PEN - NYSE

Good afternoon. My name is Julianne, and I will be your conference operator today. At this time, I would like to welcome everyone to Penumbra's First Quarter 2023 Conference Call. [Operator Instructions] I would now like to introduce Ms. Jee Hamlyn-Harris, Investor Relations for Penumbra. Ms. Hamlyn-Harris, you may now begin your conference.

Thank you, operator, and thank you all for joining us on today's call to discuss Penumbra's earnings release for the first quarter of 2023. A copy of the press release and financial tables, which includes a GAAP to non-GAAP reconciliation, can be viewed under the Investors tab on our company website at www.penumbrainc.com. During the course of this conference call, the company will make forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding our financial performance, commercialization, clinical trials, regulatory status, quality compliance and business trends. Actual results could differ materially from those stated or implied by our forward-looking statements due to certain risks and uncertainties, including those referenced in our 10-K for the year ended December 31, 2022, filed with the SEC. As a result, we caution you against placing undue reliance on these forward-looking statements, and we encourage you to review our periodic filings with the SEC, including the 10-K previously mentioned, for a more complete discussion of these factors and other risks that may affect our future results or the market price of our stock. Penumbra disclaims any duty to update or revise our forward-looking statements as a result of new information, future events, developments or otherwise. On this call, certain financial measures are presented on a non-GAAP basis. The corresponding GAAP measures and a reconciliation of GAAP to non-GAAP financial measures are provided in our posted press release. Adam Elsesser, Penumbra's Chairman and CEO, will provide a business update. Maggie Yuen, our Chief Financial Officer, will then discuss our financial results for the first quarter. And Jason Mills, our Executive Vice President of Strategy, will discuss our 2023 guidance. Sandra Lesenfants, our President of Interventional, will join the team for questions. With that, I would like to turn over the call to Adam Elsesser.

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

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

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

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

[Operator Instructions] Our first question comes from Robbie Marcus from JPMorgan.

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

Yes, Robbie, first of all, thanks for the -- I was going to say 2-part question, but I think it's a 3- or 4-part question. The -- let me try to articulate this way. I think you can tell from our prepared remarks that we're in a pretty good spot right now. We feel like with the product launches of Flash, the product launch of Lightning Bolt 7 and the product launches in neuro, we're seeing a lot of momentum. So we went out of our way to say that just from a pure number standpoint, the peripheral thrombectomy tools, both Flash and LIGHTNING BOLT are going to have a larger role in that growth. Obviously, the numbers support that. And that just makes sense given that 800,000-patient target that we put out there, which everyone seems to think is on the conservative side. So that's our goal. As it relates to the question -- the first question of market expansion versus share gain and so on, that depends on which product we're talking about and the definition of market expansion versus share gain. Obviously, in stroke, we want to keep treating more and more people. But at the same time, over the past little bit of time when the market has slowed growth, share gain was sort of the primary focus. Now, we're seeing a bit of a renewed interest in stroke. There's a lot of energy around it. So I think we're going to see both in stroke. As it relates to LIGHTNING BOLT, you could argue, depending on how you define share gain versus market expansion, you don't really have other mechanical products that we are competing against for the most part. You're talking about other procedures, whether it's open surgery or lytic. Is that market share gain from those diseases? Or is the market growth -- I'm not sure it matters. That's our main focus, is going after those areas where physicians are using that -- those modes of treating those patients. And as it relates to the venous side, both PE and DVT, it's going to be both how fast share shifts and how fast we then go after the rest of those patients, the DVT patients and the PE. That's really the work we have ahead of us this year and the following year and the following year as we really focus our attention on getting to those 800,000 patients.

Yes. And Robbie, just to the latter part of your question on guidance and contribution, I think we said in our prepared remarks that our U.S. vascular thrombectomy business was the vast majority of that $20 million sequential increase. And of course, that was primarily Flash. And as we move forward, as Adam mentioned, we expect Flash and Lightning Bolt 7 to hold similar sort of share of the growth we're going to -- an acceleration we're expecting. Just a couple of other reminders to help you out. We mentioned that on the venous and PE side, just from a procedural volume standpoint, we believe we increased over 30% sequentially from the fourth quarter in our U.S. venous franchise.

Really helpful. If I could sneak one more in. This was probably the best stroke or neuro quarter you've had in a really long time. Just any -- how sustainable is this and? Any onetime items to call out there?

Yes. It's a great question. Really, there's no onetime sort of distributor order per se that's out of sort of cycle. The real issue that we highlighted comes from the launch of -- the continued launch of RED in Europe but really a pretty remarkable launch of what we call SENDit, which is our inner catheter technology for RED 72 and the real continued launch of RED 43. We're starting to get more inventory to support that, and the reaction has been pretty remarkable. So, I think you add to that what we're starting to see -- and again, I don't want to jinx it by saying we have massive visibility on it, but we're starting to see a fairly renewed excitement in the field around treating stroke and getting back to the work that's necessary to grow that. So we're optimistic about it. We think we're in a pretty good spot on our stroke business. But again, obviously, the main topic that we've been getting from most people is around Flash and Bolt. And again, those products are performing unbelievably well and gives us an incredible amount of confidence. Frankly, it's just been a lot of fun to see the cases, to see the reaction from customers that we've had for a long time but also the myriad of customers that aren't -- that are new to our thrombectomy tools. It's just a lot of fun.

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

Our next question comes from Larry Biegelsen from Wells Fargo.

Adam, I was curious about your comments on the arterial side for Bolt. We -- you have a very strong position there. I don't know if there's any significant competition in mechanical thrombectomy. So I saw this as more of kind of maybe a mix benefit. But you talked about getting procedures from lytics and open procedures. The last slide, the last numbers you presented on this is about 50,000 procedures out of about 260,000 patients or 20% penetration. So, how are you -- I guess, how are you thinking about converting lytics and open procedures? Kind of what's driving that? And what do you think you need to do in addition to offering a better product here to drive that conversion? And I had one follow-up.

Yes. Larry, thank you. That's a really, really great question. And it's early on, and we will sort of share our strategy as we sort of get into executing it over the next couple of quarters as opposed to in advance. I think you can understand that. But the real -- the most important fact there is what we described. If this product continues to do what it's done, and we've done enough cases to be way past worrying that it's -- we don't know -- we know. If it's as simple as putting the catheter in the clot or in front of the clot, pushing the button and the clot tends to come out pretty quickly in most of these cases, that is fairly compelling to either an interventionalist or a vascular surgeon who has used another technique because that's pretty fast. That's pretty safe. That's pretty easy. And it's sort of causing a reaction that we're seeing. Now how long does it take to get that word out to have people try it, to have people have that same experience? We'll see. That's the question. And obviously, we're focused with all of our energy, and I said that over and over on the call, to do that. But that's really what happens. Will we have additional work to do to show that, to bring people together to share that experience? Of course. But the most important thing is the product is doing exactly what we had hoped it would do, and it's having a very positive reception particularly -- we knew it would have a positive reception with our current customers, but with people who otherwise weren't using our tool but using either open surgery or lytics, and that to me is what gives us the confidence that we have a freely -- a long runway with this product.

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

Yes. Well, let me start on the THUNDER trial. Enrollment is still going. The cases are going well. We'll get an update on completion dates as we can in the next quarter or so. What we're seeing is a lot more increased energy around it, which is really good. I think that comes from our sense that the markets -- people are focused again on stroke and so on. We do see part of the measures. We see an awful lot more screen failures not because those patients aren't ultimately treated usually with our product, but because we are -- the trials have an 8-hour window in it. So I think that's actually a positive that there's energy around focusing on the trial ongoing. But again, so far, very optimistic, and we'll give you more of a definitive update as soon as we have a better sense of that. As it relates to supply constrained for Flash, we're in a much better spot. We've been working really hard to get on top of that. And I don't think we feel that we're supply constrained for either Flash or Bolt at this point.

Our next question comes from Joanne Wuensch from Citi.

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

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

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

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

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

Our next question comes from Imron

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

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

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

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

Okay. And then when do you think -- do you have a time frame of when do you think you can achieve that 70% aspirational target for gross margin?

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

Our next question comes from Margaret Kaczor from William Blair.

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

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

Yes.

Yes. So with Flash, what we're talking to -- let's talk about Flash versus Lightning Bolt 7. With Flash, the first bit of work in the first quarter, again, was getting the product into people's hands, getting them to order it, use it. And so there -- it's hard to sort of quantify that people who otherwise were using Lightning 12 now were using Flash and how many more cases they did that they would have used something else. That's probably a pretty small category of people. So, I wouldn't probably have quantified that. I don't know that. I think we're looking at people who used our products and then people who didn't use our products. People who didn't use our products, that's sort of the most important number. Some of those people used other means like lytics. Others used other mechanical tools, devices on the market. The rate of reuse and reorder is very high, and it's the same between those new customers and customers who used Lightning 12 before. And I -- we wanted to share that because that's a huge important fact that gives us the confidence that this is sticky even with customers who didn't use us before this launch. So that was the point that we were making. We're not seeing -- I'm sure you can come up with one person who didn't do that, but the vast majority have. And that level of sort of engagement and reorder is significant, both from existing but more importantly for purposes of growth of new customers.

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

Yes. So the most important thing here is to -- again, without taking away any of the excitement and enthusiasm that we feel or anyone else feels, these things aren't 100% linear. And we'll, I'm sure, spend the next better part of time walking through how launches work and so on because they're not just straight line, linear thing. But obviously, you can tell from our updated guidance that we have a lot of belief that we can do this and that these products will be adopted over the course of this year in pretty significant numbers. So, that's the most important message that we're trying to convey, that these products work. They're relatively -- they're transformational at a scale that you don't typically see. It's pretty rare. And not only do we worry about this quarter and next, but what we've done and what we now can do and we've now had this conversation with dozens and dozens of physicians, is we're now getting closer to having the products that can go out there and fundamentally be viable to treat everybody that should be treated. And that's the work ahead. That's sort of the focus that we, as a company, now feel we can put on these products because of the reception that we've got so far. And that's really exciting. That's sort of why we're here, to make products that can remove clot, whether it's in your arteries in your leg, in your veins or your lungs, in a manner that is bordering on routine. So that's what we're trying to do, and I think we're getting really close to that, and that's what the excitement is about right now. So we're getting to work.

Our next question comes from Michael Sarcone from Jefferies.

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

It was significant, but I don't have those numbers in front of me. It was significant. Obviously, we had a pretty good fourth quarter, and fourth quarter is generally one of our strongest quarters. So I don't think we've quoted that number, and I don't have it in front of me, but it was a significant growth on a year-over-year basis for that business and for the vascular business -- U.S. vascular thrombectomy business as we quoted. So it was higher than that number that we gave you for the total U.S. thrombectomy business is a fair way to put it.

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

Yes, it's a good -- really good question for Lightning Bolt 7. There are different -- if you just look at material cost, obviously, the cost of Lightning Bolt is more than what you would do from a "materials cost" in open surgery. But if you look at it the way most hospital administrators look at it, when you're looking at the total cost to the hospital, the OR, which many of them are billed sort of by the hour, you look at post stay and how long that is, if you have those kind of open surgeries versus interventional surgeries, same with lytic, 2 days in ICU on average, we have a pretty compelling argument that we are significantly more cost-effective on a total cost basis than either of those two. So, I think we're going to get some real traction. Again, the first step is to get everyone to order it and get through it and try it. What I'm excited about is just like Flash, there is a lot of interest in that. There is a lot of we're not -- there's going to be a group that we probably have to convince. But so far, we have a lot of momentum with folks willing to engage with us on the process to get the product going and in and starting to use it. And again, that comes from the successful cases that we're seeing every day.

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

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

Yes. Thank you, Shagun. Please chime in if I missed any of this, but I'll try to address both the vascular question and the guidance question. So first on vascular, as I look at it, I don't think -- I agree with the premise. I know it looks like that neuro drove the upside to what your consensus expectations were, but we didn't give guidance specific to neuro versus vascular. And there was upside to the U.S. vascular business relative to what you were modeling. And the international business, as Maggie pointed out, there was a distributor variances that was favorable to neuro and the opposite is favorable to vascular, which is why we called out our U.S. vascular business and our U.S. vascular thrombectomy business, so you can get a sense for that. So -- and we also said that Flash drove the majority of that $20 million sequential increase. So if you put those facts together, I think the conclusion you draw is that the strength in the quarter was driven by U.S. vascular thrombectomy. As it relates to the guidance, certainly, as Adam mentioned, going forward, we've commented that our vascular business will accelerate. We've also said that vascular growth globally will be slightly above the top end of that global revenue guidance range. That should give you, I think, enough guidance to draw the conclusion that Flash and Bolt will drive a significant portion of the growth that we're seeing on a year-over-year basis, which year-over-year in dollar terms is now in and around $200 million.

Got it. And then just in terms of your commentary here, you guys have been talking about your portfolio of products in '23 and that they're transformational. You're guiding to 24% growth in '23. I'm just wondering, what does that mean for your sales growth trajectory beyond 2023? Is there -- should we think of you as a plus/minus 20% grower? Just any floor you're willing to put out there. And then also on margins, you talked about exiting at plus 10%. Should we think of a similar magnitude of increase in '24 as we saw in '20 -- as we are looking for in '23?

I really appreciate the questions. I love that you're trying to get us to give 2024 guidance already. I respect that immensely. That having been said, I don't think we want to give 2024 guidance quite yet. We've done, of course, a lot of work on what our business looks like, not just in 2024. I think Adam might have mentioned 3 or 4 times 5-plus years. So clearly, that is not just said flippantly but said with a good degree of conversation with our entire team about what this looks like this year and over that 5-plus years. And we do expect strong growth going forward, strong double-digit growth, but not to put any sort of quantitative sort of figure on that just quite yet. From an operating income perspective, I think we went out of our way at least qualitatively to give you some sense that we -- with strong revenue growth, our gross margin expansion expectations and our disciplined spending that we do expect our operating margins to expand not just this year but next year. And to frame that on a quantitative basis, again, it's a little too early, but we're excited about the leverage that exists in 2024 and frankly beyond that.

Our next question comes from Bill Plovanic from Canaccord Genuity.

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

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

Great. And if I could, on the real product, given your recently announced agreement with the VA for real, how should we think about the revenue contribution both near term and longer term from this product? Does it -- should we kind of bring it back into the discussion or still hold off maybe until next year to start really thinking about it?

Yes. There's a lot of work to be done. I can't wait to share some of what is happening in that. Some of it, we will be able to share. But some of it, I can't yet share. I got to tell you, I'm really confident and excited about finding this partner, finding their passion for this, the possibility -- or actually the reality now of helping a lot of veterans, which also then allows us to really have a model that can be rolled out throughout the country. So I'm very excited about it, very optimistic. But from a contributing revenue standpoint, particularly on a year like this where we have Lightning Bolt 7, Lightning Flash in our neuro business, it's not going to be the thing we're talking about from a revenue standpoint. But from a laying the groundwork for the future, it couldn't be better right now.

Our next question comes from Richard Newitter from Truist Securities.

I was just wondering, just following up to an earlier question, the question -- you had 30% sequential growth, I believe, in your thrombectomy -- venous thrombectomy. And I'm just curious to know how much of that maybe came from March. I know that the launch wasn't the entire quarter or not full scale the entire quarter. So can you just characterize that for us?

Yes. Look, what we said is -- and I want to be crystal clear. We said 30% increase in cases done. Obviously, we're getting product out there. We're having orders. We were pretty clear that we were talking about cases, and that's an important piece of information. We also said we were seeing acceleration throughout the quarter. So that would tell you that March was better than February, and February is better than January. And I think that is pretty clear that there is momentum here on this product.

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

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

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

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

Yes. That's a great question. Someday, I should -- we should have a little class on how these product -- these things launch and sell and so on. It's a pretty diverse process. Some hospitals are pretty straightforward. Others are not. Scheduling the meeting sometimes is the biggest issue. I could go through all kinds of stuff. None of those are excuses. We are doing fine. This is working. I just -- there is a gate here that everyone just has to remember. You can't just sell to everyone who wants it immediately. And that process is just -- we're talking about it simply to remind everyone that there's a process here. That being said, yes, things are working really well. The physicians are advocates. They want us -- they want the product. We know how to go through this. We've been selling product now. The company has for well over a decade, and we know how to do this. And so there's nothing unusual about this process than any other product that we've ever launched, and we launched dozens and dozens and dozens of products over the course of the year. So nothing other than the process. It means we have to go through it over time.

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

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

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

This is Sam [ph] on for Matt. I guess one of my questions, we just wanted to follow up on -- you mentioned the rate of reorders. Maybe could you provide a little bit more color and maybe put it into context with historical launches?

So historical, it depends -- we've had so many products over the years. So it's hard to do that with any validity. If you look back on Lightning 12, maybe the best example, the rate of reorder from new customers seems higher. I don't have the numbers in front of me, so I can't quote with specificity. If I did have that number, you would think something's wrong that I would walk around with that in my head. I just don't. But what we were really pleased about is the reception this product has had and how customers who were not using our products before reordered the product because they really liked it. And that's an important metric for us to get out there so that you know, as we put out guidance and we talk about it, what's behind it and how confident we are that over the course of the next years, we can go after all these patients. So that's why we talked about it. It obviously is something that is notably higher than in the past, but I can't quantify it because I don't have -- of the dozens of products we've launched, I don't know that.

Our last question will come from Ryan

I promise this will not be a 30-part question squeezed into one question. This will be a one question squeezed into one question. So just -- I want to talk about Lightning Flash briefly. The one thing we didn't talk about was pricing. And I know you're not going to give pricing, Adam, but I'd love for you just to talk qualitatively about unit growth versus pricing as Lightning Flash does commercialize and what impact that pricing could have relative to the unit growth or the market expansion and how important that is to kind of what you're implying in your guidance.

Yes. It's really -- I really appreciate the question. It's a great question. There's been some misinformation out there on our pricing. What we've done is priced Flash sort of below what was then the sort of market-leading price. When you look at Flash versus Lightning 12 and the need for a separator, we're not talking fundamentally different price. They're very close to the price, not exactly, but close enough that you're not going to see significant gain just because of mix or price between the two. So this is real gain. This is products that are being used in cases that we wouldn't otherwise have necessarily done. And that's really important here. Our price isn't -- this is not all price gain from existing customers. In fact, it's very, very minimal part of the mix, if at all. Again, we haven't quantified it.

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

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