 388,023 
Prepaid expenses and other current assets31,265 36,424 
Total current assets891,753 915,402 
Property and equipment, net59,919 72,691 
Operating lease right-of-use assets180,923 188,756 
Finance lease right-of-use assets28,888 31,092 
Intangible assets, net6,920 71,056 
Goodwill166,355 166,270 
Deferred taxes105,851 85,158 
Other non-current assets38,514 25,880 
Total assets$1,479,123 $1,556,305 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$33,151 $27,155 
Accrued liabilities105,550 110,555 
Current operating lease liabilities12,068 11,203 
Current finance lease liabilities2,416 2,231 
Total current liabilities153,185 151,144 
Non-current operating lease liabilities189,960 197,229 
Non-current finance lease liabilities22,245 23,680 
Other non-current liabilities9,453 5,308 
Total liabilities374,843 377,361 
Commitments and contingencies (Note 9)
Stockholders’ equity:
Common stock38 39 
Additional paid-in capital1,079,193 1,047,198 
Accumulated other comprehensive loss (963)(3,151)
Retained earnings26,012 134,858 
Total stockholders’ equity1,104,280 1,178,944 
Total liabilities and stockholders’ equity$1,479,123 $1,556,305 

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,
2024202320242023
Revenue$301,039 $270,946 $879,097 $773,843 
Cost of revenue100,733 93,228 334,823 278,192 
Gross profit200,306 177,718 544,274 495,651 
Operating expenses:
Research and development 25,205 20,958 74,773 62,481 
Sales, general and administrative 139,737 125,920 426,052 376,433 
Acquired in-process research and development— 18,215 — 18,215 
Impairment charge— — 76,945 — 
Total operating expenses 164,942 165,093 577,770 457,129 
Income (loss) from operations35,364 12,625 (33,496)38,522 
Interest and other income, net4,414 679 10,026 2,970 
Income (loss) before income taxes39,778 13,304 (23,470)41,492 
Provision for (benefit from) income taxes10,251 4,090 (3,799)4,756 
Net income (loss)$29,527 $9,214 $(19,671)$36,736 
Net income (loss) per share:
Basic$0.76 $0.24 $(0.51)$0.96 
Diluted$0.75 $0.23 $(0.51)$0.94 
Weighted average shares outstanding:
Basic38,610,805 38,462,463 38,706,809 38,324,279 
Diluted39,178,227 39,219,966 38,706,809 39,183,635 

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,
2024202320242023
Net income (loss)$29,527 $9,214 $(19,671)$36,736 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of tax3,185 (2,359)881 (1,302)
Net change in unrealized gains or losses on available-for-sale securities, net of tax900 698 1,307 2,186 
Total other comprehensive income (loss), net of tax4,085 (1,661)2,188 884 
Comprehensive income (loss)$33,612 $7,553 $(17,483)$37,620 

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 LossRetained Earnings Total Stockholders’ Equity
SharesAmount
Balance at December 31, 202338,681,549 $39 $1,047,198 $(3,151)$134,858 $1,178,944 
Issuance of common stock76,597 — 238 — — 238 
Shares held for tax withholdings(1,732)— (421)— — (421)
Stock-based compensation— — 15,455 — — 15,455 
Other comprehensive loss— — — (1,687)— (1,687)
Net income — — — — 11,002 11,002 
Balance at March 31, 202438,756,414 $39 $1,062,470 $(4,838)$145,860 $1,203,531 
Issuance of common stock28,043 — 61 — — 61 
Issuance of common stock under employee stock purchase plan51,752 — 8,861 — — 8,861 
Shares held for tax withholdings(428)— (89)— — (89)
Stock-based compensation— — 9,277 — — 9,277 
Other comprehensive loss— — — (210)— (210)
Net loss— — — — (60,200)(60,200)
Balance at June 30, 202438,835,781 $39 $1,080,580 $(5,048)$85,660 $1,161,231 
Issuance of common stock45,678 — 484 — — 484 
Shares held for tax withholdings(375)— (72)— — (72)
Stock-based compensation— — 9,982 — — 9,982 
Repurchase of common stock(1)
(517,763)(1)(11,781)— (89,175)(100,957)
Other comprehensive income— — — 4,085 — 4,085 
Net income— — — — 29,527 29,527 
Balance at September 30, 202438,363,321 $38 $1,079,193 $(963)$26,012 $1,104,280 
    (1) Refer to Note “11. Share Repurchase Program” for more information on the repurchase of common stock during the quarter ended September 30, 2024.
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 Stockholders’ Equity
SharesAmount
Balance at December 31, 202238,107,977 $38 $963,040 $(8,124)$43,904 $998,858 
Issuance of common stock134,936 — 2,209 — — 2,209 
Shares held for tax withholdings(813)— (204)— — (204)
Stock-based compensation— — 13,781 — — 13,781 
Other comprehensive income— — — 1,263 — 1,263 
Net income— — — — 8,562 8,562 
Balance at March 31, 202338,242,100 $38 $978,826 $(6,861)$52,466 $1,024,469 
Issuance of common stock114,930 — 1,614 — — 1,614 
Issuance of common stock under employee stock purchase plan51,264 — 8,385 — — 8,385 
Shares held for tax withholdings(2,689)— (822)— — (822)
Stock-based compensation— — 12,655 — — 12,655 
Other comprehensive income— — — 1,282 — 1,282 
Net income— — — — 18,960 18,960 
Balance at June 30, 202338,405,605 $38 $1,000,658 $(5,579)$71,426 $1,066,543 
Issuance of common stock95,927 — 834 834 
Issuance of common stock in connection with asset acquisition(1)
71,211 — 17,227 — — 17,227 
Shares held for tax withholdings(404)— (123)— — (123)
Stock-based compensation— — 12,104 — — 12,104 
Other comprehensive loss— — — (1,661)— (1,661)
Net income— — — 9,214 9,214 
Balance at September 30, 202338,572,339 $38 $1,030,700 $(7,240)$80,640 $1,104,138 
    (1) Refer to Note “6. Asset Acquisition” for more information on the impact of the asset acquisition during the quarter ended September 30, 2023.
See accompanying notes to the unaudited condensed consolidated financial statements
6
Penumbra, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
 Nine Months Ended September 30,
 20242023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income$(19,671)$36,736 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization19,314 20,218 
Stock-based compensation34,069 39,725 
Impairment charge76,945 — 
Inventory write-downs40,946 5,250 
Deferred taxes(20,939)(35)
Acquired in-process research and development— 18,215 
Other1,404 2,623 
Changes in operating assets and liabilities:
Accounts receivable23,365 (6,609)
Inventories(45,992)(46,466)
Prepaid expenses and other current and non-current assets1,733 (10,288)
Accounts payable6,035 2,054 
Accrued expenses and other non-current liabilities164 (351)
Net cash provided by operating activities117,373 61,072 
CASH FLOWS FROM INVESTING ACTIVITIES:
Asset acquisition, net of cash acquired— (988)
Purchases of non-marketable investments(10,000)— 
Purchases of marketable investments(13,026)(73,370)
Proceeds from maturities of marketable investments125,816 46,070 
Purchases of property and equipment(15,811)(11,568)
Other1,600 (500)
Net cash provided by (used in) investing activities88,579 (40,356)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercises of stock options783 4,657 
Proceeds from issuance of stock under employee stock purchase plan8,861 8,385 
Payment of employee taxes related to vested stock(582)(1,149)
Payments of finance lease obligations(1,687)(1,456)
Repurchase of common stock(100,388)— 
Other(61)(155)
 Net cash (used in) provided by financing activities(93,074)10,282 
Effect of foreign exchange rate changes on cash and cash equivalents112 (99)
NET INCREASE IN CASH AND CASH EQUIVALENTS112,990 30,899 
CASH AND CASH EQUIVALENTS—Beginning of period167,486 69,858 
CASH AND CASH EQUIVALENTS—End of period$280,476 $100,757 
NONCASH INVESTING AND FINANCING ACTIVITIES:
Right-of-use assets obtained in exchange for operating lease obligations$1,941 $1,486 
Right-of-use assets obtained in exchange for finance lease obligations$437 $531 
Purchase of property and equipment funded through accounts payable and accrued liabilities$1,831 $1,275 
Fair value of common stock issued as consideration in connection with an asset acquisition$— $17,227 
Excise tax accrued on repurchase of common stock$566 $— 
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for amounts included in the measurement of operating lease liabilities$16,433 $14,985 
Cash paid for income taxes$14,367 $4,029 
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”), the world’s leading thrombectomy company, is focused on developing the most innovative technologies for challenging medical conditions such as ischemic stroke, venous thromboembolism such as pulmonary embolism, and acute limb ischemia. The Company’s broad portfolio, which includes computer assisted vacuum thrombectomy (CAVT), centers on removing blood clots from head-to-toe with speed, safety and simplicity. 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 its products is attractive to its customers.
2. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying condensed consolidated balance sheet as of September 30, 2024, 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, 2024 and 2023, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2024 and 2023 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, 2023 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, 2024, the results of its operations for the three and nine months ended September 30, 2024 and 2023, the changes in its comprehensive income (loss) and stockholders’ equity for the three and nine months ended September 30, 2024 and 2023, and its cash flows for the nine months ended September 30, 2024 and 2023. The results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 or for any other future annual or interim period. Certain changes in presentation were made to interest income (expense), net and other income (expense), net in the condensed consolidated statements of operations for the three and nine months ended September 30, 2023 to conform to the presentation for the three and nine months ended September 30, 2024.
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, 2023, included in the Company’s Annual Report on Form 10-K as filed with the SEC on February 22, 2024. There have been no changes to the Company’s significant accounting policies during the nine months ended September 30, 2024, 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, 2023, other than changes to include the Company’s share repurchase policy in connection with an accelerated repurchase agreement that occurred during the three months ended September 30, 2024.
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, non-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, the fair value of long-lived assets tested for impairment, and other contingencies, including the probability of achieving performance targets associated with equity awards with performance conditions, among
8
Penumbra, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
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 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.
Share Repurchases
Shares of our common stock repurchased pursuant to our repurchase program are retired. The par value of repurchased shares is deducted from common stock and the excess repurchase price over par value, as well as the portion due for excise taxes, is allocated to retained earnings on the consolidated balance sheets.
Recently Issued Accounting Standards
In December 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes— Improvements to Income Tax Disclosures. The standard enhances annual income tax disclosures, by requiring additional disaggregated information about an entity’s effective tax rate reconciliation and income taxes paid. The ASU adds guidance that requires public business entities to disclose additional information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate (the rate reconciliation) for federal, state, and foreign income taxes. It also requires greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a specified threshold (5%). In addition to new disclosures associated with the rate reconciliation, the ASU requires information pertaining to taxes paid (net of refunds received) to be disaggregated for federal, state, and foreign taxes and further disaggregated for specific jurisdictions to the extent the related amounts exceed the quantitative threshold. For public business entities, the amendments in ASU 2023-09 are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements not yet issued or made available for issuance. The Company is assessing the impact the new guidance will have on the disclosures within its consolidated financial statements and does not elect to early adopt as of September 30, 2024.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly reviewed by the CODM and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. The ASU also allows, in addition to the measure that is most consistent with U.S. GAAP, the disclosure of additional measures of segment profit or loss that are used by the CODM in assessing segment performance and deciding how to allocate resources. All disclosure requirements under ASU 2023-07 are also required for public entities with a single reportable segment. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, on a retrospective basis, with early adoption permitted. The Company is assessing the impact the new guidance will have on the disclosures within its consolidated financial statements and does not elect to early adopt as of September 30, 2024.
In March 2024, the SEC issued Release Nos. 33-11275; 34-99678 "The Enhancement and Standardization of Climate-Related Disclosures for Investors", which will require registrants to provide certain climate-related information in their registration statements and annual reports, including information about a registrant’s climate-related risks that have materially impacted, or are reasonably likely to have a material impact on, its business strategy, results of operations, or financial condition, as well as certain disclosures related to severe weather events and other natural conditions in a registrant’s audited financial statements. The disclosure requirements follow a phase-in timeline, with initial requirements beginning with the Company's annual report for the year ending December 31, 2025. On April 4, 2024, the SEC voluntarily stayed implementation of this new rule pending judicial review. The Company is currently analyzing the impact that the new climate-related rules will have on the disclosures within its consolidated financial statements and will continue to monitor the status of the rules while legal challenges are pending.
3. Investments and Fair Value of Financial Instruments
9
Penumbra, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Marketable and Non-Marketable Investments
The Company’s marketable and non-marketable investments have been classified and accounted for as available-for-sale. The Company’s marketable and non-marketable investments as of September 30, 2024 and December 31, 2023 were as follows (in thousands):
September 30, 2024
Securities with net gains or losses in accumulated other comprehensive income (loss)
Amortized CostGross Unrealized GainsGross Unrealized LossesAllowance
 for
 Credit Loss		Fair Value
Marketable investments:
Commercial paper $2,781 $1 $— $— $2,782 
U.S. treasury7,779 — (13)$— 7,766 
Total10,560 1 (13)— 10,548 
Non-marketable investments:
Non-marketable debt securities10,000 1,000 — — 11,000 
Total10,000 1,000 — — 11,000 
Total $20,560 $1,001 $(13)$— $21,548 
December 31, 2023
Securities with net gains or losses in accumulated other comprehensive income (loss)
Amortized CostGross Unrealized GainsGross Unrealized LossesAllowance
 for
 Credit Loss		Fair Value
Marketable investments:
Commercial paper $39,727 $32 $(3)$— $39,756 
Certificate of Deposit6,392 9 — — 6,401 
U.S. treasury10,226 — (160)— 10,066 
U.S. states and municipalities2,950 — (35)— 2,915 
Corporate bonds62,964 29 (430)— 62,563 
Total$122,259 $70 $(628)$— $121,701 
As of September 30, 2024, the total amortized cost basis of the Company’s available-for-sale debt securities, excluding non-marketable debt securities, in an unrealized loss position exceeded its fair value by an immaterial amount. The Company reviewed its available-for-sale securities in an unrealized loss position and concluded that the decline in fair value was not related to credit losses and is recoverable. As of September 30, 2024, the Company’s non-marketable available-for sale debt securities were not in an unrealized loss position. During the three and nine months ended September 30, 2024, no allowance for credit losses was recorded and instead the unrealized losses are reported as a component of accumulated other comprehensive loss.
10
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 and more twelve months as of September 30, 2024 and December 31, 2023 (in thousands):
September 30, 2024
Less than 12 monthsMore than 12 monthsTotal
Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
Marketable investments:
U.S. treasury2,804 (4)4,963 (9)7,767 (13)
Total$2,804 $(4)$4,963 $(9)$7,767 $(13)
December 31, 2023
Less than 12 monthsMore than 12 monthsTotal
Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
Marketable investments:
Commercial paper$16,241 $(3)$— $— $16,241 $(3)
U.S. treasury5,677 (54)4,389 (106)10,066 (160)
U.S. states and municipalities— — 2,915 (35)2,915 (35)
Corporate bonds15,945 (2)30,912 (428)46,857 (430)
Total$37,863 $(59)$38,216 $(569)$76,079 $(628)
The contractual maturities of the Company’s marketable investments as of September 30, 2024 (in thousands):
September 30, 2024
Marketable investments:Amortized CostFair Value
Due in one year$7,753 $7,744 
Due in one to five years2,807 2,804 
Total$10,560 $10,548 
Non-Marketable Investments
During the three months ended March 31, 2024, the Company completed a strategic investment in a privately held company. Under the terms of the investment, the Company paid $10.0 million in exchange for shares of Series B preferred stock which represented an immaterial investment in the outstanding equity securities of the privately held company. The Company determined that the investment did not meet the criteria to be accounted for as an equity method investment under ASC 323. The investment was accounted for as an available-for-sale debt security in accordance with ASC 320 as the preferred stock contains a contingent redemption feature at the Company’s option. The investment is included in other non-current assets on the condensed consolidated balance sheet and changes in fair value are recorded in total other comprehensive income (loss), net of tax.
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 reporting 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.
11
Penumbra, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
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 classifies its non-marketable investments in preferred stock in privately held companies within Level 3, as they do not have a readily determinable fair value.
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.
Non-marketable investments classified within Level 3 of the fair value hierarchy are valued based on unobservable inputs that are supported by little or no market activity. Current financial information of private companies may not be available and consequently the Company estimates the fair value using inputs that are based on the best available information at the measurement date. Key inputs may include the most recent financial information, financial projections, and financing transactions available for the investee and other quantitative and qualitative factors. Additionally, based on the timing, volume, and other characteristics of the available information, the Company may supplement this information by using one or more valuation techniques, including market and income approaches. The Company did not hold any non-marketable investments classified within Level 3 as of September 30, 2023 or December 31, 2023.
The following table summarizes the changes in fair value of our Level 3 non-marketable debt securities for the three and nine months ended September 30, 2024 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
 20242024
Balance, beginning of the period$10,096 $— 
Total gains included in other comprehensive income (loss)904 1,000 
Purchases— 10,000 
Balance, end of the period$11,000 $11,000 
The Company did not hold any Level 3 marketable investments as of September 30, 2024 or December 31, 2023. During the nine months ended September 30, 2024 and 2023, the Company did not have any transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy for marketable or non-marketable investments. Additionally, the Company did not have any financial assets and liabilities measured at fair value on a non-recurring basis as of September 30, 2024 or December 31, 2023.
12
Penumbra, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The following tables set forth the Company’s financial assets and liabilities measured at fair value by level within the fair value hierarchy as of September 30, 2024 and December 31, 2023 (in thousands):
 As of September 30, 2024
 Level 1Level 2Level 3Fair Value
Financial Assets
Cash equivalents:
Commercial paper$— $93,860 $— $93,860 
Certificate of deposit— 22,859 — 22,859 
Money market funds80,349 — — 80,349 
U.S. treasury5,371 — — 5,371 
Marketable investments:
Commercial paper— 2,782 — 2,782 
Certificate of deposit— — — — 
U.S. treasury7,766 — — 7,766 
Non-marketable investments:
Non-marketable investments— — 11,000 11,000 
Total$93,486 $119,501 $11,000 $223,987 
 As of December 31, 2023
 Level 1Level 2Level 3Fair Value
Financial Assets
Cash equivalents:
Money market funds$86,991 $— $— $86,991 
Marketable investments:
Commercial paper— 39,756 — 39,756 
Certificate of Deposit— 6,401 — 6,401 
U.S. treasury10,066 — — 10,066 
U.S. states and municipalities— 2,915 — 2,915 
Corporate bonds— 62,563 — 62,563 
Total$97,057 $111,635 $— $208,692 

4. Impairment and Restructuring Costs of Immersive Healthcare Asset Group
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. During the three months ended June 30, 2024, the Company made the strategic decision to explore alternative avenues for its Immersive Healthcare business; as a consequence to this decision, the Company tested the Immersive Healthcare asset group’s long-lived assets for impairment. Prior to the three months ended June 30, 2024, there were no events or circumstances that indicated the need to test for impairment.
The Immersive Healthcare asset group included substantially all the assets and liabilities associated with the Immersive Healthcare business, which primarily consisted of finite-lived developed technology intangible assets, inventory, and property and equipment associated with the developed technology. Prior to performing a recoverability test for the asset group, the Company recorded a $33.4 million charge to cost of revenue in the unaudited condensed consolidated statements of operations during the three months ended June 30, 2024 for the write-down of Immersive Healthcare inventory to net realizable value.
The Company then performed a recoverability test for the asset group, comparing the carrying amount of the asset group to the sum of its estimated undiscounted future cash flows. The carrying amount of the asset group was determined to be not recoverable, as it exceeded the undiscounted future cash flows.
13
Penumbra, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Accordingly, the Company measured the impairment loss by calculating the excess of the asset group's carrying amount over its fair value. The fair value of the asset group was determined using a discounted cash flow approach, which is considered a Level 3 measurement within the fair value hierarchy and utilized significant Level 3 inputs such as expected future cash flows, including forecasted sales, gross profit and operating expenses, and the use of an appropriate discount rate. As a result of this assessment, the Company recorded a pre-tax impairment charge of $76.9 million during the three months ended June 30, 2024, which was primarily comprised of $58.9 million in finite-lived intangible assets and $18.0 million in property and equipment.
During the third quarter of 2024, the Company made the decision to wind down and exit its Immersive Healthcare business. As a result, during the three and nine months ended September 30, 2024, the Company incurred $5.0 million in restructuring and related charges for severance and other costs related to the wind down of the Immersive Healthcare business. These costs were included in research and development and sales, general and administrative within the condensed consolidated statements of operations. As of September 30, 2024, unpaid severance of $3.5 million was included in accrued liabilities within the condensed consolidated balance sheets.
The following table details the costs incurred during the three and nine months ended September 30, 2024 associated with the wind down of the Immersive Healthcare business (in thousands):
 Three and Nine Months Ended September 30, 2024
Severance and other associated costs$4,971 
Total$4,971 
The following table details the change in accruals associated with the wind down of the Immersive Healthcare business as of September 30, 2024 (in thousands):
Severance and other associated costs
Balance as of January 1, 2024$— 
Cost incurred and charged to expense4,971 
Costs paid or otherwise settled(1,444)
Balance as of September 30, 2024$3,527 
5. Balance Sheet Components
Inventories
The components of inventories consisted of the following (in thousands):
 September 30, 2024December 31, 2023
Raw materials$126,574 $119,511 
Work in process40,540 34,489 
Finished goods226,299 234,023 
Inventories$393,413 $388,023 
During the three months ended June 30, 2024, the Company recorded a $33.4 million charge to cost of revenue in the unaudited condensed consolidated statements of operations for the write-down of Immersive Healthcare inventory to net realizable value. Refer to Note “4. Impairment and Restructuring Costs of Immersive Healthcare Asset Group” for more details.
14
Penumbra, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
September 30, 2024December 31, 2023
Machinery and equipment$47,724 $43,152 
Furniture and fixtures18,910 18,049 
Leasehold improvements36,476 29,241 
Software5,648 19,939 
Computers19,416 18,427 
Construction in progress3,683 3,535 
Total property and equipment131,857 132,343 
Less: Accumulated depreciation and amortization(71,938)(59,652)
Property and equipment, net$59,919 $72,691 
During the three months ended June 30, 2024, the Company recorded an impairment of property and equipment charge of $18.0 million, primarily related to software. Refer to Note “4. Impairment and Restructuring Costs of Immersive Healthcare Asset Group” for more details.
Accrued Liabilities
The components of accrued liabilities consisted of the following (in thousands):
 September 30, 2024December 31, 2023
Payroll and employee-related expenses$67,926 $65,395 
Accrued expenses15,181 11,711 
Deferred revenue1,214 6,985 
Other accrued liabilities21,229 26,464 
Total accrued liabilities$105,550 $110,555 
The following table shows the changes in the Company’s estimated product warranty accrual, included in accrued liabilities, for the nine months ended September 30, 2024 and twelve months ended December 31, 2023, respectively (in thousands):
 September 30, 2024December 31, 2023
Balance at the beginning of the period$5,755 $5,370 
Accruals of warranties issued, net(2,406)1,865 
Settlements of warranty claims(1,359)(1,480)
Balance at the end of the period$1,990 $5,755 
6. Asset Acquisition
On September 29, 2023 (the “Closing Date”), the Company acquired an In-Process Research and Development (“IPR&D”) asset in an asset acquisition. On the Closing Date, the Company recorded an $18.2 million charge to acquired IPR&D expense in the condensed consolidated statements of operations as the IPR&D asset had no alternative future use.
15
Penumbra, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
IPR&D acquired in an asset acquisition is recorded using the cost accumulation model and is immediately expensed if there is no alternative future use at the time of acquisition.
The total consideration transferred was allocated to the non-monetary assets acquired and liabilities assumed using the cost accumulation model based on their relative fair value. The following table summarizes the Closing Date fair value of the consideration transferred (in thousands):
Fair value of common stock consideration(1)
$17,227 
Payment of certain acquiree transaction costs and other liabilities on behalf of acquiree(2)
1,001 
Total purchase price$18,228 
(1)The fair value of the 71,211 shares of common stock issued as part of consideration transferred was determined based on the Closing Date market price of the Company’s common stock of $241.91.
(2)Transaction costs and other pre-existing liabilities paid on behalf of the acquiree as part of the consideration transferred for the IPR&D are presented in the investing activities section of the condensed consolidated statements of cash flows.
7. Intangible Assets
The following table presents details of the Company’s acquired intangible assets as of September 30, 2024 and December 31, 2023 (in thousands, except weighted-average amortization period):
As of September 30, 2024Weighted-Average Amortization PeriodGross Carrying AmountAccumulated AmortizationNet
Finite-lived intangible assets:
Developed technology(1)
8.8 years$83,289 $(83,289)$— 
Customer relationships15.0 years6,653 (3,215)3,438 
Trade secrets and processes20.0 years5,256 (1,774)3,482 
Total intangible assets 17.5 years$95,198 $(88,278)$6,920 
(1)During the three months ended June 30, 2024, the Company recorded an impairment of developed technology charge of $58.9 million included within accumulated amortization in the table above. Refer to Note “4. Impairment and Restructuring Costs of Immersive Healthcare Asset Group” for more details.
As of December 31, 2023Weighted-Average
Amortization Period		Gross Carrying AmountAccumulated AmortizationNet
Finite-lived intangible assets:
Developed technology8.8 years$83,289 $(19,640)$63,649 
Customer relationships15.0 years6,579 (2,851)3,728 
Trade secrets and processes20.0 years5,256 (1,577)3,679 
Total intangible assets9.6 years$95,124 $(24,068)$71,056 
The gross carrying amount and accumulated amortization of the customer relationships are the only intangible assets subject to foreign currency translation effects. The Company’s $5.3 million trade secrets and processes intangible asset was recognized in connection with a royalty buyout agreement in 2018.
The following table presents the amortization recorded related to the Company’s finite-lived intangible assets for the three and nine months ended September 30, 2024 and 2023 (in thousands):
16
Penumbra, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 Three Months Ended September 30,Nine Months Ended September 30,
 2024202320242023
Cost of revenue$66 $66 $197 $197 
Sales, general and administrative(1)
110 2,487 5,083 7,461 
Total$176 $2,553 $5,280 $7,658 
(1)This does not include the impairment charge of $58.9 million related to the Company’s Immersive Healthcare developed technology during the three months ended June 30, 2024. Refer to Note “4. Impairment and Restructuring Costs of Immersive Healthcare Asset Group” for more information.
8. Goodwill
The following table presents the changes in goodwill during the nine months ended September 30, 2024 (in thousands):
Total Company
Balance as of December 31, 2023$166,270 
Foreign currency translation 85 
Balance as of September 30, 2024$166,355 
Goodwill Impairment Review
The Company reviews goodwill for impairment annually on October 31, or more frequently if events or circumstances indicate that an impairment loss may have occurred. The Company operates as one segment, which is the sole reporting unit of the Company, and therefore goodwill is tested for impairment at the consolidated level. Accordingly, when assessing whether an impairment test is required more frequently than on its annual testing date, the Company considers whether events or circumstances have taken place that indicate it is more likely than not that the Company’s enterprise fair value is less than the carrying amount of its one reporting unit, including goodwill. Due to the impairment of the Immersive Healthcare asset group during the three months ended June 30, 2024, the Company assessed the reporting unit for impairment and determined there was no impairment of goodwill. The Company also determined there were no impairment indicators as of September 30, 2024.
9. Commitments and Contingencies
Royalty Obligations
In March 2005, the Company entered into a license agreement that requires the Company to make minimum royalty payments to the licensor on a quarterly basis. As of December 31, 2018, the license agreement required minimum annual royalty payments of $0.1 million in equal quarterly installments. In July 2019, the Company amended the license agreement to extend its term for an additional ten years and to increase the required minimum annual royalty payments by $0.2 million for a required minimum annual royalty payment of $0.3 million. Unless terminated earlier, the term of the amended license agreement shall expire June 30, 2029.
Royalty expense included in cost of sales for the three months ended September 30, 2024 and 2023 was $0.7 million and $0.7 million, respectively, and for the nine months ended September 30, 2024 and 2023, was $2.0 million and $2.0 million respectively.
Contingencies
From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of business. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.
Indemnification
The Company enters into standard indemnification arrangements in the ordinary course of business. In many such arrangements, the Company agrees to indemnify, hold harmless, and reimburse the indemnified parties for losses suffered or incurred by the indemnified parties in connection with any trade secret, copyright, patent or other intellectual property
17
Penumbra, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
infringement claim by any third-party with respect to the Company’s technology. The Company also agrees to indemnify many indemnified parties for product defect and similar claims. The term of these indemnification agreements is generally perpetual. The maximum potential amount of future payments the Company could be required to make under these agreements is not determinable because it involves claims that may be made against the Company in the future, but have not yet been made.
The Company has entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers, other than liabilities arising from willful misconduct of the individual.
The Company has not incurred costs to defend lawsuits or settle claims related to these indemnification agreements. No liability associated with any of these indemnification requirements has been recorded to date.
Litigation
From time to time, the Company is subject to certain legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business. The Company reviews the status of each significant matter quarterly and assesses its potential financial exposure. If the potential loss from a claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company records a liability and an expense for the estimated loss and discloses it in the Company’s financial statements if it is material. If the Company determines that a loss is possible and the range of the loss can be reasonably determined, the Company does not record a liability or an expense but the Company discloses the range of the possible loss. The Company bases its judgments on the best information available at the time. As additional information becomes available, the Company reassesses the potential liability related to its pending claims and litigation and may revise its estimates.
On April 7, 2023, a former contractor who had been retained by the Company through a third party staffing agency filed a putative class action lawsuit as well as a Private Attorney General Act (“PAGA”) representative action complaint against the Company in the Superior Court of the State of California for the County of Alameda, on behalf of the contractor and similarly situated Company contractors and employees in California, alleging various claims pursuant to the California Labor Code related to wages, overtime, meal and rest breaks, reimbursement of business expenses, wage statements and records, and other similar allegations. Additionally, on April 10, 2023, a current employee of the Company filed a PAGA representative action complaint against the Company in the Superior Court of the State of California for the County of Alameda, on behalf of the employee and similarly situated Company employees in California, alleging similar claims. The complaints seek payment of various alleged unpaid wages, penalties, interest and attorneys’ fees in unspecified amounts. Following mediation in April 2024, in May 2024 the parties entered into a formal agreement to settle the claims for an aggregate amount of $4.6 million, subject to approval by the court. The proposed settlement agreement was initially submitted to the court for preliminary approval on June 18, 2024, and the court granted preliminary approval of the settlement agreement on October 14, 2024. The Company recorded an accrual of $4.6 million in its financial statements for the three months ended March 31, 2024 related to these matters. There have been no changes to the accrual as of September 30, 2024.
10. Stockholders’ Equity
Common Stock
On September 29, 2023, the Company issued 71,211 shares of common stock as part of the total consideration transferred in connection with an asset acquisition. Refer to Note “6. Asset Acquisition” for more details.
Stock-based Compensation
Stock-based compensation expense is associated with restricted stock units (“RSUs”), RSUs with performance conditions (“PSUs”), stock options, and the Company’s Employee Stock Purchase Plan (“ESPP”).
Certain PSUs granted to senior management during the nine months ended September 30, 2024, will vest subject to the achievement of pre-established financial performance targets for the year ending December 31, 2024, and continued service. The fair value of these PSUs is based on the closing price of the Company's common stock on the date of grant. Stock-based compensation costs associated with these PSUs are recognized over the requisite service period of 4.25 years using graded vesting which results in more accelerated expense recognition compared to traditional time-based vesting over the same vesting period. Each reporting period, the Company monitors the probability of achieving the performance targets and may adjust periodic stock-based compensation expense based on its determination of the likelihood of achieving these performance targets and the estimated number of shares of common stock that will vest. The actual number of PSUs awarded is based on the actual performance during the performance period compared to the performance targets.
18
Penumbra, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The following table sets forth the stock-based compensation expense included in the Company’s condensed consolidated statements of operations for the three and nine months ended September 30, 2024 and 2023 (in thousands):
 Three Months Ended September 30,Nine Months Ended September 30,
 2024202320242023
Cost of revenue$1,140 $1,428 $3,315 $3,900 
Research and development1,201 2,219 5,115 6,928 
Sales, general and administrative8,599 10,489 25,639 28,897 
Total$10,940 $14,136 $34,069 $39,725 
As of September 30, 2024, total unrecognized compensation cost related to unvested share-based compensation arrangements, excluding PSUs, was $45.8 million, which is expected to be recognized over a weighted average period of 2.5 years.
As of September 30, 2024, total unrecognized compensation cost related to unvested PSU share-based compensation arrangements was $12.9 million, which is expected to be recognized over a weighted average period of 2.9 years.
The total stock-based compensation cost capitalized in inventory was $1.0 million and $1.3 million as of September 30, 2024 and December 31, 2023, respectively.
11. Share Repurchase Program
On August 5, 2024, the Company’s Board of Directors approved a share repurchase authorization in the amount of up to $200.0 million, allowing the Company to repurchase its common stock from time to time at such prices as it deems appropriate through open market purchases, block transactions, privately negotiated transactions, including accelerated share repurchase transactions, or otherwise. The repurchase authorization expires on July 31, 2025.
Under this authorization, the Company entered into an accelerated share repurchase agreement (“ASR”) with JPMorgan Chase Bank, National Association (the “Dealer”) to repurchase $100.0 million of the Company’s common stock during the three months ended September 30, 2024. Under the ASR, the Company made an initial payment of $100.0 million to the Dealer and received an initial delivery of 473,962 shares of common stock. The ASR program concluded on September 16, 2024 and the Company received an additional 43,801 shares, which was determined using a price of 193.14 based on the average of the daily volume-weighted average prices of the Company’s common stock during the term of the ASR, less a discount pursuant to the terms of the ASR. The Company received an aggregate of 517,763 shares of common stock for a total cost of $100.4 million, including legal and financial advisor fees of $0.4 million associated with the repurchase. Additionally, the Company recorded an excise tax of $0.6 million, which has been included in retained earnings as part of the cost basis of the stock repurchased, and accrued liabilities in the condensed consolidated balance sheets.
All shares repurchased were immediately retired and reduced the weighted-average number of shares of common stock outstanding used in the computation of basic and diluted earnings per share. The forward contract upon final settlement did not impact weighted average common shares outstanding used in the computation of diluted earnings per share. As of September 30, 2024, the Company had remaining authority to purchase $100.0 million of its common stock under the share repurchase authorization.
12. Accumulated Other Comprehensive Loss
Other comprehensive income (loss) consists of two components: unrealized gains or losses on the Company’s available-for-sale marketable investments, non-marketable investments, and gains or losses from foreign currency translation adjustments. Until realized and reported as a component of consolidated net income (loss), these comprehensive income (loss) items accumulate and are included within accumulated other comprehensive loss. Unrealized gains and losses on our marketable investments are reclassified from accumulated other comprehensive loss into earnings when realized upon sale, and are determined based on specific identification of securities sold. Gains and losses from the translation of assets and liabilities denominated in non-U.S. dollar functional currencies are included in accumulated other comprehensive loss.
19
Penumbra, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The following table summarizes the changes in the accumulated balances during the period, and includes information regarding the manner in which the reclassifications out of accumulated other comprehensive loss into earnings affect our condensed consolidated statements of comprehensive income (loss) (in thousands):
Three Months Ended September 30, 2024Three Months Ended September 30, 2023
 Marketable
Investments		Non-Marketable Investments Currency Translation
Adjustments		 Total Marketable
Investments		Non-Marketable Investments Currency Translation
Adjustments		 Total
Balance, beginning of the period$(247)$96 $(4,897)$(5,048)$(2,012)$— $(3,567)$(5,579)
Other comprehensive loss before reclassifications:
Unrealized gains — investments234 904 — 1,138 698 — — 698 
Foreign currency translation gains (losses)— — 3,185 3,185 — — (2,359)(2,359)
Income tax effect — expense(238)— — (238)— — — — 
Net of tax(4)904 3,185 4,085 698 — (2,359)(1,661)
Net current-year other comprehensive income (loss)(4)904 3,185 4,085 698 — (2,359)(1,661)
Balance, end of the period$(251)$1,000 $(1,712)$(963)$(1,314)$— $(5,926)$(7,240)
Nine Months Ended September 30, 2024Nine Months Ended September 30, 2023
Marketable
Investments		Non-Marketable InvestmentsCurrency Translation
Adjustments		TotalMarketable
Investments		Non-Marketable Investments<