QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
Title of each class | Trading Symbol | Name of each exchange on which registered |
☒ | Accelerated filer | ☐ | ||
Non-accelerated filer | ☐ | Smaller reporting company | ||
Emerging growth company | ||||
Page | ||
June 30, 2019 | December 31, 2018 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Marketable investments | ||||||||
Accounts receivable, net of doubtful accounts of $2,708 and $2,782 at June 30, 2019 and December 31, 2018, respectively | ||||||||
Inventories | ||||||||
Prepaid expenses and other current assets | ||||||||
Total current assets | ||||||||
Property and equipment, net | ||||||||
Operating lease right-of-use assets | ||||||||
Intangible assets, net | ||||||||
Goodwill | ||||||||
Deferred taxes | ||||||||
Other non-current assets | ||||||||
Total assets | $ | $ | ||||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | $ | ||||||
Accrued liabilities | ||||||||
Current operating lease liabilities | ||||||||
Total current liabilities | ||||||||
Deferred rent | ||||||||
Non-current operating lease liabilities | ||||||||
Other non-current liabilities | ||||||||
Total liabilities | ||||||||
Commitments and contingencies (Note 9) | ||||||||
Stockholders’ equity: | ||||||||
Common stock | ||||||||
Additional paid-in capital | ||||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
Retained earnings | ||||||||
Total Penumbra, Inc. stockholders’ equity | ||||||||
Non-controlling interest | ||||||||
Total stockholders’ equity | ||||||||
Total liabilities and stockholders’ equity | $ | $ | ||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenue | $ | $ | $ | $ | ||||||||||||
Cost of revenue | ||||||||||||||||
Gross profit | ||||||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | ||||||||||||||||
Sales, general and administrative | ||||||||||||||||
Total operating expenses | ||||||||||||||||
Income from operations | ||||||||||||||||
Interest income, net | ||||||||||||||||
Other expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Income before income taxes and equity in losses of unconsolidated investee | ||||||||||||||||
Benefit from income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Income before equity in losses of unconsolidated investee | ||||||||||||||||
Equity in losses of unconsolidated investee | ( | ) | ( | ) | ||||||||||||
Consolidated net income | $ | $ | $ | $ | ||||||||||||
Net loss attributable to non-controlling interest | ( | ) | ( | ) | ||||||||||||
Net income attributable to Penumbra, Inc. | $ | $ | $ | $ | ||||||||||||
Net income attributable to Penumbra, Inc. per share: | ||||||||||||||||
Basic | $ | $ | $ | $ | ||||||||||||
Diluted | $ | $ | $ | $ | ||||||||||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | ||||||||||||||||
Diluted | ||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Consolidated net income | $ | $ | $ | $ | ||||||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||
Foreign currency translation adjustments, net of tax | ( | ) | ( | ) | ( | ) | ||||||||||
Net change in unrealized gains (losses) on available-for-sale securities, net of tax | ( | ) | ||||||||||||||
Total other comprehensive income (loss), net of tax | ( | ) | ( | ) | ||||||||||||
Consolidated comprehensive income | $ | $ | $ | $ | ||||||||||||
Net loss attributable to non-controlling interest | ( | ) | $ | ( | ) | $ | ||||||||||
Comprehensive income attributable to Penumbra, Inc. | $ | $ | $ | $ | ||||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Total Penumbra, Inc. Stockholders’ Equity | Non-Controlling Interest | Total Stockholders’ Equity | |||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||
Balance at December 31, 2018 | $ | $ | $ | ( | ) | $ | $ | $ | $ | ||||||||||||||||||||||
Issuance of common stock | — | — | — | ||||||||||||||||||||||||||||
Shares held for tax withholdings | ( | ) | — | ( | ) | — | — | ( | ) | — | ( | ) | |||||||||||||||||||
Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | ( | ) | — | ( | ) | — | ( | ) | ||||||||||||||||||||
Net income | — | — | — | — | ( | ) | |||||||||||||||||||||||||
Balance at March 31, 2019 | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
Issuance of common stock | — | — | — | ||||||||||||||||||||||||||||
Issuance of common stock under employee stock purchase plan | — | — | — | — | |||||||||||||||||||||||||||
Shares held for tax withholdings | ( | ) | — | ( | ) | — | — | ( | ) | — | ( | ) | |||||||||||||||||||
Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||
Capital contribution from non-controlling interest | — | — | — | — | — | — | |||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | ||||||||||||||||||||||||||
Net income | — | — | — | — | ( | ) | |||||||||||||||||||||||||
Balance at June 30, 2019 | $ | $ | $ | ( | ) | $ | $ | $ | $ | ||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total Penumbra, Inc. Stockholders’ Equity | Non-Controlling Interest | Total Stockholders’ Equity | |||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||
Balance at December 31, 2017 | $ | $ | $ | $ | $ | $ | — | $ | |||||||||||||||||||||||
Issuance of common stock | — | — | — | ||||||||||||||||||||||||||||
Issuance of common stock pursuant to royalty buy-out | — | — | — | ||||||||||||||||||||||||||||
Shares held for tax withholdings | ( | ) | — | ( | ) | — | — | ( | ) | — | ( | ) | |||||||||||||||||||
Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||
Impact of the adoption of ASC 606, ASU 2016-16, and ASU 2018-021 | — | — | — | — | — | ||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | ||||||||||||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||||||
Balance at March 31, 2018 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Issuance of common stock | — | — | — | ||||||||||||||||||||||||||||
Issuance of common stock under employee stock purchase plan | — | — | — | — | |||||||||||||||||||||||||||
Shares held for tax withholdings | ( | ) | — | ( | ) | — | — | ( | ) | — | ( | ) | |||||||||||||||||||
Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||
Impact of the adoption of ASC 606, ASU 2016-16, and ASU 2018-021 | — | — | — | — | — | ||||||||||||||||||||||||||
Other comprehensive income | — | — | — | ( | ) | — | ( | ) | — | ( | ) | ||||||||||||||||||||
Net Income | — | — | — | — | |||||||||||||||||||||||||||
Balance at June 30, 2018 | $ | $ | $ | ( | ) | $ | $ | $ | $ | ||||||||||||||||||||||
Six Months Ended June 30, | ||||||||
2019 | 2018 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | $ | ||||||
Adjustments to reconcile consolidated net income to net cash (used in) provided by operating activities: | ||||||||
Depreciation and amortization | ||||||||
Stock-based compensation | ||||||||
Loss on non-marketable equity investments | ||||||||
Inventory write-downs | ||||||||
Deferred taxes | ( | ) | ( | ) | ||||
Change in fair value of contingent consideration | ||||||||
Other | ||||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | ( | ) | ( | ) | ||||
Inventories | ( | ) | ( | ) | ||||
Prepaid expenses and other current and non-current assets | ( | ) | ||||||
Accounts payable | ||||||||
Accrued expenses and other non-current liabilities | ( | ) | ||||||
Net cash (used in) provided by operating activities | ( | ) | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Contributions to non-marketable investments | ( | ) | ||||||
Purchases of marketable investments | ( | ) | ( | ) | ||||
Proceeds from sales of marketable investments | ||||||||
Proceeds from maturities of marketable investments | ||||||||
Purchases of property and equipment | ( | ) | ( | ) | ||||
Other | ( | ) | ||||||
Net cash provided by investing activities | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from exercises of stock options | ||||||||
Proceeds from issuance of stock under employee stock purchase plan | ||||||||
Payment of employee taxes related to vested common and restricted stock | ( | ) | ( | ) | ||||
Payment of asset acquisition-related and business acquisition-related obligations (Note 5) | ( | ) | ( | ) | ||||
Proceeds from capital contribution from non-controlling interest | ||||||||
Other | ( | ) | ||||||
Net cash used in financing activities | ( | ) | ( | ) | ||||
Effect of foreign exchange rate changes on cash and cash equivalents | ( | ) | ( | ) | ||||
NET INCREASE IN CASH AND CASH EQUIVALENTS | ||||||||
CASH AND CASH EQUIVALENTS—Beginning of period | ||||||||
CASH AND CASH EQUIVALENTS—End of period | $ | $ | ||||||
NONCASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
Common shares issued as consideration in connection with a buyout agreement (Notes 9 and 10) | $ | $ | ||||||
Purchase of property and equipment funded through accounts payable and accrued liabilities | $ | $ | ||||||
June 30, 2019 | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
Commercial paper | $ | $ | $ | $ | ||||||||||||
U.S. treasury | ( | ) | ||||||||||||||
U.S. agency and government sponsored securities | ( | ) | ||||||||||||||
U.S. states and municipalities | ||||||||||||||||
Corporate bonds | ( | ) | ||||||||||||||
Total | $ | $ | $ | ( | ) | $ | ||||||||||
December 31, 2018 | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
Commercial paper | $ | $ | $ | ( | ) | $ | ||||||||||
U.S. treasury | ( | ) | ||||||||||||||
U.S. agency and government sponsored securities | ( | ) | ||||||||||||||
U.S. states and municipalities | ( | ) | ||||||||||||||
Corporate bonds | ( | ) | ||||||||||||||
Total | $ | $ | $ | ( | ) | $ | ||||||||||
June 30, 2019 | ||||||||||||||||||||||||
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||
Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | |||||||||||||||||||
U.S. treasury | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||
U.S. agency and government sponsored securities | ( | ) | ( | ) | ||||||||||||||||||||
Corporate bonds | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
Total | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||
December 31, 2018 | ||||||||||||||||||||||||
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||
Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | |||||||||||||||||||
Commercial paper | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | ||||||||||||||
U.S. treasury | ( | ) | ( | ) | ||||||||||||||||||||
U.S. agency and government sponsored securities | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
U.S. states and municipalities | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
Corporate bonds | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
Total | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||
June 30, 2019 | December 31, 2018 | |||||||
Fair Value | Fair Value | |||||||
Due in less than one year | $ | $ | ||||||
Due in one to five years | ||||||||
Total | $ | $ | ||||||
As of June 30, 2019 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
Financial Assets | ||||||||||||||||
Cash equivalents: | ||||||||||||||||
Money market funds | $ | $ | $ | $ | ||||||||||||
Marketable investments: | ||||||||||||||||
Commercial paper | ||||||||||||||||
U.S. treasury | ||||||||||||||||
U.S. agency and government sponsored securities | ||||||||||||||||
U.S. states and municipalities | ||||||||||||||||
Corporate bonds | ||||||||||||||||
Total | $ | $ | $ | $ | ||||||||||||
Financial Liabilities: | ||||||||||||||||
Contingent consideration obligations(1) | $ | $ | $ | $ | ||||||||||||
Total | $ | $ | $ | $ | ||||||||||||
As of December 31, 2018 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
Financial Assets | ||||||||||||||||
Cash equivalents: | ||||||||||||||||
Commercial paper | $ | $ | $ | $ | ||||||||||||
Money market funds | ||||||||||||||||
Marketable investments: | ||||||||||||||||
Commercial paper | ||||||||||||||||
U.S. treasury | ||||||||||||||||
U.S. agency and government sponsored securities | ||||||||||||||||
U.S. states and municipalities | ||||||||||||||||
Corporate bonds | ||||||||||||||||
Total | $ | $ | $ | $ | ||||||||||||
Financial Liabilities: | ||||||||||||||||
Contingent consideration obligations(1) | $ | $ | $ | $ | ||||||||||||
Total | $ | $ | $ | $ | ||||||||||||
Fair Value at June 30, 2019 (in thousands) | Valuation Method | Unobservable Inputs | Input (range where applicable) | |||||||
Crossmed: Revenue-based milestones | $ | Monte Carlo Simulation | Earn-out period over which revenue-based milestone payments are made | 2019 | ||||||
Risk-adjusted discount rate | ||||||||||
Revenue volatilities for each type of revenue-based milestone | 5.1% and 18.4% | |||||||||
Fair Value of Contingent Consideration | ||||
Balance at December 31, 2018 | $ | |||
Payments of contingent consideration liabilities | ( | ) | ||
Changes in fair value | ||||
Foreign currency remeasurement | ( | ) | ||
Balance at June 30, 2019 | $ | |||
Fair Value of Contingent Consideration | ||||
Balance at December 31, 2017 | $ | |||
Payments of contingent consideration liabilities | ( | ) | ||
Changes in fair value | ||||
Foreign currency remeasurement | ||||
Balance at June 30, 2018 | $ | |||
June 30, 2019 | December 31, 2018 | |||||||
Raw materials | $ | $ | ||||||
Work in process | ||||||||
Finished goods | ||||||||
Inventories | $ | $ | ||||||
June 30, 2019 | December 31, 2018 | |||||||
Payroll and employee-related cost | $ | $ | ||||||
Accrued expenses | ||||||||
Sales return provision | ||||||||
Product warranty | ||||||||
Contingent consideration & other acquisition-related costs(1) | ||||||||
Other accrued liabilities | ||||||||
Total accrued liabilities | $ | $ | ||||||
June 30, 2019 | December 31, 2018 | |||||||
Balance at the beginning of the period | $ | $ | ||||||
Accruals of warranties issued | ||||||||
Settlements of warranty claims | ( | ) | ( | ) | ||||
Balance at the end of the period | $ | $ | ||||||
June 30, 2019 | December 31, 2018 | |||||||
Deferred tax liabilities | $ | $ | ||||||
Licensing-related cost(1) | ||||||||
Other non-current liabilities | ||||||||
Total other non-current liabilities | $ | $ | ||||||
June 30, 2019 | Weighted-Average Amortization Period | Gross Carrying Amount | Accumulated Amortization | Net | ||||||||||
Customer relationships | $ | $ | ( | ) | $ | |||||||||
Trade secrets and processes | ( | ) | ||||||||||||
Other | ( | ) | ||||||||||||
Total intangible assets subject to amortization | $ | $ | ( | ) | $ | |||||||||
Intangible assets related to licensed technology | ||||||||||||||
Total intangible assets | $ | $ | ( | ) | $ | |||||||||
December 31, 2018 | Weighted-Average Amortization Period | Gross Carrying Amount | Accumulated Amortization | Net | ||||||||||
Customer relationships | $ | $ | ( | ) | $ | |||||||||
Trade secrets and processes | ( | ) | ||||||||||||
Other | ( | ) | ||||||||||||
Total intangible assets subject to amortization | $ | $ | ( | ) | $ | |||||||||
Intangible assets related to licensed technology | — | |||||||||||||
Total intangible assets | $ | $ | ( | ) | $ | |||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Cost of revenue | $ | $ | $ | $ | ||||||||||||
Sales, general and administrative | ||||||||||||||||
Total | $ | $ | $ | $ | ||||||||||||
Total Company | ||||
Balance as of December 31, 2018 | $ | |||
Foreign currency translation | ( | ) | ||
Balance as of June 30, 2019 | $ | |||
December 31, 2018 | Adjustments due to the adoption of Topic 842 | January 1, 2019 | ||||||||||
Assets | ||||||||||||
Prepaid expenses and other current assets(1) | ( | ) | ||||||||||
Total current assets | ( | ) | ||||||||||
Operating lease right-of-use assets(1) | — | |||||||||||
Total assets | $ | $ | $ | |||||||||
Liabilities and Stockholders’ Equity | ||||||||||||
Current liabilities: | ||||||||||||
Accrued liabilities(2) | ( | ) | ||||||||||
Current operating lease liabilities(2) | — | |||||||||||
Total current liabilities | ||||||||||||
Deferred rent(2) | ( | ) | — | |||||||||
Non-current operating lease liabilities(2) | — | |||||||||||
Total liabilities | ||||||||||||
Total liabilities and stockholders’ equity | $ | $ | $ | |||||||||
Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | |||||||
Operating lease cost | $ | $ | ||||||
Variable lease cost(1) | ||||||||
Total lease costs | $ | $ | ||||||
Weighted Average Remaining Lease Term | ||||||||
Operating leases | ||||||||
Weighted Average Discount Rate | ||||||||
Operating leases | % | |||||||
Lease Payments(1) | ||||
Remainder of 2019 | $ | |||
Year ending December 31, 2020 | ||||
Year ending December 31, 2021 | ||||
Year ending December 31, 2022 | ||||
Year ending December 31, 2023 | ||||
Year ending December 31, 2024 | ||||
Thereafter | ||||
Total undiscounted lease payments | $ | |||
Less imputed interest | ( | ) | ||
Present value of lease liabilities | $ | |||
Lease Payments(1) | ||||
Year Ending December 31: | ||||
2019 | $ | |||
2020 | ||||
2021 | ||||
2022 | ||||
2023 | ||||
Thereafter | ||||
Total future minimum lease payments | $ | |||
Six Months Ended June 30, 2019 | ||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||
Operating cash flows from operating leases | $ | |||
Right-of-use assets obtained in exchange for lease obligations: | ||||
Operating leases | $ | |||
Number of Shares | Weighted-Average Exercise Price | ||||||
Balance at December 31, 2018 | $ | ||||||
Exercised | ( | ) | |||||
Canceled/Forfeited | ( | ) | |||||
Balance at June 30, 2019 | |||||||
Number of Shares | Weighted -Average Grant Date Fair Value | ||||||
Unvested at December 31, 2018 | $ | ||||||
Granted | |||||||
Vested | ( | ) | |||||
Canceled/Forfeited | ( | ) | |||||
Unvested at June 30, 2019 | |||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Cost of revenue | $ | $ | $ | $ | ||||||||||||
Research and development | ||||||||||||||||
Sales, general and administrative | ||||||||||||||||
Total | $ | $ | $ | $ | ||||||||||||
Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | |||||||||||||||||||||||
Marketable Investments | Currency Translation Adjustments | Total | Marketable Investments | Currency Translation Adjustments | Total | |||||||||||||||||||
Balance at beginning of the period | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||
Other comprehensive income (loss) before reclassifications: | ||||||||||||||||||||||||
Unrealized gain — marketable investments | — | — | ||||||||||||||||||||||
Foreign currency translation gains (losses) | — | — | ( | ) | ( | ) | ||||||||||||||||||
Income tax effect — benefit (expense) | ( | ) | ( | ) | ||||||||||||||||||||
Net of tax | ( | ) | ( | ) | ||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income to earnings: | ||||||||||||||||||||||||
Income tax effect — expenses | ||||||||||||||||||||||||
Net of tax | ||||||||||||||||||||||||
Net current-year other comprehensive income (loss) | ( | ) | ( | ) | ||||||||||||||||||||
Balance at end of the period | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||
Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | |||||||||||||||||||||||
Marketable Investments | Currency Translation Adjustments | Total | Marketable Investments | Currency Translation Adjustments | Total | |||||||||||||||||||
Balance at beginning of the period | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||
Other comprehensive (loss) income before reclassifications: | ||||||||||||||||||||||||
Unrealized gain (losses) — marketable investments | — | ( | ) | — | ( | ) | ||||||||||||||||||
Foreign currency translation (losses) | — | ( | ) | ( | ) | — | ( | ) | ( | ) | ||||||||||||||
Income tax effect — benefit (expense) | ( | ) | ( | ) | ||||||||||||||||||||
Net of tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
Amounts reclassified from accumulated other comprehensive income to earnings: | ||||||||||||||||||||||||
Income tax effect — expense | ||||||||||||||||||||||||
Net of tax | ||||||||||||||||||||||||
Net current-year other comprehensive (loss) income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
Balance at end of the period | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Numerator: | ||||||||||||||||
Net income attributable to Penumbra, Inc. | $ | $ | $ | $ | ||||||||||||
Denominator: | ||||||||||||||||
Weighted average shares used to compute net income: | ||||||||||||||||
Basic | ||||||||||||||||
Effect of dilutive securities from stock-based benefit plans, as calculated using treasury stock method | ||||||||||||||||
Diluted | ||||||||||||||||
Net income attributable to Penumbra, Inc. per share from: | ||||||||||||||||
Basic | $ | $ | $ | $ | ||||||||||||
Diluted | $ | $ | $ | $ | ||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
United States | $ | $ | $ | $ | ||||||||||||
Japan | ||||||||||||||||
Other International | ||||||||||||||||
Total | $ | $ | $ | $ | ||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Neuro | $ | $ | $ | $ | ||||||||||||
Vascular | ||||||||||||||||
Total | $ | $ | $ | $ | ||||||||||||
• | Neuro thrombectomy - Penumbra System designed for mechanical thrombectomy, including Penumbra JET and ACE reperfusion catheters, aspiration tubing, aspiration pump, and the 3D Revascularization Device |
• | Neuro embolization - Penumbra SMART COIL, Penumbra Coil 400, POD400, PAC400 and PX SLIM |
• | Neuro access - delivery catheters, consisting of Neuron, Neuron MAX, Select, BENCHMARK and DDC |
• | Neurosurgical - Artemis Neuro Evacuation Device |
• | Vascular thrombectomy - Indigo System designed for mechanical thrombectomy, including aspiration catheters, separators, aspiration pump and accessories |
• | Vascular embolization - Ruby Coil System, POD System (POD and POD Packing Coil) and the LANTERN Delivery Microcatheter |
• | The rate at which we grow our salesforce and the speed at which newly hired salespeople become fully effective can impact our revenue growth or our costs incurred in anticipation of such growth. |
• | Our industry is intensely competitive and, in particular, we compete with a number of large, well-capitalized companies. We must continue to successfully compete in light of our competitors’ existing and future products and their resources to successfully market to the specialist physicians who use our products. |
• | We must continue to successfully introduce new products that gain acceptance with specialist physicians and successfully transition from existing products to new products, ensuring adequate supply. In addition, as we introduce new products, we generally hire and train additional personnel and build our inventory of components and finished goods in advance of sales, which may cause quarterly fluctuations in our operating results and financial condition. |
• | Publications of clinical results by us, our competitors and other third parties can have a significant influence on whether, and the degree to which, our products are used by specialist physicians and the procedures and treatments those physicians choose to administer for a given condition. |
• | The specialist physicians who use our products may not perform procedures during certain times of the year, such as those periods when they are at major medical conferences or are away from their practices for other reasons, the timing of which occurs irregularly during the year and from year to year. |
• | Most of our sales outside of the United States are denominated in the local currency of the country in which we sell our products. As a result, our revenue from international sales can be significantly impacted by fluctuations in foreign currency exchange rates. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||||||
(in thousands, except for percentages) | (in thousands, except for percentages) | ||||||||||||||||||||||||||
Revenue | $ | 134,201 | 100.0 | % | $ | 109,638 | 100.0 | % | $ | 262,640 | 100.0 | % | $ | 212,339 | 100.0 | % | |||||||||||
Cost of revenue | 40,273 | 30.0 | 37,386 | 34.1 | 84,802 | 32.3 | 73,530 | 34.6 | |||||||||||||||||||
Gross profit | 93,928 | 70.0 | 72,252 | 65.9 | 177,838 | 67.7 | 138,809 | 65.4 | |||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||
Research and development | 13,462 | 10.0 | 8,193 | 7.5 | 25,129 | 9.6 | 16,206 | 7.6 | |||||||||||||||||||
Sales, general and administrative | 67,665 | 50.4 | 54,776 | 50.0 | 128,756 | 49.0 | 109,275 | 51.5 | |||||||||||||||||||
Total operating expenses | 81,127 | 60.5 | 62,969 | 57.4 | 153,885 | 58.6 | 125,481 | 59.1 | |||||||||||||||||||
Income from operations | 12,801 | 9.5 | 9,283 | 8.5 | 23,953 | 9.1 | 13,328 | 6.3 | |||||||||||||||||||
Interest income, net | 784 | 0.6 | 720 | 0.7 | 1,517 | 0.6 | 1,469 | 0.7 | |||||||||||||||||||
Other expense, net | (71 | ) | (0.1 | ) | (340 | ) | (0.3 | ) | (47 | ) | — | (630 | ) | (0.3 | ) | ||||||||||||
Income before income taxes and equity in losses of unconsolidated investee | 13,514 | 10.1 | 9,663 | 8.8 | 25,423 | 9.7 | 14,167 | 6.7 | |||||||||||||||||||
Benefit from income taxes | (2,735 | ) | (2.0 | ) | (4,948 | ) | (4.5 | ) | (1,280 | ) | (0.5 | ) | (6,886 | ) | (3.2 | ) | |||||||||||
Income before equity in losses of unconsolidated investee | 16,249 | 12.1 | 14,611 | 13.3 | 26,703 | 10.2 | 21,053 | 9.9 | |||||||||||||||||||
Equity in losses of unconsolidated investee | — | — | (1,230 | ) | (1.1 | ) | — | — | (2,181 | ) | (1.0 | ) | |||||||||||||||
Consolidated net income | $ | 16,249 | 12.1 | % | 13,381 | 12.2 | % | $ | 26,703 | 10.2 | % | $ | 18,872 | 8.9 | % | ||||||||||||
Net loss attributable to non-controlling interest | (339 | ) | (0.3 | ) | — | — | (583 | ) | (0.2 | ) | — | — | |||||||||||||||
Net income attributable to Penumbra, Inc. | $ | 16,588 | 12.4 | % | $ | 13,381 | 12.2 | % | $ | 27,286 | 10.4 | % | $ | 18,872 | 8.9 | % | |||||||||||
Three Months Ended June 30, | Change | |||||||||||||
2019 | 2018 | $ | % | |||||||||||
(in thousands, except for percentages) | ||||||||||||||
Neuro | $ | 81,547 | $ | 74,196 | $ | 7,351 | 9.9 | % | ||||||
Vascular | 52,654 | 35,442 | 17,212 | 48.6 | % | |||||||||
Total | $ | 134,201 | $ | 109,638 | $ | 24,563 | 22.4 | % | ||||||
Three Months Ended June 30, | Change | ||||||||||||||||||||
2019 | 2018 | $ | % | ||||||||||||||||||
(in thousands, except for percentages) | |||||||||||||||||||||
United States | $ | 86,374 | 64.4 | % | $ | 71,279 | 65.0 | % | $ | 15,095 | 21.2 | % | |||||||||
Japan | 12,231 | 9.1 | % | 10,614 | 9.7 | % | 1,617 | 15.2 | % | ||||||||||||
Other International | 35,596 | 26.5 | % | 27,745 | 25.3 | % | 7,851 | 28.3 | % | ||||||||||||
Total | $ | 134,201 | 100.0 | % | $ | 109,638 | 100.0 | % | $ | 24,563 | 22.4 | % | |||||||||
Three Months Ended June 30, | Change | |||||||||||||
2019 | 2018 | $ | % | |||||||||||
(in thousands, except for percentages) | ||||||||||||||
Cost of revenue | $ | 40,273 | $ | 37,386 | $ | 2,887 | 7.7 | % | ||||||
Gross profit | $ | 93,928 | $ | 72,252 | $ | 21,676 | 30.0 | % | ||||||
Gross margin % | 70.0 | % | 65.9 | % | ||||||||||
Three Months Ended June 30, | Change | |||||||||||||
2019 | 2018 | $ | % | |||||||||||
(in thousands, except for percentages) | ||||||||||||||
R&D | $ | 13,462 | $ | 8,193 | $ | 5,269 | 64.3 | % | ||||||
R&D as a percentage of revenue | 10.0 | % | 7.5 | % | ||||||||||
Three Months Ended June 30, | Change | |||||||||||||
2019 | 2018 | $ | % | |||||||||||
(in thousands, except for percentages) | ||||||||||||||
SG&A | $ | 67,665 | $ | 54,776 | $ | 12,889 | 23.5 | % | ||||||
SG&A as a percentage of revenue | 50.4 | % | 50.0 | % | ||||||||||
Three Months Ended June 30, | Change | |||||||||||||
2019 | 2018 | $ | % | |||||||||||
(in thousands, except for percentages) | ||||||||||||||
Benefit from income taxes | $ | (2,735 | ) | $ | (4,948 | ) | $ | 2,213 | (44.7 | )% | ||||
Effective tax rate | (20.2 | )% | (51.2 | )% | ||||||||||
Six Months Ended June 30, | Change | |||||||||||||
2019 | 2018 | $ | % | |||||||||||
(in thousands, except for percentages) | ||||||||||||||
Neuro | $ | 163,018 | $ | 145,624 | $ | 17,394 | 11.9 | % | ||||||
Vascular | 99,622 | 66,715 | 32,907 | 49.3 | % | |||||||||
Total | $ | 262,640 | $ | 212,339 | $ | 50,301 | 23.7 | % | ||||||
Six Months Ended June 30, | Change | ||||||||||||||||||||
2019 | 2018 | $ | % | ||||||||||||||||||
(in thousands, except for percentages) | |||||||||||||||||||||
United States | $ | 168,885 | 64.3 | % | $ | 137,080 | 64.6 | % | $ | 31,805 | 23.2 | % | |||||||||
Japan | 21,753 | 8.3 | % | 21,296 | 10.0 | % | 457 | 2.1 | % | ||||||||||||
Other International | 72,002 | 27.4 | % | 53,963 | 25.4 | % | 18,039 | 33.4 | % | ||||||||||||
Total | $ | 262,640 | 100.0 | % | $ | 212,339 | 100.0 | % | $ | 50,301 | 23.7 | % | |||||||||
Six Months Ended June 30, | Change | |||||||||||||
2019 | 2018 | $ | % | |||||||||||
(in thousands, except for percentages) | ||||||||||||||
Cost of revenue | $ | 84,802 | $ | 73,530 | $ | 11,272 | 15.3 | % | ||||||
Gross profit | $ | 177,838 | $ | 138,809 | $ | 39,029 | 28.1 | % | ||||||
Gross margin % | 67.7 | % | 65.4 | % | ||||||||||
Six Months Ended June 30, | Change | |||||||||||||
2019 | 2018 | $ | % | |||||||||||
(in thousands, except for percentages) | ||||||||||||||
R&D | $ | 25,129 | $ | 16,206 | $ | 8,923 | 55.1 | % | ||||||
R&D as a percentage of revenue | 9.6 | % | 7.6 | % | ||||||||||
Six Months Ended June 30, | Change | |||||||||||||
2019 | 2018 | $ | % | |||||||||||
(in thousands, except for percentages) | ||||||||||||||
SG&A | $ | 128,756 | $ | 109,275 | $ | 19,481 | 17.8 | % | ||||||
SG&A as a percentage of revenue | 49.0 | % | 51.5 | % | ||||||||||
Six Months Ended June 30, | Change | |||||||||||||
2019 | 2018 | $ | % | |||||||||||
(in thousands, except for percentages) | ||||||||||||||
(Benefit from) provision for income taxes | $ | (1,280 | ) | $ | (6,886 | ) | $ | 5,606 | (81.4 | )% | ||||
Effective tax rate | (5.0 | )% | (48.6 | )% | ||||||||||
June 30, 2019 | December 31, 2018 | ||||||
(in thousands) | |||||||
Cash and cash equivalents | $ | 77,261 | $ | 67,850 | |||
Marketable investments | 109,996 | 133,039 | |||||
Accounts receivable, net | 99,011 | 81,896 | |||||
Accounts payable | 8,743 | 8,176 | |||||
Accrued liabilities | 57,276 | 57,886 | |||||
Working capital(1) | 364,843 | 344,664 | |||||
(1) | Working capital consists of total current assets less total current liabilities. |
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
(in thousands) | |||||||
Cash and cash equivalents and restricted cash at beginning of period | $ | 67,850 | $ | 50,637 | |||
Net cash (used in) provided by operating activities | (165 | ) | 10,832 | ||||
Net cash provided by investing activities | 16,742 | 10,637 | |||||
Net cash used in financing activities | (7,018 | ) | (11,936 | ) | |||
Cash and cash equivalents and restricted cash at end of period | 77,261 | 59,705 | |||||
Period | (a) Total Number of Shares Purchased(1) | (b) Average Price Paid per Share | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Dollar Value of Shares of Shares that May Yet be Purchased Under the Plans or Programs | |||||||||
April 1, 2019 - April 30, 2019 | 79,615 | $ | 137.04 | — | — | ||||||||
May 1, 2019 - May 31, 2019 | — | — | — | — | |||||||||
June 1, 2019 - June 30, 2019 | — | — | — | — | |||||||||
Total | 79,615 | $ | — | — | — | ||||||||
Exhibit Number | Description | Form | File No. | Exhibit(s) | Filing Date | |||||
Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended. | ||||||||||
Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended. | ||||||||||
Certification of Principal Executive Officer and Principal Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350. | ||||||||||
101* | The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 formatted in Inline Extensible Business Reporting Language (iXBRL) includes: (i) Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018, (ii) Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2019 and 2018, (ii) Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2019 and 2018, (iii) Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2019 and 2018, (iv) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018, and (v) Notes to Condensed Consolidated Financial Statements. | |||||||||
PENUMBRA, INC. | ||
Date: August 6, 2019 | ||
By: | /s/ Sri Kosaraju | |
Sri Kosaraju | ||
Chief Financial Officer and Head of Strategy | ||
(Principal Financial and Accounting Officer) | ||
1. | I have reviewed this Quarterly Report on Form 10-Q of Penumbra, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Adam Elsesser |
Adam Elsesser |
Chairman, Chief Executive Officer and President |
1. | I have reviewed this Quarterly Report on Form 10-Q of Penumbra, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Sri Kosaraju |
Sri Kosaraju |
Chief Financial Officer and Head of Strategy |
• | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
• | The information in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Adam Elsesser |
Adam Elsesser |
Chairman, Chief Executive Officer and President |
/s/ Sri Kosaraju |
Sri Kosaraju |
Chief Financial Officer and Head of Strategy |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Allowance for doubtful accounts | $ 2,708 | $ 2,782 |
Condensed Consolidated Statements of Comprehensive (Loss) Income - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
| Statement of Comprehensive Income [Abstract] | ||||
| Consolidated net income | $ 16,249 | $ 13,381 | $ 26,703 | $ 18,872 |
| Other comprehensive income (loss), net of tax: | ||||
| Foreign currency translation adjustments, net of tax | 850 | (3,400) | (248) | (2,014) |
| Net change in unrealized gains (losses) on available-for-sale securities, net of tax | 214 | 102 | 676 | (216) |
| Total other comprehensive income (loss), net of tax | 1,064 | (3,298) | 428 | (2,230) |
| Consolidated comprehensive income | 17,313 | 10,083 | 27,131 | 16,642 |
| Net loss attributable to non-controlling interest | (339) | 0 | (583) | 0 |
| Comprehensive income attributable to Penumbra, Inc. | $ 17,652 | $ 10,083 | $ 27,714 | $ 16,642 |
Organization and Description of Business |
6 Months Ended |
|---|---|
Jun. 30, 2019 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Organization and Description of Business | 1. Organization and Description of Business Penumbra, Inc. (the “Company”) is a global healthcare company focused on innovative therapies. The Company designs, develops, manufactures and markets medical devices and has a broad portfolio of products that addresses challenging medical conditions and significant clinical needs.
|
Summary of Significant Accounting Policies |
6 Months Ended |
|---|---|
Jun. 30, 2019 | |
| Accounting Policies [Abstract] | |
| Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis of Presentation and Consolidation The accompanying condensed consolidated balance sheet as of June 30, 2019, the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive income, and the condensed consolidated statements of stockholders’ equity for the three and six months ended June 30, 2019 and 2018, and the condensed consolidated statements of cash flows for the six months ended June 30, 2019 and 2018 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 as of December 31, 2018 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 June 30, 2019, the results of its operations for the three and six months ended June 30, 2019 and 2018, the changes in comprehensive income and stockholders’ equity for the three and six months ended June 30, 2019 and 2018, and the cash flows for the six months ended June 30, 2019 and 2018. The results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019 or for any other future annual or interim period. 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 year ended December 31, 2018, included in the Company’s Annual Report on Form 10-K. There have been no changes to the Company’s significant accounting policies during the six months ended June 30, 2019, 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, 2018, other than changes to the Company’s leasing policy described below in connection with the adoption of the guidance under Accounting Standards Codification (“ASC”) 842. The condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and its majority-owned subsidiary. The portion of equity not attributable to the Company is considered non-controlling interest and is classified separately in the condensed consolidated financial statements. Any subsequent changes in the Company’s ownership interest while the Company retains its controlling interest in its majority-owned subsidiary will be accounted for as equity transactions. 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, provisions for doubtful accounts, the amount of variable consideration included in the transaction price, warranty reserve, valuation of inventories, useful lives of property and equipment, operating lease right-of-use (“ROU”) assets and liabilities, income taxes, contingent consideration and other contingencies, among 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 devices, 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. Recently Adopted Accounting Standards On January 1, 2019, the Company adopted Accounting Standard Update (“ASU”) No. 2016-02, Leases (Topic 842), and its associated amendments using the modified retrospective transition approach by applying the new standard to all leases existing at the date of initial application and not restating comparative periods. There was no cumulative-effect adjustment recorded to retained earnings upon adoption. Under the standard, a lessee is required to recognize a lease liability and ROU asset for all leases. The new guidance also modified the classification criteria and requires additional disclosures to enable users of financial statements to understand the amount, timing, and uncertainty of cash flows arising from leases. Consistent with current guidance, a lessee’s recognition, measurement, and presentation of expenses and cash flows arising from a lease continues to depend primarily on its classification. The Company elected the package of practical expedients permitted under the transition guidance, which allowed the Company to carryforward its historical lease classification, its assessment on whether a contract was or contains a lease, and its initial direct costs for any leases that existed prior to January 1, 2019. In addition, the Company elected the following transitional practical expedients: (1) the short-term lease exception and (2) to not separate its non-lease components for its real estate, vehicle and equipment leases. The impact of adoption and additional disclosures required by the ASU have been included in “Significant Accounting Policies - Leases” below and in Note “8. Leases.” Significant Accounting Policies - Leases The Company adopted the guidance under ASC 842 on January 1, 2019 using the modified retrospective transition approach. There was no cumulative-effect adjustment recorded to retained earnings upon adoption. Under ASC 842, the Company determines if an arrangement is a lease at inception. In addition, the Company determines whether leases meet the classification criteria of a finance or operating lease at the lease commencement date considering: (1) whether the lease transfers ownership of the underlying asset to the lessee at the end of the lease term, (2) whether the lease contains a bargain purchase option, (3) whether the lease term is for a major part of the remaining economic life of the underlying asset, (4) whether the present value of the sum of the lease payments and residual value guaranteed by the lessee equals or exceeds substantially all of the fair value of the underlying asset, and (5) whether the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. As of June 30, 2019, the Company's lease population consisted of real estate, equipment and vehicle leases. As of the date of adoption of ASC 842 and June 30, 2019, the Company did not have material finance leases. Operating leases are included in operating lease right-of-use assets, current operating lease liabilities, and non-current operating lease liabilities in our condensed consolidated balance sheet. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, the Company uses its incremental borrowing rate based on the information available at the lease commencement date if the rate implicit in the lease is not readily determinable. The determination of the Company’s incremental borrowing rate requires management judgment including, the development of a synthetic credit rating and cost of debt as the Company currently does not carry any debt. The operating lease ROU assets also include adjustments for prepayments, accrued lease payments and exclude lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. Operating lease cost is recognized on a straight-line basis over the expected lease term. Lease agreements entered into after the adoption of ASC 842 that include lease and non-lease components are accounted for as a single lease component. Lease agreements with a noncancelable term of less than 12 months are not recorded on the Company’s condensed consolidated balance sheet. For more information about the impact of adoption and disclosures on the Company’s leases, refer to Note “8. Leases.” Recent Accounting Guidance Recently Issued Accounting Standards In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, Financial Instruments—Credit Losses. The standard changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The Company will recognize an allowance for credit losses on available-for-sale securities rather than deductions in amortized cost. In April 2019, the FASB issued ASU No. 2019-04 which provides additional clarification and addresses stakeholders’ specific issues about certain aspects of the amendments in the previously issued ASU No. 2016-13. In May 2019, the FASB issued ASU No. 2019-05 which further amends ASU No. 2016-13 by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. The standard is effective for fiscal years and interim periods beginning after December 15, 2019. Early adoption is permitted for all periods beginning after December 15, 2018. The Company is currently evaluating the impact of adopting this standard. In August 2018, the FASB issued ASU 2018-13, Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The primary focus of the standard is to improve the effectiveness of the disclosure requirements for fair value measurements. The standard is effective for fiscal years and interim periods beginning after December 15, 2019. An entity is permitted to early adopt the removed or modified disclosures upon the issuance of the standard and may delay adoption of the additional disclosures until their effective date. The Company is currently evaluating the impact of adopting this standard.
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Investments and Fair Value of Financial Instruments |
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| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value of Financial Instruments | 3. Investments and Fair Value of Financial Instruments Marketable Investments The Company’s marketable investments have been classified and accounted for as available-for-sale. The following table presents the Company’s marketable investments as of June 30, 2019 and December 31, 2018 (in thousands):
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 twelve months or for twelve months or more as of June 30, 2019 and December 31, 2018 (in thousands):
The following table presents the contractual maturities of the Company’s marketable investments as of June 30, 2019 and December 31, 2018 (in thousands):
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 measurement 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. 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 determined the fair value of its Level 1 financial instruments, which are traded in active markets, using quoted market prices for identical instruments. Financial instruments 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, or historical pricing trends of a security 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. The following tables set forth the Company’s financial assets measured at fair value by level within the fair value hierarchy as of June 30, 2019 and December 31, 2018 (in thousands):
(1) More information on the contingent consideration obligations and the changes in fair value are presented below.
(1) More information on the contingent consideration obligations and the changes in fair value are presented below. Contingent Consideration Obligations As of June 30, 2019 and December 31, 2018, the Company’s contingent consideration liability relates to milestone payments due in connection with the 2017 acquisition of Crossmed S.p.a. (“Crossmed”) and is classified as a Level 3 measurement for which fair value is derived from various inputs, including forecasted revenues during the earn-out milestone periods, revenue volatilities, discount rates, and estimates in the likelihood of achieving revenue-based milestones. The fair value of the contingent consideration liability is remeasured each reporting period. The following table presents quantitative information about certain unobservable inputs used in the Level 3 fair value measurement of the Company’s contingent consideration liability, other than the forecasted revenues during the earn-out milestone period:
The following tables summarize the changes in fair value of the contingent consideration obligation for the six months ended June 30, 2019 and June 30, 2018 (in thousands):
During the three and six months ended June 30, 2019, there were no changes to the fair value of the contingent consideration obligation. During the three and six months ended June 30, 2018, the fair value of the contingent consideration obligation increased by $0.3 million and $0.7 million, respectively, which was recorded in sales, general and administrative expense in the condensed consolidated statements of operations. The fair value of the contingent consideration increased as a result of updates to the underlying forecasts based on actual results to date and changes in estimates. For more information related to the payment of the contingent consideration liabilities refer to Note “5. Asset Acquisitions and Business Combinations.” During the three and six months ended June 30, 2019 and 2018, the Company did not record impairment charges related to its marketable investments and the Company did not hold any Level 3 marketable investments as of June 30, 2019 or December 31, 2018. During the six months ended June 30, 2019 and 2018, the Company did not have any transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy. Additionally, the Company did not have any financial assets and liabilities measured at fair value on a non-recurring basis as of June 30, 2019 or December 31, 2018.
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Balance Sheet Components |
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance Sheet Components | 4. Balance Sheet Components Inventories The following table shows the components of inventories as of June 30, 2019 and December 31, 2018 (in thousands):
Accrued Liabilities The following table shows the components of accrued liabilities as of June 30, 2019 and December 31, 2018 (in thousands):
(1) Amount consists of the current portion of contingent liabilities related to (1) the cash milestone payments and working capital adjustment liabilities for the 2017 acquisition of Crossmed and (2) an anti-dilution provision for the 2018 asset acquisition of MVI Health Inc (“MVI”). Refer to Note “5. Asset Acquisitions and Business Combinations” for more information on the acquisition of Crossmed and asset acquisition of MVI. The following table shows the changes in the Company’s estimated product warranty accrual, included in accrued liabilities, as of June 30, 2019 and December 31, 2018 (in thousands):
Other Non-Current Liabilities The following table shows the components of other non-current liabilities as of June 30, 2019 and December 31, 2018 (in thousands):
(1) Amount relates to the non-current liability recorded for probable future milestone payments to be made under the licensing agreement described in Note “6. Intangible Assets.” Refer therein for more information.
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Asset Acquisitions & Business Combination |
6 Months Ended |
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Jun. 30, 2019 | |
| Business Combinations [Abstract] | |
| Asset Acquisitions and Business Combinations | 5. Asset Acquisitions and Business Combinations Payments Related to 2017 Crossmed Acquisition On July 3, 2017, the Company completed its acquisition of Crossmed, a joint stock company organized under the laws of Italy. As of June 30, 2019 and December 31, 2018, the Company’s condensed consolidated balance sheet included $1.3 million and $2.6 million, respectively, in current liabilities primarily related to additional consideration due to the sellers of Crossmed (the “Sellers”) for revenue-based milestone payments, based on net revenue in the years ending December 31, 2018 and 2019, and other working capital and financial debt adjustments. During the six months ended June 30, 2019, the Company made $1.3 million in milestone payments of which $0.6 million is presented in operating activities and $0.7 million is presented in financing activities in the condensed consolidated statement of cash flows. During the six months ended June 30, 2018, the Company made $4.4 million in payments to the Sellers which is presented in financing activities in the condensed consolidated statement of cash flows. Payments Related to 2018 MVI Asset Acquisition In 2017, the Company and Sixense Enterprises, Inc. (“Sixense”) formed MVI Health Inc. (“MVI”) as a privately-held joint venture for the purpose of exploring healthcare applications of virtual reality technology, with each party holding 50% of the issued and outstanding equity of MVI. On August 31, 2018 (“Transfer Agreement Closing Date”), the Company completed its asset acquisition to obtain a controlling interest of MVI pursuant to a Stock Transfer Agreement (the “Transfer Agreement”) between the Company, MVI and Sixense to obtain a controlling interest of MVI for $20.0 million, excluding the additional $4.5 million of probable future payments relating to an anti-dilution provision in the Transfer Agreement. Following the Transfer Agreement Closing Date, the Company owns a 90% controlling interest in MVI and Sixense retains the remaining 10% minority interest. As of December 31, 2018, the Company’s condensed consolidated balance sheet included $1.5 million and $2.5 million, respectively, in current and non-current liabilities related to the anti-dilution provision in the Transfer Agreement. During the six months ended June 30, 2019, the Company contributed $0.5 million to MVI related to the anti-dilution provision which is presented in financing activities in the condensed consolidated statement of cash flows. As of June 30, 2019, the Company’s condensed consolidated balance sheet included $3.0 million and $0.5 million, respectively, in current and non-current liabilities related to the anti-dilution provision in the Transfer Agreement.
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Intangible Assets |
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| Intangible Assets, Net (Excluding Goodwill) [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Intangible Assets | 6. Intangible Assets Acquired Intangible Assets The following tables present details of the Company’s acquired finite-lived and indefinite-lived intangible assets, as of June 30, 2019 and December 31, 2018 (in thousands, except weighted-average amortization period):
The customer relationships and other intangible assets subject to amortization relate to the acquisition of Crossmed during the third quarter of 2017. The gross carrying amount and accumulated amortization of these intangible assets are subject to foreign currency translation effects. Refer to Note “5. Asset Acquisitions and Business Combinations” for more information. The Company’s $5.3 million trade secrets and processes intangible asset was recognized in connection with a royalty buyout agreement during the first quarter of 2018, which is discussed further in Note “9. Commitments and Contingencies” and Note “10. Stockholders’ Equity.” The following table presents the amortization expense recorded related to the Company’s finite-lived intangible assets for the three and six months ended June 30, 2019 and June 30, 2018 (in thousands):
Licensed technology During the third quarter of 2017, the Company entered into an exclusive technology license agreement (the “License Agreement”) that required the Company to pay an upfront payment to the licensor of $2.5 million and future revenue milestone-based payments on sales of products covered by the licensed intellectual property. The Company recorded an intangible asset equal to the total payments made and expected to be made under the License Agreement and a corresponding contingent liability for the probable future milestone payments not yet paid. As of June 30, 2019, the licensed technology is accounted for as an indefinite-lived intangible asset. Upon the commercialization of the underlying product utilizing the licensed technology, the capitalized amount will be amortized over its estimated useful life. At the end of each reporting period the Company adjusts the contingent liabilities to reflect the amount of future milestone payments that are probable to be paid. Prior to the commercialization of products utilizing the underlying technology, any changes in the contingent liability are recorded as an adjustment between the liability balances and the gross carrying amount of the indefinite-lived intangible asset. During the three and six months ended June 30, 2019, the contingent liability related to the exclusive technology license agreement decreased by $0.6 million. The changes in the contingent liability balance were due to changes in the underlying revenue forecasts used to estimate the probable future milestone payments. As of June 30, 2019, the balance of the contingent liability related to probable future milestone payments under the License Agreement was $11.8 million, of which $1.5 million and $10.3 million were included in accrued liabilities and other non-current liabilities on the condensed consolidated balance sheet, respectively. As of December 31, 2018, the balance of the contingent liability related to probable future milestone payments under the License Agreement was $12.4 million, of which $0.9 million and $11.5 million were included in accrued liabilities and other non-current liabilities on the consolidated balance sheet, respectively. As of June 30, 2019, the gross carrying amount of the indefinite-lived intangible asset was $14.2 million. During the six months ended June 30, 2019, the Company noted no events or circumstances that indicate the carrying value of the licensed technology may no longer be recoverable and that an impairment loss may have occurred.
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| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||
| Goodwill | 7. Goodwill The following table presents the changes in goodwill during the six months ended June 30, 2019 (in thousands):
Goodwill Impairment Review The Company reviews goodwill for impairment annually during the fourth quarter, on October 31st, or more frequently if events or circumstances indicate that an impairment loss may have occurred. During the six months ended June 30, 2019, there were no events or changes in circumstances which triggered an impairment review.
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| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases | 8. Leases Adoption of ASC Topic 842, “Leases” The Company adopted the guidance under ASC 842 on January 1, 2019 using the modified retrospective transition approach. Therefore the comparative prior year information has not been adjusted and continues to be reported under ASC 840. The impact of the adoption of ASC 842 on the Company’s condensed consolidated balance sheet as of January 1, 2019 was as follows (in thousands):
(1) Upon the adoption of ASC 842, prepaid rent is included in the operating lease right-of-use assets. (2) Upon the adoption of ASC 842, current and non-current deferred rent is included in the current and non-current operating lease liabilities. Lease Overview As of December 31, 2018 and June 30, 2019, the Company’s contracts that contained a lease consisted of real estate, equipment and vehicle leases. The Company leases real estate for office and warehouse space primarily under non-cancelable operating leases that expire at various dates through 2031, subject to the Company’s option to renew certain leases for an additional five to fifteen years. The Company also leases other equipment and vehicles primarily under non-cancelable operating leases that expire at various dates through 2024. As of December 31, 2018 and June 30, 2019, the Company did not have material finance leases. The following table presents the components of the Company’s lease cost, lease term and discount rate during the three and six months ended June 30, 2019 (in thousands, except years and percentages):
(1) Variable lease costs represent payments that are dependent on usage, a rate or index. Variable lease cost primarily relates to common area maintenance charges for its real estate leases as the Company elected not to separate non-lease components from lease components upon adoption of ASC 842. Prior to January 1, 2019, the Company recorded operating lease rent expense under ASC 840 on a straight-line basis over the non-cancellable lease term. Rent expense for the three and six months ended June 30, 2018 was $1.4 million and $2.9 million, respectively. During the third quarter of 2018, the Company signed a fifteen year lease for a manufacturing facility in Roseville, California (the “Roseville Lease”) which has not yet commenced as of June 30, 2019. The Roseville Lease is expected to commence upon substantial completion of lessor owned improvements to the building which the Company anticipates will be in 2020. The following table is a schedule, by years, of maturities of the Company's lease liabilities as of June 30, 2019 (in thousands):
(1) The table above excludes the estimated future minimum lease payment for the Roseville Lease, due to the uncertainty around the timing of when the Roseville Lease will commence and payments will be due. The total estimated lease payments over the fifteen year lease term is approximately $40.9 million. In addition, the Company anticipates to make approximately $14 million in prepaid rental payments to the lessor prior to the lease commencement date. The table also excludes lease payments that were not fixed at commencement or modification. The following table below shows the maturities of the Company’s operating lease liabilities previously disclosed under ASC 840 as of December 31, 2018 (in thousands):
(1) The table above excludes the estimated future minimum lease payment for the Roseville Lease, due to the uncertainty around the timing of when the Roseville Lease will commence and payments will be due. Supplemental cash flow information related to leases during the six months ended June 30, 2019 are as follows (in thousands):
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Commitments and Contingencies |
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| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies | 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 both June 30, 2019 and December 31, 2018, the license agreement required minimum annual royalty payments of $0.1 million in equal quarterly installments. On each January 1, the quarterly calendar year minimum royalty shall be adjusted to equal the prior year’s minimum royalty adjusted by a percentage equal to the percentage change in the “consumer price index for all urban consumers” for the prior calendar year as reported by the U.S. Department of Labor. Unless terminated earlier, the term of the license agreement shall continue until the expiration of the last to expire patent that covers that licensed product or for the period of fifteen years following the first commercial sale of such licensed product, whichever is longer. The first commercial sale of covered products occurred in June 2007. In April 2012, the Company entered into an agreement that requires the Company to pay, on a quarterly basis, a 5% royalty on sales of products covered under applicable patents. The first commercial sale of covered products occurred in April 2014. Unless terminated earlier, the royalty term for each applicable product shall continue for fifteen years following the first commercial sale of such patented product, or when the applicable patent covering such product has expired, whichever is sooner. In November 2013, the Company entered into an agreement that required the Company to pay, on a quarterly basis, a 3% royalty on the first $5.0 million in sales and a 1% royalty on sales thereafter of products covered under applicable patents. The agreement was terminated effective January 1, 2018. In April 2015, the Company entered into a royalty agreement that required the Company to pay a 2% royalty on sales of certain products covered by the agreement, on a quarterly basis, in exchange for certain trade secrets and processes which were used to develop such covered products. The Company began the first commercial sale of the covered products in July 2015. In the first quarter of 2018, the Company entered into a buyout agreement (the “Buyout Agreement”) in which future royalty payments under the royalty agreement were canceled in exchange for shares of the Company’s common stock with a fair value of $5.3 million. The Company recorded an intangible asset equal to the $5.3 million buyout amount which will be amortized into cost of sales over the period in which the Company receives future economic benefit. After determining that the pattern of future cash flows associated with this intangible asset could not be reliably estimated with a high level of precision, the Company concluded that the intangible asset will be amortized on a straight‑line basis over its estimated useful life. For more information refer to Note “10. Stockholders’ Equity.” Royalty expense included in cost of revenue for the three months ended June 30, 2019 and 2018, was $1.1 million and $0.8 million, respectively, and for the six months ended June 30, 2019 and 2018, was $2.2 million and $1.6 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. Refer to Note “3. Investments and Fair Value of Financial Instruments,” Note “5. Asset Acquisitions and Business Combinations” and Note “6. Intangible Assets” for more information on contingent liabilities recorded on the condensed consolidated balance sheet. 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 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 other claims and assessments in the ordinary course of business. The Company is not currently a party to any such litigation matter that, individually or in the aggregate, is expected to have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.
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| Stockholder's Equity | 10. Stockholders’ Equity Common Stock In the first quarter of 2018, the Company issued 53,256 fully vested restricted stock units with a fair value of $5.3 million in connection with the Buyout Agreement, as discussed in Note “9. Commitments and Contingencies.” The Company recorded the $5.3 million fair value of the shares issued to additional-paid in capital on the condensed consolidated balance sheet upon the issuance of the awards, with the associated expense being amortized into cost of sales over the period in which the Company receives future economic benefit from the buyout. Equity Incentive Plans Stock Options Activity of stock options under the Penumbra, Inc. 2005 Stock Plan, the Penumbra, Inc. 2011 Equity Incentive Plan and the Amended and Restated Penumbra, Inc. 2014 Equity Incentive Plan (collectively the “Plans”) during the six months ended June 30, 2019 is set forth below:
Restricted Stock and Restricted Stock Units Activity of unvested restricted stock awards and restricted stock units under the Plans during the six months ended June 30, 2019 is set forth below:
As of June 30, 2019, 359,695 restricted stock awards and restricted stock units are expected to vest. Stock-based Compensation The following table sets forth the stock-based compensation expense included in the Company’s condensed consolidated statements of operations for the three and six months ended June 30, 2019 and 2018 (in thousands):
As of June 30, 2019, total unrecognized compensation cost was $34.8 million related to unvested share-based compensation arrangements which is expected to be recognized over a weighted average period of 2.8 years. The total stock-based compensation cost capitalized in inventory was $0.5 million and $0.4 million as of June 30, 2019 and December 31, 2018, respectively.
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| Accumulated Other Comprehensive Income | 11. 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 and gains or losses from foreign currency translation adjustments. Until realized and reported as a component of net (loss) income, these comprehensive income (loss) items accumulate and are included within accumulated other comprehensive loss. Unrealized gains and losses on the Company’s 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. The following table summarizes the changes in the accumulated balances during the three and six months ended June 30, 2019 and June 30, 2018, and includes information regarding the manner in which the reclassifications out of accumulated other comprehensive loss into earnings affect the Company’s condensed consolidated statements of operations and consolidated statements of comprehensive income (in thousands):
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Income Taxes |
6 Months Ended |
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Jun. 30, 2019 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | 12. Income Taxes The Company’s income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid. The Company is subject to income taxes in both the United States and foreign jurisdictions. Significant judgment and estimates are required in determining the consolidated income tax expense. During interim periods, the Company generally utilizes the estimated annual effective tax rate method which involves the use of forecasted information. Under this method, the provision is calculated by applying an estimate of the annual effective tax rate for the full fiscal year to “ordinary” income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. Jurisdictions with tax assets for which the Company believes a tax benefit cannot be realized are excluded from the computation of its annual effective tax rate. The Company’s benefit from income taxes for the three months ended June 30, 2019 was $2.7 million, compared to $4.9 million of tax benefit for the three months ended June 30, 2018. The Company’s effective tax rate changed to (20.2)% for the three months ended June 30, 2019, compared to (51.2)% for the three months ended June 30, 2018. The Company’s benefit from income taxes for the six months ended June 30, 2019 was $1.3 million, compared to $6.9 million of tax benefit for the six months ended June 30, 2018. The Company’s effective tax rate changed to (5.0)% for the six months ended June 30, 2019, compared to (48.6)% for the six months ended June 30, 2018. The Company’s benefit from income taxes for the three and six months ended June 30, 2019 and 2018 was primarily due to excess tax benefits from stock-based compensation attributable to the Company’s U.S. jurisdiction, offset by income taxes attributable to its worldwide profits. The Company’s change in effective tax rate was primarily attributable to lower stock-based compensation excess tax benefits, and higher worldwide profits diluting the impact of such tax benefits on the Company’s effective tax rate for the three and six months ended June 30, 2019, when compared to the three and six months ended June 30, 2018. The 2017 Tax Reform Act significantly revised the U.S. corporate income tax regime. In addition, the Securities and Exchange Commission issued Staff Accounting Bulletin 118 (“SAB 118”), which provided a measurement period, that should not extend beyond one year from the Tax Reform Act enactment date. As such, the Company completed its accounting for the tax effects of the Tax Reform Act under FASB ASC 740 “Income Taxes” based on authoritative guidance available as of the year ended December 31, 2018. Going forward, the Company will continue to evaluate further legislative guidance associated with the Tax Reform Act and determine the tax impact on the financial statements, if any. Significant domestic deferred tax assets (“DTAs”) were generated in recent years, primarily due to excess tax benefits from stock option exercises and vesting of restricted stock. The Company evaluates all available positive and negative evidence, objective and subjective in nature, in each reporting period to determine if sufficient taxable income will be generated to realize the benefits of its DTAs and, if not, a valuation allowance to reduce the DTAs is recorded. As of June 30, 2019 and 2018, the Company maintains a valuation allowance against its Federal Research and Development Tax Credit and California DTAs as the Company could not conclude at the required more-likely-than-not level of certainty, that the benefit of these tax attributes would be realized prior to expiration. As of June 30, 2019, the Company also maintains a valuation allowance against DTAs acquired from MVI which are subject to Separate Return Limitation Year (“SRLY”) rules that limit the utilization of the pre-acquisition tax attributes to offset future taxable income solely generated by MVI. The Company maintains that all foreign earnings, with the exception of a portion of the earnings of its German subsidiary, are permanently reinvested outside the United States and therefore deferred taxes attributable to such are not provided for in the Company’s financial statements as of June 30, 2019. The Company will repatriate foreign earnings only to the extent doing so will not result in any material U.S. tax consequences. Thus, deferred taxes on any potential future repatriation of a portion of the earnings of its German subsidiary were not reflected in the Company’s financial statements as of June 30, 2019.
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Net Income per Share |
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| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Income per Share | 13. Net Income Attributable to Penumbra, Inc. Per Share The Company’s basic net income attributable to Penumbra, Inc. per share is calculated by dividing the net income attributable to Penumbra, Inc. by the weighted average number of shares of common stock outstanding for the period. The diluted net income per share is computed by giving effect to all potential dilutive common stock equivalents outstanding for the period. For purposes of this calculation, options to purchase common stock, restricted stock, restricted stock units and stock sold through the Company’s employee stock purchase plan are considered common stock equivalents. A reconciliation of the numerator and denominator used in the calculation of the basic and diluted net income per share for the three and six months ended June 30, 2019 and 2018 is as follows (in thousands, except share and per share amounts):
Outstanding common stock equivalents of 45 thousand and 8 thousand shares for the three months ended June 30, 2019 and 2018, respectively, and 48 thousand and 63 thousand shares for the six months ended June 30, 2019 and 2018, respectively, were excluded from the computation of diluted net income attributable to Penumbra, Inc. per share because their effect would have been anti-dilutive.
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Revenues |
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| Revenues | 14. Revenues Revenue Recognition Revenue is recognized in an amount that reflects the consideration the Company expects to be entitled to in exchange for goods or services. All revenue recognized in the income statement is considered to be revenue from contracts with customers. The following table presents the Company’s revenues disaggregated by geography, based on the destination to which the Company ships its products, for the three and six months ended June 30, 2019 and 2018 (in thousands):
The following table presents the Company’s revenues disaggregated by product category, for the three and six months ended June 30, 2019 and 2018 (in thousands):
Performance Obligations Delivery of products - The Company’s contracts with customers typically contain a single performance obligation, delivery of Penumbra products. Satisfaction of that performance obligation occurs when control of the promised goods transfers to the customer, which is generally upon shipment for non-consignment sale agreements and upon utilization for consignment sale agreements. Payment terms - The Company’s payment terms vary by the type and location of our customer. The timing between fulfillment of performance obligations and when payment is due is not significant and does not give rise to financing transactions. The Company did not have any contracts with significant financing components as of June 30, 2019. Product returns - The Company may allow customers to return products purchased at the Company’s discretion. The Company estimates the amount of its product sales that may be returned by its customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized. The Company currently estimates product return liabilities using its own historic sales information, trends, industry data, and other relevant data points. Warranties - The Company offers its standard warranty to all customers and it is not available for sale on a standalone basis. The Company’s standard warranty represents its guarantee that its products function as intended, are free from defects, and comply with agreed-upon specifications and quality standards. This assurance does not constitute a service and is not a separate performance obligation. Transaction Price Revenue is recorded at the net sales price, which includes estimates of variable consideration such as product returns utilizing historical return rates, rebates, discounts, and other adjustments to net revenue. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price. When determining if variable consideration should be constrained, management considers whether there are factors that could result in a significant reversal of revenue and the likelihood of a potential reversal. Variable consideration is included in revenue only to the extent that it is probable that a significant reversal of the revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. These estimates are re-assessed each reporting period as required. During the three and six months ended June 30, 2019, the Company made no changes in estimates for variable consideration. When the Company performs shipping and handling activities after control of goods is transferred to the customer, they are considered as fulfillment activities, and costs are accrued for when the related revenue is recognized. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues.
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Summary of Significant Accounting Policies (Policies) |
6 Months Ended |
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Jun. 30, 2019 | |
| Accounting Policies [Abstract] | |
| Basis of Presentation | Basis of Presentation and Consolidation The accompanying condensed consolidated balance sheet as of June 30, 2019, the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive income, and the condensed consolidated statements of stockholders’ equity for the three and six months ended June 30, 2019 and 2018, and the condensed consolidated statements of cash flows for the six months ended June 30, 2019 and 2018 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 as of December 31, 2018 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 June 30, 2019, the results of its operations for the three and six months ended June 30, 2019 and 2018, the changes in comprehensive income and stockholders’ equity for the three and six months ended June 30, 2019 and 2018, and the cash flows for the six months ended June 30, 2019 and 2018. The results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019 or for any other future annual or interim period. 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 year ended December 31, 2018, included in the Company’s Annual Report on Form 10-K. There have been no changes to the Company’s significant accounting policies during the six months ended June 30, 2019, 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, 2018, other than changes to the Company’s leasing policy described below in connection with the adoption of the guidance under Accounting Standards Codification (“ASC”) 842.
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| Consolidation | The condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and its majority-owned subsidiary. The portion of equity not attributable to the Company is considered non-controlling interest and is classified separately in the condensed consolidated financial statements. Any subsequent changes in the Company’s ownership interest while the Company retains its controlling interest in its majority-owned subsidiary will be accounted for as equity transactions. All intercompany balances and transactions have been eliminated in consolidation.
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| Use of Estimates | 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, provisions for doubtful accounts, the amount of variable consideration included in the transaction price, warranty reserve, valuation of inventories, useful lives of property and equipment, operating lease right-of-use (“ROU”) assets and liabilities, income taxes, contingent consideration and other contingencies, among 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.
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| Recent Accounting Guidance | Recent Accounting Guidance Recently Issued Accounting Standards In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, Financial Instruments—Credit Losses. The standard changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The Company will recognize an allowance for credit losses on available-for-sale securities rather than deductions in amortized cost. In April 2019, the FASB issued ASU No. 2019-04 which provides additional clarification and addresses stakeholders’ specific issues about certain aspects of the amendments in the previously issued ASU No. 2016-13. In May 2019, the FASB issued ASU No. 2019-05 which further amends ASU No. 2016-13 by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. The standard is effective for fiscal years and interim periods beginning after December 15, 2019. Early adoption is permitted for all periods beginning after December 15, 2018. The Company is currently evaluating the impact of adopting this standard. In August 2018, the FASB issued ASU 2018-13, Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The primary focus of the standard is to improve the effectiveness of the disclosure requirements for fair value measurements. The standard is effective for fiscal years and interim periods beginning after December 15, 2019. An entity is permitted to early adopt the removed or modified disclosures upon the issuance of the standard and may delay adoption of the additional disclosures until their effective date. The Company is currently evaluating the impact of adopting this standard.
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| Leases | Leases The Company adopted the guidance under ASC 842 on January 1, 2019 using the modified retrospective transition approach. There was no cumulative-effect adjustment recorded to retained earnings upon adoption. Under ASC 842, the Company determines if an arrangement is a lease at inception. In addition, the Company determines whether leases meet the classification criteria of a finance or operating lease at the lease commencement date considering: (1) whether the lease transfers ownership of the underlying asset to the lessee at the end of the lease term, (2) whether the lease contains a bargain purchase option, (3) whether the lease term is for a major part of the remaining economic life of the underlying asset, (4) whether the present value of the sum of the lease payments and residual value guaranteed by the lessee equals or exceeds substantially all of the fair value of the underlying asset, and (5) whether the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. As of June 30, 2019, the Company's lease population consisted of real estate, equipment and vehicle leases. As of the date of adoption of ASC 842 and June 30, 2019, the Company did not have material finance leases. Operating leases are included in operating lease right-of-use assets, current operating lease liabilities, and non-current operating lease liabilities in our condensed consolidated balance sheet. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, the Company uses its incremental borrowing rate based on the information available at the lease commencement date if the rate implicit in the lease is not readily determinable. The determination of the Company’s incremental borrowing rate requires management judgment including, the development of a synthetic credit rating and cost of debt as the Company currently does not carry any debt. The operating lease ROU assets also include adjustments for prepayments, accrued lease payments and exclude lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. Operating lease cost is recognized on a straight-line basis over the expected lease term. Lease agreements entered into after the adoption of ASC 842 that include lease and non-lease components are accounted for as a single lease component. Lease agreements with a noncancelable term of less than 12 months are not recorded on the Company’s condensed consolidated balance sheet. For more information about the impact of adoption and disclosures on the Company’s leases, refer to Note “8. Leases.”
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| Segments | 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 devices, 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.
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| New Accounting Pronouncements and Changes in Accounting Principles [Text Block] | Recently Adopted Accounting Standards On January 1, 2019, the Company adopted Accounting Standard Update (“ASU”) No. 2016-02, Leases (Topic 842), and its associated amendments using the modified retrospective transition approach by applying the new standard to all leases existing at the date of initial application and not restating comparative periods. There was no cumulative-effect adjustment recorded to retained earnings upon adoption. Under the standard, a lessee is required to recognize a lease liability and ROU asset for all leases. The new guidance also modified the classification criteria and requires additional disclosures to enable users of financial statements to understand the amount, timing, and uncertainty of cash flows arising from leases. Consistent with current guidance, a lessee’s recognition, measurement, and presentation of expenses and cash flows arising from a lease continues to depend primarily on its classification. The Company elected the package of practical expedients permitted under the transition guidance, which allowed the Company to carryforward its historical lease classification, its assessment on whether a contract was or contains a lease, and its initial direct costs for any leases that existed prior to January 1, 2019. In addition, the Company elected the following transitional practical expedients: (1) the short-term lease exception and (2) to not separate its non-lease components for its real estate, vehicle and equipment leases. The impact of adoption and additional disclosures required by the ASU have been included in “Significant Accounting Policies - Leases” below and in Note “8. Leases.”
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Investments and Fair Value of Financial Instruments (Tables) |
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| Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Marketable Investments | Marketable Investments The Company’s marketable investments have been classified and accounted for as available-for-sale. The following table presents the Company’s marketable investments as of June 30, 2019 and December 31, 2018 (in thousands):
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| Schedule of the Fair Value of Marketable Investments in an Unrealized Loss Position for Less than Twelve Months | 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 twelve months or for twelve months or more as of June 30, 2019 and December 31, 2018 (in thousands):
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| Schedule of Contractual Maturities of Marketable Investments | The following table presents the contractual maturities of the Company’s marketable investments as of June 30, 2019 and December 31, 2018 (in thousands):
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| Schedule of Fair Value of Assets and Liabilities | The following tables set forth the Company’s financial assets measured at fair value by level within the fair value hierarchy as of June 30, 2019 and December 31, 2018 (in thousands):
(1) More information on the contingent consideration obligations and the changes in fair value are presented below.
(1) More information on the contingent consideration obligations and the changes in fair value are presented below.
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| Fair Value Measurement Inputs and Valuation Techniques [Table Text Block] | The following table presents quantitative information about certain unobservable inputs used in the Level 3 fair value measurement of the Company’s contingent consideration liability, other than the forecasted revenues during the earn-out milestone period:
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| Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block] | The following tables summarize the changes in fair value of the contingent consideration obligation for the six months ended June 30, 2019 and June 30, 2018 (in thousands):
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Balance Sheet Components Balance Sheet Components (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Inventories | The following table shows the components of inventories as of June 30, 2019 and December 31, 2018 (in thousands):
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| Schedule of Accrued Liabilities | The following table shows the components of accrued liabilities as of June 30, 2019 and December 31, 2018 (in thousands):
(1) Amount consists of the current portion of contingent liabilities related to (1) the cash milestone payments and working capital adjustment liabilities for the 2017 acquisition of Crossmed and (2) an anti-dilution provision for the 2018 asset acquisition of MVI Health Inc (“MVI”). Refer to Note “5. Asset Acquisitions and Business Combinations” for more information on the acquisition of Crossmed and asset acquisition of MVI.
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| Schedule of Estimated Product Warranty Accrual | The following table shows the changes in the Company’s estimated product warranty accrual, included in accrued liabilities, as of June 30, 2019 and December 31, 2018 (in thousands):
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| Schedule of Other Non-Current Liabilities | The following table shows the components of other non-current liabilities as of June 30, 2019 and December 31, 2018 (in thousands):
(1) Amount relates to the non-current liability recorded for probable future milestone payments to be made under the licensing agreement described in Note “6. Intangible Assets.” Refer therein for more information.
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Intangible Assets Intangible Assets (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Intangible Assets, Net (Excluding Goodwill) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of indefinite-lived intangible assets | The following tables present details of the Company’s acquired finite-lived and indefinite-lived intangible assets, as of June 30, 2019 and December 31, 2018 (in thousands, except weighted-average amortization period):
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| Finite-lived Intangible Assets Amortization Expense | The following table presents the amortization expense recorded related to the Company’s finite-lived intangible assets for the three and six months ended June 30, 2019 and June 30, 2018 (in thousands):
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Goodwill Goodwill (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||
| Schedule of goodwill | The following table presents the changes in goodwill during the six months ended June 30, 2019 (in thousands):
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Leases (Tables) |
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| Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of New Accounting Pronouncements and Changes in Accounting Principles | The impact of the adoption of ASC 842 on the Company’s condensed consolidated balance sheet as of January 1, 2019 was as follows (in thousands):
(1) Upon the adoption of ASC 842, prepaid rent is included in the operating lease right-of-use assets. (2) Upon the adoption of ASC 842, current and non-current deferred rent is included in the current and non-current operating lease liabilities.
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| Lease, Cost | The following table presents the components of the Company’s lease cost, lease term and discount rate during the three and six months ended June 30, 2019 (in thousands, except years and percentages):
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| Lessee, Operating Lease, Liability, Maturity | The following table is a schedule, by years, of maturities of the Company's lease liabilities as of June 30, 2019 (in thousands):
(1) The table above excludes the estimated future minimum lease payment for the Roseville Lease, due to the uncertainty around the timing of when the Roseville Lease will commence and payments will be due. The total estimated lease payments over the fifteen year lease term is approximately $40.9 million. In addition, the Company anticipates to make approximately $14 million in prepaid rental payments to the lessor prior to the lease commencement date. The table also excludes lease payments that were not fixed at commencement or modification.
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| Schedule of Future Minimum Rental Payments for Operating Leases | The following table below shows the maturities of the Company’s operating lease liabilities previously disclosed under ASC 840 as of December 31, 2018 (in thousands):
(1) The table above excludes the estimated future minimum lease payment for the Roseville Lease, due to the uncertainty around the timing of when the Roseville Lease will commence and payments will be due.
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| Schedule of Cash Flow, Supplemental Disclosures | Supplemental cash flow information related to leases during the six months ended June 30, 2019 are as follows (in thousands):
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Stockholder's Equity (Tables) |
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| Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Stock Option Activity | Activity of stock options under the Penumbra, Inc. 2005 Stock Plan, the Penumbra, Inc. 2011 Equity Incentive Plan and the Amended and Restated Penumbra, Inc. 2014 Equity Incentive Plan (collectively the “Plans”) during the six months ended June 30, 2019 is set forth below:
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| Summary of Unvested Restricted Stock and Restricted Stock Unit Activity | Activity of unvested restricted stock awards and restricted stock units under the Plans during the six months ended June 30, 2019 is set forth below:
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| Schedule of Stock-based Compensation Expense | The following table sets forth the stock-based compensation expense included in the Company’s condensed consolidated statements of operations for the three and six months ended June 30, 2019 and 2018 (in thousands):
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Accumulated Other Comprehensive Income AOCI (Tables) |
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| Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accumulated Other Comprehensive Income (Loss) | The following table summarizes the changes in the accumulated balances during the three and six months ended June 30, 2019 and June 30, 2018, and includes information regarding the manner in which the reclassifications out of accumulated other comprehensive loss into earnings affect the Company’s condensed consolidated statements of operations and consolidated statements of comprehensive income (in thousands):
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Net Income per Share Net Income Per Share (Tables) |
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| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reconciliation of the Numerator and Denominator used in the Calculation of the Basic and Diluted Earnings per Share | A reconciliation of the numerator and denominator used in the calculation of the basic and diluted net income per share for the three and six months ended June 30, 2019 and 2018 is as follows (in thousands, except share and per share amounts):
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Revenues Revenues (Tables) |
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| Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disaggregation of Revenue | The following table presents the Company’s revenues disaggregated by geography, based on the destination to which the Company ships its products, for the three and six months ended June 30, 2019 and 2018 (in thousands):
The following table presents the Company’s revenues disaggregated by product category, for the three and six months ended June 30, 2019 and 2018 (in thousands):
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Summary of Significant Accounting Policies - Additional Disclosures (Details) |
6 Months Ended | ||
|---|---|---|---|
|
Jun. 30, 2019
USD ($)
segment
activity
|
Apr. 01, 2018
USD ($)
|
Jan. 01, 2018
USD ($)
|
|
| Accounting Policies [Abstract] | |||
| Leases | Leases The Company adopted the guidance under ASC 842 on January 1, 2019 using the modified retrospective transition approach. There was no cumulative-effect adjustment recorded to retained earnings upon adoption. Under ASC 842, the Company determines if an arrangement is a lease at inception. In addition, the Company determines whether leases meet the classification criteria of a finance or operating lease at the lease commencement date considering: (1) whether the lease transfers ownership of the underlying asset to the lessee at the end of the lease term, (2) whether the lease contains a bargain purchase option, (3) whether the lease term is for a major part of the remaining economic life of the underlying asset, (4) whether the present value of the sum of the lease payments and residual value guaranteed by the lessee equals or exceeds substantially all of the fair value of the underlying asset, and (5) whether the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. As of June 30, 2019, the Company's lease population consisted of real estate, equipment and vehicle leases. As of the date of adoption of ASC 842 and June 30, 2019, the Company did not have material finance leases. Operating leases are included in operating lease right-of-use assets, current operating lease liabilities, and non-current operating lease liabilities in our condensed consolidated balance sheet. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, the Company uses its incremental borrowing rate based on the information available at the lease commencement date if the rate implicit in the lease is not readily determinable. The determination of the Company’s incremental borrowing rate requires management judgment including, the development of a synthetic credit rating and cost of debt as the Company currently does not carry any debt. The operating lease ROU assets also include adjustments for prepayments, accrued lease payments and exclude lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. Operating lease cost is recognized on a straight-line basis over the expected lease term. Lease agreements entered into after the adoption of ASC 842 that include lease and non-lease components are accounted for as a single lease component. Lease agreements with a noncancelable term of less than 12 months are not recorded on the Company’s condensed consolidated balance sheet. For more information about the impact of adoption and disclosures on the Company’s leases, refer to Note “8. Leases.”
|
||
| Number of business activities | activity | 1 | ||
| Number of Operating Segments | segment | 1 | ||
| Cumulative effect adjustments | $ | $ 0 | $ 1,000 | $ 464,000 |
Investments and Fair Value of Financial Instruments - Contractual Maturities of Marketable Investments (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
| Due in less than one year | $ 39,759 | $ 83,391 |
| Due in one to five years | 70,237 | 49,648 |
| Total | $ 109,996 | $ 133,039 |
Investments and Fair Value of Financial Instruments - Quantitative Information On Unobservable Inputs (Details) - Monte Carlo Simulation - Level 3 |
6 Months Ended |
|---|---|
Jun. 30, 2019 | |
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
| Fair Value Inputs, Risk-Adjusted Discount Rate | 15.00% |
| Minimum | |
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
| Fair Value Input, Revenue Volatility | 5.10% |
| Maximum | |
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
| Fair Value Input, Revenue Volatility | 18.40% |
Investments and Fair Value of Financial Instruments - Contingent Consideration (Details) - Fair Value of Contingent Consideration - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |
|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
| Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |||
| Payments of contingent consideration liabilities | $ (1,296) | $ (3,017) | |
| Monte Carlo Simulation | Level 3 | |||
| Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |||
| December 31, 2018 | 2,571 | 4,675 | |
| June 30, 2019 | $ 1,256 | 1,256 | 2,400 |
| Sales, general and administrative | |||
| Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |||
| Changes in fair value | $ 300 | 0 | 725 |
| Other Expense [Member] | |||
| Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |||
| Foreign currency remeasurement | $ (19) | $ 17 | |
Balance Sheet Components - Inventories (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
| Raw materials | $ 21,367 | $ 18,829 |
| Work in process | 17,028 | 10,630 |
| Finished goods | 94,340 | 86,282 |
| Inventories | $ 132,735 | $ 115,741 |
Balance Sheet Components - Accrued Liabilities (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Jan. 01, 2019 |
Dec. 31, 2018 |
|---|---|---|---|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
| Payroll and employee-related cost | $ 29,150 | $ 33,838 | |
| Accrued expenses | 6,864 | 4,088 | |
| Sales return provision | 2,220 | 2,986 | |
| Product warranty | 2,079 | 1,875 | |
| Contingent consideration & other acquisition-related costs(1) | 4,622 | 4,439 | |
| Other accrued liabilities | 12,341 | 10,660 | |
| Total accrued liabilities | $ 57,276 | $ 57,754 | $ 57,886 |
Balance Sheet Components - Product Warranty (Details) - USD ($) $ in Thousands |
6 Months Ended | 12 Months Ended |
|---|---|---|
Jun. 30, 2019 |
Dec. 31, 2018 |
|
| Product Warranty, Increase (Decrease) [Roll Forward] | ||
| Balance at the beginning of the period | $ 1,875 | $ 1,088 |
| Accruals of warranties issued | 515 | 1,336 |
| Settlements of warranty claims | (311) | (549) |
| Balance at the end of the period | $ 2,079 | $ 1,875 |
Balance Sheet Components - Other Non-Current Liabilities (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
| Deferred tax liabilities | $ 4,006 | $ 4,171 |
| Licensing-related cost, Noncurrent | 10,278 | 11,506 |
| Other Accrued Liabilities, Noncurrent | 735 | 3,266 |
| Total other non-current liabilities | $ 15,019 | $ 18,943 |
Asset Acquisitions & Business Combination - Narrative (Details) - Fair Value of Contingent Consideration - USD ($) $ in Millions |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2018 |
Jun. 30, 2019 |
Dec. 31, 2018 |
|
| Business Acquisition [Line Items] | |||
| Payment of acquisition-related obligations | $ 4.4 | ||
| Current Liabilities | |||
| Business Acquisition [Line Items] | |||
| Contingent consideration for milestone payments | $ 1.3 | $ 2.6 |
Goodwill (Details) - USD ($) |
3 Months Ended | 6 Months Ended |
|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2019 |
|
| Goodwill [Roll Forward] | ||
| Goodwill | $ 7,813,000 | |
| Foreign currency translation | (48,000) | |
| Goodwill | $ 7,765,000 | $ 7,765,000 |
| Impairment loss | $ 0 |
Leases - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Dec. 31, 2018 |
|
| Lessee, Lease, Description [Line Items] | ||||
| Rent expense | $ 1,400 | $ 2,900 | ||
| Operating lease, future minimum payments | $ 70,656 | |||
| Roseville Lease | ||||
| Lessee, Lease, Description [Line Items] | ||||
| Operating lease term, lease not yet commenced | 15 years | |||
| Operating lease, future minimum payments | $ 40,900 | |||
| Minimum | ||||
| Lessee, Lease, Description [Line Items] | ||||
| Operating lease, renewal term | 5 years | |||
| Maximum | ||||
| Lessee, Lease, Description [Line Items] | ||||
| Operating lease, renewal term | 15 years |
Leases - Summary of Lease Cost (Details) $ in Thousands |
3 Months Ended | 6 Months Ended |
|---|---|---|
|
Jun. 30, 2019
USD ($)
|
Jun. 30, 2019
USD ($)
|
|
| Leases [Abstract] | ||
| Operating lease cost | $ 1,686 | $ 3,453 |
| Variable lease cost(1) | 846 | 1,604 |
| Total lease costs | $ 2,532 | $ 5,057 |
| Weighted Average Remaining Lease Term | 10 years 3 months 18 days | 10 years 3 months 18 days |
| Weighted Average Discount Rate | 6.20% | 6.20% |
Leases - Schedule of Maturity of Lease Liabilities (Details) $ in Thousands |
Jun. 30, 2019
USD ($)
|
|---|---|
| Leases [Abstract] | |
| Remainder of 2019 | $ 3,267 |
| 2020 | 6,884 |
| 2021 | 6,195 |
| 2022 | 6,087 |
| 2023 | 6,060 |
| 2024 | 5,980 |
| Thereafter | 33,935 |
| Total undiscounted lease payments | 68,408 |
| Less imputed interest | (18,520) |
| Present value of lease liabilities | 49,888 |
| Prepaid rental payments | $ 14,000 |
Leases - Schedule of Leases Payments Under Previous Guidance (Details) $ in Thousands |
Dec. 31, 2018
USD ($)
|
|---|---|
| Leases [Abstract] | |
| 2019 | $ 6,575 |
| 2020 | 6,571 |
| 2021 | 5,809 |
| 2022 | 5,772 |
| 2023 | 5,735 |
| Thereafter | 40,194 |
| Total future minimum lease payments | $ 70,656 |
Leases - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands |
6 Months Ended | |
|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
|
| Leases [Abstract] | ||
| Operating cash flows from operating leases | $ 3,354 | |
| Right-of-use assets obtained in exchange for operating lease obligations | $ 1,111 | |
Stockholder's Equity - Common Stock (Details) |
3 Months Ended |
|---|---|
|
Mar. 31, 2018
shares
| |
| Restricted Stock Units (RSUs) | |
| Subsidiary, Sale of Stock [Line Items] | |
| Granted (in shares) | 53,256 |
Stockholder's Equity - Stock Option Activity (Details) |
6 Months Ended |
|---|---|
|
Jun. 30, 2019
$ / shares
shares
| |
| Number of Shares | |
| Beginning balance (in shares) | shares | 1,688,881 |
| Options exercised (in shares) | shares | (188,064) |
| Options cancelled (in shares) | shares | (3,259) |
| Ending balance (in shares) | shares | 1,497,558 |
| Weighted-Average Exercise Price | |
| Beginning balance (in dollars per share) | $ / shares | $ 18.91 |
| Options exercised (in dollars per share) | $ / shares | 12.08 |
| Options cancelled (in dollars per share) | $ / shares | 21.94 |
| Ending balance (in dollars per share) | $ / shares | $ 19.76 |
Stockholder's Equity - Restricted Stock and Restricted Stock Units Activity (Details) - Restricted stock and restricted stock units |
6 Months Ended |
|---|---|
|
Jun. 30, 2019
$ / shares
shares
| |
| Number of Shares | |
| Unvested beginning balance (in shares) | 451,463 |
| Granted (in shares) | 150,413 |
| Vested (in shares) | (211,614) |
| Canceled/Forfeited (in shares) | (12,737) |
| Unvested and expected to vest ending balance (in shares) | 377,525 |
| Weighted -Average Grant Date Fair Value | |
| Unvested beginning balance (in dollars per share) | $ / shares | $ 57.29 |
| Granted (in dollars per share) | $ / shares | 143.28 |
| Vested (in dollars per share) | $ / shares | 29.23 |
| Canceled/Forfeited (in dollars per share) | $ / shares | 81.89 |
| Unvested and expected to vest ending balance (in dollars per share) | $ / shares | $ 106.45 |
| Restricted stock and RSUs expected to vest (shares) | 359,695 |
Income Taxes Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
| Income Tax Contingency [Line Items] | |||||
| Benefit from income taxes | $ 2,735 | $ 4,948 | $ 1,280 | $ 6,886 | |
| Effective tax rate | (20.20%) | (51.20%) | (5.00%) | (48.60%) | |
Net Income per Share - Basic and Diluted Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
| Numerator: | ||||
| Net income attributable to Penumbra, Inc. | $ 16,588 | $ 13,381 | $ 27,286 | $ 18,872 |
| Denominator: | ||||
| Weighted average shares used to compute net (loss) income per share attributable to common stockholders — Basic (in shares) | 34,694,228 | 34,072,223 | 34,601,270 | 33,959,997 |
| Potential dilutive shares (in shares) | 1,520,093 | 2,044,031 | 1,613,092 | 2,070,307 |
| Weighted average shares used to compute net income attributable to common stockholders —Diluted (in shares) | 36,214,321 | 36,116,254 | 36,214,362 | 36,030,304 |
| Net (loss) income per share attributable to common stockholders — Basic (in dollars per share) | $ 0.48 | $ 0.39 | $ 0.79 | $ 0.56 |
| Net (loss) income per share attributable to common stockholders — Diluted (in dollars per share) | $ 0.46 | $ 0.37 | $ 0.75 | $ 0.52 |
Net Income per Share - Antidilutive Securities (Details) - shares shares in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
| Antidilutive securities excluded from the computation of earnings per share (in shares) | 45 | 8 | 48 | 63 |
| Label | Element | Value |
|---|---|---|
| Retained Earnings [Member] | ||
| Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 1,000 |
| Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 464,000 |
| Parent [Member] | ||
| Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 464,000 |
| Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 1,000 |
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