Good afternoon. My name is Julianne, and I will be your conference operator today. At this time, I would like to welcome everyone to Penumbra's First Quarter 2023 Conference Call. I would now like to introduce Ms. Jee Hamlyn-Harris, Investor Relations for Penumbra. Ms. Hamlyn-Harris, you may now 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 first quarter of 2023. 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, 2022, filed with the SEC. 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. The corresponding GAAP measures and a reconciliation of GAAP to non-GAAP financial measures are provided in our posted press release. 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 first quarter. And Jason Mills, our Executive Vice President of Strategy, will discuss our 2023 guidance. Sandra Lesenfants, our President of Interventional, will join the team for questions. With that, I would like to turn over the call to Adam Elsesser.

Thank you, Jee. Good afternoon. Thank you for joining Penumbra's First Quarter 2023 Conference Call. Our total revenues for the first quarter were $241.4 million, a year-over-year increase of 18.4% as reported and 19.7% on a constant currency basis. Our first quarter revenue increased sequentially by $20 million, the fastest sequential dollar growth in our company's history, excluding the COVID-related second to third quarter of 2020. The Lightning Flash launch in the first quarter exceeded our high expectations, becoming the biggest product launch in the company's history, even with limited supply through the quarter. Lightning Flash is driving acceleration in our U.S. vascular business, which grew 23% year-over-year, and our U.S. vascular thrombectomy franchise, which grew 26% year-over-year in the first quarter. We are following this up with the recent launch of Lightning Bolt 7, for which cases to date have gone extremely well. The launches of RED 72 with our proprietary SENDit technology, RED 43 and BMX81 have added significant momentum to our market-leading ischemic stroke business. Therefore, we are raising our 2023 revenue forecast significantly, and we see a robust growth trajectory over the next 5-plus years. Jason will discuss our forecast in more detail later in this call. Gross margins met our expectations for the first quarter, and we expect gross margin expansion through 2023. We continue to target 70% plus gross margins within a few years. Non-GAAP operating income increased to $10.4 million, representing 4.3% of revenue in the first quarter, notwithstanding traditionally higher payroll taxes and sales meeting expenses at the beginning of each year. With strong revenue growth, expanding gross margins and disciplined operating spending, we expect to significantly increase our operating profits and cash flow in 2023 and beyond. Lightning Flash has arrived at a consequential moment in the thrombectomy market. And based on our initial launch, we believe this product will transform PE and venous thrombectomy to the ultimate benefit of hundreds of thousands of patients not just in 2023 but for at least the next 5-plus years. During the first quarter, we grew our actual PE and DVT procedures in the U.S. by more than 30% sequentially. We saw acceleration of cases through the quarter as the conversion from other mechanical thrombectomy products and lytics to Lightning Flash gained momentum. Acceleration of Flash demand was evident from both new customers as well as existing customers. In fact, the majority of these customers have already reordered Flash, and the rate of reorders is the same for new customers and existing customers. Again, we think this momentum could continue longer than a typical product launch for us given the propriety of this technology, the size of this opportunity and the current state of this field. Some of the largest hospital systems in the country have just put Lightning Flash on contract in April, which allows our team to start the individual hospital Value Analysis Committee process for Lightning Flash. Lightning Bolt 7 arriving just 1 quarter after Lightning Flash makes this an unprecedented moment in time for Penumbra as well as for thrombectomy patients in the United States. We have received extraordinary feedback from physicians who have used Lightning Bolt 7. And even though it is early, we are already starting to see conversion to Lightning Bolt 7 from physicians who might historically have performed open surgery or used lytics. A great example of the benefit of Lightning Bolt 7 occurred about 3 weeks ago. A patient presented to the hospital with severe leg pain and necrotic toes. The patient had an SFA stent placed about 3 months prior. A CT scan showed complete blockage of the SFA to the popliteal. The patient was scheduled for an above-the-knee amputation. But the day prior, the physician, who is new to Penumbra's thrombectomy devices, had heard about Lightning Bolt 7. He decided to try it prior to the scheduled surgery. Lightning Bolt 7 cleared the thrombus completely in about 2 minutes of device time, and the patient will likely keep her foot and leg. With this breakthrough technology, we have a rare opportunity to convert a large number of physicians to Lightning Bolt 7 from traditional modes of treating arterial thrombus. But we understand that we have a lot of work ahead of us. This work will take time, and we are off to a great start, including the hospital contracting and value analysis process we mentioned earlier for Flash. Hearing about the differentiated success for both Lightning Flash and Lightning Bolt 7 so far gives our team an extraordinary amount of motivation to get these technologies to every physician treating the 800,000-plus venous, PE and arterial patients in the United States. Add to this the successful product launches in stroke, and we fully understand that there is a lot of excitement among our physician customers that is also spread to the investment community. We obviously share that excitement. However, let me take a step back from the near term and state that this work will be our main focus over the next 5-plus years. With this focus, we believe that these amazing proprietary technologies will reach a significant percentage of these patients. The building blocks that are necessary to achieve our plans are important. They include continuing to scale manufacturing to meet increasing demand, demonstrating value to hospital customers, increasing physician awareness and training and generating additional clinical evidence. Every one of our functional teams from R&D to regulatory, manufacturing to marketing, clinical to commercial and national accounts have evolved in profound ways over the past 2 years and are now fully prepared and focused on the work ahead. We believe computer-orchestrated thrombectomy will prosper near term and will have a long tail and become the ultimate paradigm in thrombectomy. Turning to our neuro franchise. The acceleration in our stroke business, which was up 6% sequentially in the U.S., was driven by the launches of RED 72 with our proprietary inner catheter SENDit technology and RED 43. These products represent meaningful advances in both trackability of 0.072 sized aspiration catheters as well as distal clot removal. As we build more inventory of these 2 important products, we think they, coupled with the recently launched BMX81, will continue to increase our growth and market share in neuro, particularly as physicians continue to realize the trade-off with oversized aspiration catheters that have entered the market in the past several years. Our newest products are critical as we lay a strong foundation in anticipation of Thunderbolt, our computer-orchestrated platform for stroke. Turning to our international business. We are proud of the work our global teams have done, growing revenue 8% sequentially, taking our international business to a revenue run rate that exceeds $0.25 billion annually. We are even more excited about what's to come in ensuing years. We recently launched our RED catheter for stroke and our first-generation computer-orchestrated thrombectomy products, Lightning 12 and 7, in Europe. And we have added significant expertise and capacity to our sales, regulatory and reimbursement capabilities internationally. In sum, we think, within 3-plus years, we can bring our franchise products like RED catheters and CAT RX together with all of our most advanced products, Lightning Flash, Lightning Bolt 7 and Thunderbolt, to our global teams. Over this time period, we expect to materially increase both revenue and profitability in our international business. Our Immersive Healthcare business is making significant progress as well. We are both proud and excited to have recently established a multiyear collaboration with the Department of Veteran Affairs Office of Healthcare Innovation and Learning to test, co-develop and scale virtual reality solutions for veterans in multiple health care settings, including the home. We are so impressed with both the VHA's vision and its commitment to expanding access to high-quality care to veterans. This collaboration, coupled with other important work we are doing with large private health care systems in the United States, is teaching us so much about the myriad ways our technology can improve health care across rehab mental and cognitive health and aging while also helping develop the business model to scale this business in the years ahead to the ultimate benefit of many patients. I'll now turn the call over to Maggie to go over our financial results for the first quarter of 2023.

Thank you, Adam. Good afternoon, everyone. Today, I will discuss the financial results for the first quarter of 2023. Financial results on this quarter for revenue and gross margin are on a GAAP basis, while operating expenses and operating income are on a non-GAAP basis. The corresponding GAAP measures and a reconciliation of GAAP to non-GAAP financial measures are provided in our posted press release. For the first quarter ended March 31, 2023, our total revenues were $241.4 million, an increase of 18.4% reported and 19.7% in constant currency compared to the first quarter of 2022. Our geographic mix of sales in the quarter was 71.2% in the U.S. and 28.8% international. U.S. reported growth of 19.1%, and our international regions increased 16.7% reported and 21% in constant currency. Sequential growth of 9.1% was primarily driven by strong momentum in our U.S. vascular thrombectomy business. Moving to revenue by franchise. Revenue from our vascular business grew to $142.8 million in the first quarter of 2023, an increase of 16.3% reported and 17.2% in constant currency compared to the same period last year. Worldwide vascular revenue was primarily driven by strong growth in the U.S., which increased 23% year-over-year, partially offset by variability in international distributor region revenue compared to the same quarter a year ago. Revenue from our neuro business was $98.5 million in the first quarter of 2023, an increase of 21.5% reported and 23.4% in constant currency compared to the same period a year ago, driven by new product launches in the U.S., continued momentum in Europe and positive variability in international distributor region revenue compared to the same quarter a year ago. Turning to gross margin. Gross margin for the first quarter of 2023 is 62.6% compared to 62.5% for the first quarter of 2022 and 62.6% last quarter. Gross margin performance was driven by approximately a 1 point improvement from higher vascular thrombectomy product mix sales, offset by higher start-up costs associated with multiple new product launches and regional mix. We are on track to improve our margins throughout 2023 and expect to see continued favorable product mix, improvement in productivity and fixed cost leverage as new product volumes continue to accelerate for the rest of the year. Now on to our non-GAAP operating expenses, which exclude the amortization of acquired intangible assets of $2.4 million and $1.8 million for this quarter, last quarter and for the same quarter last year, respectively. Total operating expense for the quarter was $140.7 million or 58.3% of revenue compared to $129.7 million or 63.6% of revenue for the same quarter last year. We have been effectively scaling our business while leveraging minimal headcount investment compared to last year. Our research and development expenses for Q1 2023 were $20 million compared to $20.6 million for Q1 2022. SG&A expenses for Q1 2023 were $120.7 million or 50% of revenue compared to $109.1 million or 53.5% of revenue for Q1 2022 and $113.3 million or 51.2% of revenue last quarter. We have higher seasonality expenditures in the first quarter but continue to be disciplined in discretionary spending. We recorded operating income of $10.4 million or 4.3% of revenue in the first quarter of 2023 compared to an operating loss of $2.3 million for the same period last year. Turning to cash flow and balance sheet. We ended the first quarter with cash, cash equivalents and marketable securities balance of $199.1 million, which is an increase of $11.1 million from last quarter. We expect positive operating cash flow trends to continue the rest of the year driven by improvement in profitability and working capital. And now, I'd like to turn the call over to Jason to discuss our guidance.

Thank you, Maggie, and good afternoon, everybody. For 2023, we are increasing our revenue guidance to a range of $1.04 billion to $1.06 billion, representing year-over-year growth of 23% to 25% versus 2022 total revenue of $847.1 million. This compares to our previous guidance, which solely specified a lower limit of $1 billion. We expect our global revenue growth rates to accelerate on a year-over-year basis through 2023 to the low 20% range in the second quarter and mid- to high 20% range in the second half of 2023. Relative to our total revenue guidance range of 23% to 25% year-over-year growth for 2023, we expect growth in our vascular business to be slightly above this range and growth in our neuro business to be below this range. Moving down the P&L, we expect to expand gross margins as we move through 2023, and we continue to target over 70% gross margins within a few years. Finally, we are increasing our expectations for non-GAAP operating margins and now expect to exceed 10% by the end of the year, with further operating margin expansion expected in subsequent years. I will now turn the call back to Adam for closing remarks.

Thank you, Jason, Maggie, and Jee. We are obviously extremely excited about the launches of Lightning Flash and Lightning Bolt. These types of transformational product launches don't happen often in the medical device field. We're also extremely excited about the product launches in our stroke franchise. With that excitement comes a clear understanding honed over decades of experience in our company of the critical work ahead over the next several years to take full advantage of this world-class technology and make it available to everyone whom it could benefit. Our entire team knows and understands the work ahead. I believe they are energized and ready to do that work to make sure our physician customers and their patients have this technology. From everyone I've spoken to on the team, every morning, they know that they got to get up and try and try and try. With that effort and the teamwork we have shown, we will bring the wave of computer-orchestrated aspiration to our customers around the world. I think they're ready. Thank you, and we can open the call to questions.

Our first question comes from Robbie Marcus from JPMorgan.

Congrats on a nice quarter. Maybe to start, I wanted to spend some time on the peripheral thrombectomy line, particularly Flash. You gave a couple of numbers in there, but really, the question is 2-part. One, how are you thinking about the adoption of Flash relative to market expansion versus share gains? And how can we think about Flash's impact in terms of the updated guidance range? How much of it was from Flash and the upcoming arterial product launch versus neuro?

Thank you, Robbie. First, I appreciate your question, which I believe has several parts. From our prepared remarks, it’s clear that we are in a strong position right now. With the recent product launches of Flash, Lightning Bolt 7, and advancements in neuro, we are witnessing significant momentum. We emphasized that, numerically speaking, our peripheral thrombectomy tools, specifically Flash and Lightning Bolt, will play a larger role in our growth. The data backs this up, especially considering our target of 800,000 patients, which many believe is conservative. Regarding your first question about market expansion versus share gain, it varies by product and the definitions involved. In stroke care, we aim to treat more individuals, but recently, as market growth has slowed, gaining share became our primary focus. However, there's renewed interest in the stroke segment, which we expect will yield both market expansion and share gains. For Lightning Bolt, the competition isn't mainly with other mechanical products but rather with alternative procedures like open surgery or lytics. Whether it’s classified as market share gain or market growth may not be important; our key objective is to target areas where physicians are utilizing these treatment methods. On the venous side, for both PE and DVT, we need to focus on how quickly share can shift and how we can engage the remaining DVT and PE patients. This is the work we have ahead of us this year and in the years to come as we strive to reach that 800,000 patient goal.

Yes. Regarding your question on guidance and contribution, we mentioned in our prepared remarks that our U.S. vascular thrombectomy business accounts for the majority of the $20 million sequential increase, mainly driven by Flash. As we move forward, we expect Flash and Lightning Bolt 7 to continue to contribute similarly to the growth acceleration we anticipate. Additionally, we noted that our U.S. venous franchise saw more than a 30% sequential increase in procedural volume from the fourth quarter on both the venous and PE sides.

This was probably the best quarter for stroke and neuro that you've had in a long time. How sustainable is this, and are there any one-time items to mention?

Yes, that's a great question. There's not really a one-time distributor order that's out of cycle. The main point we highlighted is the ongoing launch of RED in Europe, particularly the impressive debut of SENDit, our inner catheter technology for RED 72, as well as the continued rollout of RED 43. We're beginning to receive more inventory to support that, and the response has been quite remarkable. Additionally, we're starting to see a renewed excitement in the field regarding stroke treatment and the necessary work to grow that segment. Therefore, we're optimistic about our stroke business. However, the primary focus from many has been on Flash and Bolt, which are performing exceptionally well, boosting our confidence. It has been enjoyable to witness the cases and the positive reactions from both our long-time customers and new users of our thrombectomy tools. It's a truly rewarding experience.

Yes. And just to add to that, repeating a little bit about what Adam said about the energy around stroke, it's fair to also say that the year-over-year comparisons in the stroke business were a little easier. And we also said sort of separately that we expected, notwithstanding a really strong quarter out of our U.S. vascular thrombectomy business, that the vascular business globally writ large, we expect to accelerate through the year to sort of continue the momentum we've shown in the first quarter, just to comment a bit on both sides of it.

Our next question comes from Larry Biegelsen from Wells Fargo.

Adam, I was curious about your comments on the arterial side for Bolt. You have a very strong position there, and I don't see significant competition in mechanical thrombectomy. I view this more as a mixed benefit. You mentioned getting procedures from lytics and open procedures. The last slide you presented showed about 50,000 procedures out of roughly 260,000 patients, indicating a 20% penetration. How are you approaching the conversion from lytics and open procedures? What factors are influencing that, and what do you believe is needed beyond providing a superior product to drive that conversion? I also have one follow-up.

Yes, Larry, thank you for your question. It's still early, and we'll share our strategy as we move into execution over the next couple of quarters. The key point is as we described: If this product continues to perform as expected, we have enough cases that alleviate any concerns. It's simply about placing the catheter at the clot or in front of it, pushing a button, and the clot tends to come out quickly in most instances. This is quite compelling for interventionalists or vascular surgeons accustomed to other techniques, as it's fast, safe, and easy. We're witnessing a positive reaction. The question remains how long it will take to spread the word, encourage trials, and ensure others have similar experiences. We are committed to this effort. We may need to undertake additional work to share these positive experiences, but what's most important is that the product is performing as we hoped and is being well-received, especially among our current customers and those previously using open surgery or lytics. This gives us confidence that we have a significant opportunity with this product.

That's helpful. Just two quick ones, and I mean very quick ones. One, on Flash, are you no longer supply constrained? And the second is on the THUNDER trial. Just any update on the enrollment and when you expect to complete.

Yes. Let me start with the THUNDER trial. Enrollment is ongoing, and the cases are progressing well. We will provide an update on completion dates in the next quarter or so. There is increased energy around the trial, which is promising. This seems to stem from a renewed focus in the market on stroke. We have also observed a significant number of screen failures, not because patients aren't usually treated with our product, but due to the 8-hour window required by the trials. This is actually a positive sign of the trial's ongoing focus. So far, we remain very optimistic, and we will offer a more definitive update as soon as we have clearer information. Regarding supply issues for Flash, we are in a much better position. We have been working hard to resolve those issues and currently do not feel that we are constrained for either Flash or Bolt.

Our next question comes from Joanne Wuensch from Citi.

A couple of questions. I want to make sure I got these numbers right. Total vascular was up 17.2% constant currency, U.S. up 23%. What was OUS?

OUS, we didn't give that number, but obviously, it was less than that, less than the total number, just as averages work. And just to sort of give you some broader answer to that question, clearly, the vascular number globally was driven by the U.S. vascular thrombectomy franchise. It drove the majority of that $20 million sequential increase in our global quarterly revenue. We mentioned our U.S. vascular business grew 23%. I think we also mentioned that our U.S. vascular thrombectomy piece specifically grew 26% on a year-over-year basis. So what you're seeing there is the building momentum in the vascular franchise and the strength in the first quarter when you look at the growth and excluding the distributor variance that we saw year-over-year in vascular internationally that Maggie alluded to. And there was a bit of a distributor variance where vascular was strong first quarter last year in a couple of distributor markets and just the way the trajectory goes different this year that made that different, which is why we thought it was important to call out the U.S. to give you a true sense for the growth in that vascular business where the new products are.

Got it. As a follow-up, Thunderbolt is still on track to be approved at the end of the year? And if so or if not, what are your expectations for uptake of that particular product?

Yes. As I said just now to Larry, we'll give a more thoughtful update on exactly the timing of that as we go over the next quarter or so when we get a better sense, as I said. With a renewed level of sort of interest in the stroke field, we sort of want to play that out over a bit to give you a more accurate. Notwithstanding that, what we've said over and over again is that product, we're excited about it. We can't wait for it. But in the meantime, we're doing a lot of work in the stroke field with RED 43 and SENDit. And I think that's time well spent to lay the foundation for Thunderbolt. And also, again, we have the wonderful benefit of having Flash and Lightning Bolt here and now. And between all of that, we're in really good shape right now.

Yes. And just to add to that, Joanne, just to reiterate that point, I think the most important point here is the renewed energy around stroke. And then this new product, SENDit, is really doing quite well with 43. And the other fact just to remind you of is that we did not and continue to not have any expectation for Thunderbolt revenue in our 2023 guidance. That having been said, SENDit and 43 is performing very, very well. So we're excited about that.

Our next question comes from Imron Zafar from Deutsche Bank.

Jason, I wanted to first ask about blood loss. One of your competitors commented on the performance of your 16 French catheter, aka Lightning Flash, and talked about the big rates of blood loss in their data set. I just wondered, with the benefit of having a presumably much bigger data set, what you're seeing in your commercial experience specifically on this endpoint of blood loss with Flash.

Yes. I mean thanks for the question. Obviously, for people who use the product on a regular basis, no one's seen that or has commented on that. And I think most people understand that.

Okay. And then just in terms of gross margin, I think last time you talked about 1 to 2 points of year-over-year improvement this year. But now that we have better volume leverage, inflationary pressures seem to be abating a little bit. I just wonder, is the year-over-year improvement therefore going to be materially better than that 100 to 200 basis points that you talked about last quarter? And then when do you think you can get to that 70% gross margin level in terms of time frame?

Thanks for the question. Yes. So far, we see a pretty positive trend in the first quarter. We're excited to see that all the new product launch have accretive to the gross margin. And we are on track to all of our productivity progress. We are seeing more margin improvement opportunities. In the near term, we will primarily focus on meeting increasing demand and quality of new product launches. As I mentioned in the prepared remarks, we do see some higher start-up costs with all the new product launches, but we are still on track to our target of 100 and 200 basis point improvement for the year.

Do you have a time frame for when you think you can achieve that 70% aspirational target for gross margin?

Yes. We'll continue to see favorable mix and productivity improvement in the next few years. So within a few years, we are still on track to the 70%-plus gross margin target.

Our next question comes from Margaret Kaczor from William Blair.

I'm not going to try to do Larry and mention everyone just in the sake of time, but appreciate it. Maybe the first one just on reorder rates as a follow-up for the new and existing accounts. So you mentioned you're saying those go up. Specifically for existing, can you give us a sense of how much that's going up and maybe how that might compare to the potential addressable markets in some of these existing accounts? Maybe you're 10% within that 100 etc.

Yes. So Margaret, I apologize for not fully understanding, you're saying with our existing accounts, how much that has gone up?

Yes.

Yes. Regarding Flash, in the first quarter, our main goal was to get the product into users’ hands, encouraging them to order and use it. It’s difficult to measure how many users shifted from Lightning 12 to Flash or if they would have used another option instead, as this group is likely very small. I don’t have specific numbers on that. We're mainly focused on users of our products compared to those who haven’t used them. The latter is particularly important. Some of them have turned to other methods or products available in the market. The reorder and reuse rates are very high, consistent among both new customers and those who previously used Lightning 12. We wanted to emphasize this because it shows strong customer retention, even among those who were not familiar with our products prior to this launch. This is a critical point we wanted to convey. While there may be a few exceptions, the vast majority have engaged positively. The level of engagement and reorder rates is significant, especially concerning the growth potential with new customers.

Okay. And I think part of it, from my perspective, was utilization as well. So we can talk about that later. The second question, you mentioned the PE, DVT grew 30% sequentially. Obviously, that seems like a pretty big number. Can you give us any sense around scale between the January and March? And can that trajectory, I guess, keep going in April and beyond?

Yes. The key point here is that, while we maintain our excitement and enthusiasm, the process isn't entirely predictable. We will spend time discussing how product launches operate, as they are not just straightforward. However, based on our updated guidance, it's clear we have strong confidence in our ability to achieve significant adoption of these products this year. This is the main message we want to communicate: these products are effective and transformative on a scale that is quite rare. We're not only focused on the immediate quarters but also on what we can achieve moving forward. We have engaged with many physicians, and we are getting closer to having products that are viable for treating everyone who needs treatment. This is the work ahead and our current focus, which is fueled by the positive reception we have received thus far. We are excited about our mission to develop products that can safely remove clots, whether from arteries, veins, or lungs, in a way that is becoming routine. We believe we are approaching that goal, and this is where our enthusiasm lies. We are ready to get to work.

Our next question comes from Michael Sarcone from Jefferies.

So just a quick follow-up on Margaret's question. You talked about that over 30% quarter-over-quarter growth for PE and DVT procedures. Can you give us any color on what that looked like on a year-over-year basis?

It was significant, but I don’t have those numbers with me at the moment. We had a strong fourth quarter, which is typically one of our best periods. Although I don’t have the specific figure available, I can say there was significant year-over-year growth for that business, particularly in the U.S. vascular thrombectomy segment. It exceeded the number we previously provided for the overall U.S. thrombectomy business.

Okay. That's helpful. And then I was just curious, in arterial for Lightning Bolt, for the use case for docs, you talked about it being fast, safe and easy. Can you also talk about what the economic case looks like for using Bolt versus open or lytics?

Yes, that's a great question regarding Lightning Bolt 7. Different factors come into play when considering costs. While the material cost of Lightning Bolt is higher than the materials involved in open surgery, when hospital administrators examine the overall expenses, especially in terms of operating room costs—which are often billed hourly—they also consider post-operative stays. For example, traditional open surgeries and interventions can lead to longer ICU stays, averaging around two days for lytic procedures. This positions us as significantly more cost-effective on a total cost basis compared to both options. I believe we will gain substantial traction; the first step is encouraging orders and facilitating trials. I'm particularly excited about the interest we’re seeing, similar to what we experienced with Flash. While we may need to persuade some groups, we currently have strong momentum with many who are eager to engage in the process and start using the product, driven by the successful cases we encounter daily.

Our next question comes from Shagun Singh from RBC Capital Markets.

Congratulations on a good quarter. I just was looking for some clarification here. I thought it was interesting that the beat relative to expectations was driven by neurovascular and not peripheral. And you did call out that U.S. thrombectomy uptake, it sounds like it was better than at least what we were expecting. So were there any offsets on the vascular side for us to consider either internationally or elsewhere? And then on guidance, also just as a clarification, I was wondering, how much of Bolt is in guidance? Is the guidance increase mostly Flash? You did call out that there's not much for Thunderbolt in it, but what about LIGHTNING BOLT? How much of that is in it? And then I have a follow-up.

Thank you, Shagun. Please add anything I may have overlooked, but I will attempt to cover both the vascular topic and the guidance issue. First, regarding vascular, I agree with your observation. It appears that neuro contributed to exceeding your consensus estimations, but we didn't provide specific guidance differentiating neuro from vascular. There was an increase in our U.S. vascular business compared to your forecasts. Additionally, as Maggie noted, there were distributor variances overseas that favored neuro while the reverse benefited vascular, which is why we highlighted our U.S. vascular and U.S. vascular thrombectomy businesses for clarity. We also mentioned that Flash was responsible for most of the $20 million sequential growth. Combining these points, it is clear that the strength this quarter was primarily due to U.S. vascular thrombectomy. Regarding guidance, as Adam indicated, we expect our vascular business to accelerate moving forward. We have stated that global vascular growth will exceed the upper range of our revenue guidance. This should provide you with sufficient insight to conclude that both Flash and Bolt will significantly contribute to year-over-year growth, which is now around $200 million in dollar terms.

Got it. I’d like to discuss your product portfolio for 2023, which you described as transformational, along with your guidance for 24% growth this year. I’m curious about what this indicates for your sales growth trajectory after 2023. Should we expect you to grow in the range of plus or minus 20%? Additionally, you mentioned an exit margin of over 10%. Should we anticipate a similar increase in 2024 as we are expecting for 2023?

I appreciate the questions. I love that you're eager to get guidance for 2024 already, and I truly respect that. However, I don't think we are ready to provide 2024 guidance just yet. We have, of course, done significant work on our business outlook, not only for 2024, but also considering a timeline of five years or more. This has been a topic of thorough discussions with our team about our prospects this year and in the future. We do anticipate strong growth ahead, specifically strong double-digit growth, but we aren't prepared to give a specific quantitative figure at this time. Regarding operating income, we have qualitatively indicated that with robust revenue growth, the anticipated expansion of our gross margins, and our disciplined spending, we expect our operating margins to improve not just this year but also next year. Again, although it's a bit early to present quantitative details, we are excited about the potential leverage that exists in 2024 and beyond.

Our next question comes from Bill Plovanic from Canaccord Genuity.

Just a couple of things. One, at this point in the launch, do you think that you've gotten Lightning Flash and Bolt to all the accounts? So I think on the last call, you're still kind of in the LMR on Bolt. And then kind of a follow-up to that is, are you seeing an acceleration of the Bolt launch or benefit? Because I think we talked about going to the VAC committees with both products at the same time. Just trying to figure out where you are in the launch at this point.

Yes. So with Lightning Bolt, we launched the product. What is it? May 2, we launched the product within 3 weeks ago or something like that. I've lost the exact track of time. So I think you can be pretty darn confident in understanding that we have not gone to every account in the United States with that and have it on the shelf yet. That would be amazing. It takes a while. As you heard, one of the largest systems in the country just put Lightning Flash on contract, which allows us to start the individual hospital VAC committees in each of their hospitals. And that's in April, and we launched that in January. So the process takes time. That being said, we're pretty darn excited about the reaction to it. And without a positive reaction, you can have all the time in the world, no one's going to care. People care. They're excited about it. And I think we kind of went out of our way on this call to be clear that we have a fairly long tail on these products, and that's pretty exciting for us. And I think, hopefully, our physicians and the customers are going to get the product.

Great. With your recently announced agreement with the VA for the real product, how should we think about the revenue contribution both short-term and long-term from this product? Should we bring it back into the discussion, or should we wait until next year to start really considering it?

There's a lot of work ahead, and I look forward to sharing some developments. While some details can be shared now, others must remain undisclosed for the time being. I am really confident and excited about partnering in this effort, as it holds great potential for helping numerous veterans. This, in turn, will enable us to establish a model that can be implemented nationwide. I'm very optimistic about it. However, in terms of revenue contribution, especially in a year where we have significant projects like Lightning Bolt 7 and Lightning Flash in our neuro business, it won't be our key focus moving forward. But laying the groundwork for the future is going exceptionally well right now.

Our next question comes from Richard Newitter from Truist Securities.

I wanted to follow up on an earlier question regarding your 30% sequential growth in venous thrombectomy. I'm curious about how much of that growth can be attributed to March, since the launch wasn't fully scaled throughout the entire quarter. Could you provide some insight on that?

Yes, I want to clarify that we experienced a 30% increase in the number of cases performed. This indicates that we are successfully getting our product into the market and receiving orders. We specifically talked about cases, which is an important detail. Additionally, we observed acceleration throughout the quarter, meaning that March performed better than February, and February outperformed January. This clearly indicates that we're seeing momentum with this product.

Okay. That's helpful. And then just as I think about the range that you provided, thanks for that, for the guidance, the $1.04 billion to $1.06 billion. I'm just curious if there's any benchmarks that you can give us for kind of how you came up with those upper and lower bounds. What does it take to get you to the upper end? I know someone asked about Bolt and contribution in there. It sounds like Bolt is in there. But would love to just hear how you came up with that.

Yes. Well, we know our business very well. We've been giving guidance now for 8 years. I don't mean to come across as, but that is important to note. And we take into account lots of things. And our vascular business, we expect to grow slightly faster than that, our neuro business a little bit below that. We do a lot of work on that and came to this conclusion. Obviously, it's accelerating growth for the year and a lot higher than what we did in the first quarter. So we feel good about where we are now with that guidance.

Our next question comes from Mike Matson from Needham & Company.

I just want to ask one about the Value Analysis Committee process. Kind of how long does it typically take? How receptive have they been to Flash and Bolt? And do they ask for data? I mean I don't think you have much kind of human data on these products, but...

That's a great question. We should consider having a session on how these products launch and sell. It's quite a varied process. Some hospitals are straightforward, while others present challenges. The scheduling of meetings can sometimes be the biggest hurdle. However, none of these are excuses. We're doing well, and the process is functioning. It's important to remember that we cannot sell to everyone immediately. We're discussing this simply to emphasize that there is a process involved. That said, everything is progressing nicely. Physicians are supportive and eager for the product. We have extensive experience in this area, having sold products for over a decade, and we know how to navigate this process. There's nothing particularly unusual about this compared to any other product we've launched, and we've introduced a significant number of products over the years. It's simply about following the established process as we move forward.

Okay. I understand. And then just one last one on China. Just curious. I didn't really hear any comments about that market in the quarter. And then just curious if you're seeing any impact from the VBP stuff over there.

Yes. Thanks for the question, Mike. Yes, we certainly, like other companies, have seen the VBP process starting to play out. And that's playing out as we expected. I just got to have to say again that our partnership with Genesis is important. It's going very well. It's generally fairly early still with respect to what products we are in partnership with them both on the neuro and the vascular side. So all of that taken together, I think the future is bright in China for Genesis and therefore as their partner for us.

Our next question comes from Matt O'Brien from Piper Sandler.

This is Sam filling in for Matt. One of my questions is about the rate of reorders. Could you provide more details and put it in context with past product launches?

Historically, it's difficult to assess our product launches accurately due to the sheer number of products we've introduced over the years. For instance, Lightning 12 serves as a prime example where the reorder rate from new customers appears to be higher. Unfortunately, I don't have the specific metrics available to provide detailed figures. If I did, it would be unusual for me not to remember them. However, what is noteworthy is the positive reception of this product, as we have seen customers who previously did not use our products reorder because they genuinely liked it. This is an essential metric for us, as it underlines our confidence in pursuing new patients in the future, which is why we emphasize this point. While the reorder rate is evidently higher than in previous launches, I am unable to quantify it due to the numerous products we've released.

Our last question will come from Ryan Zimmerman from BTIG.

I promise this will not be a lengthy question. It will be focused. I want to briefly discuss Lightning Flash. One aspect we didn't address was pricing. I understand you won't provide specific pricing, Adam, but I would appreciate it if you could discuss qualitatively the relationship between unit growth and pricing as Lightning Flash goes to market and the potential impact of pricing on unit growth or market expansion, and how that relates to your guidance.

Yes, I appreciate the question. It’s a good one. There’s some misinformation regarding our pricing. We have priced Flash slightly below what was previously the market-leading price. When comparing Flash to Lightning 12 and considering the need for a separator, the prices are not fundamentally different. They are very close, not exactly the same, but close enough that you won’t see significant gains just based on the mix or price between the two. This is a real gain; we are seeing our products used in scenarios that we might not have targeted otherwise, which is very important. Our price growth isn’t primarily from existing customers; in fact, it contributes only a minimal part to the mix, if at all. We haven’t quantified it yet.

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

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

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