Penumbra - Q1 2023
May 2, 2023
Transcript
Operator (participant)
Good afternoon. My name is Julianne, I will be your conference operator today. At this time, I would like to welcome everyone to Penumbra's first quarter 2023 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.
If you would like to ask a question during this time, simply press star followed by the one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. I would now like to introduce Ms. Jee Hamlyn-Harris, investor relations for Penumbra. Ms. Hamlyn-Harris, you may now begin your conference.
Jee Hamlyn-Harris (Investor Relations)
Thank you, operator. 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 that deal 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 31st, 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 Chief Executive Officer, will provide a business update.
Maggie Yuen, our Chief Financial Officer, will then discuss our financial results for the first quarter. 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.
Adam Elsesser (Chairman and CEO)
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 US vascular business, which grew 23% year-over-year, and our US 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 inner SENDit Technology, RED 43, and BMX81 have added significant momentum to our market-leading ischemic stroke business. We are raising our 2023 revenue forecast significantly, and we see a robust growth trajectory over the next 5+ years.
Jason will discuss our forecasts 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%+ 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 growth 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. 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+ 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 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 one 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 three weeks ago.
A patient presented to the hospital with severe leg pain and necrotic toes. The patient had an SFA stent placed about three 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 two 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.
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+ venous, PE, and arterial patients in the United States.
To this the successful product launches in stroke, we fully understand that there is a lot of excitement among our physician customers that has 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+ 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 two 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% sequential 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 0.72-sized aspiration catheters as well as distal clot removal.
As we build more inventory of these two 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-offs 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. Growth in revenue 8% sequentially, taking our international business to a revenue run rate that exceeds a quarter billion dollars annually. We are even more excited about what's to come in ensuing years. We recently launched our RED catheters for stroke and our first generation computer-orchestrated thrombectomy products, Lightning 12 and seven, in Europe.
We have added significant expertise and capacity to our sales, regulatory, and reimbursement capabilities internationally. In sum, we think within 3+ 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 multi-year collaboration with the Department of Veterans Affairs Office of Healthcare Innovation and Learning to test, co-develop, and scale virtual reality solutions for veterans in multiple healthcare 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 healthcare systems in the United States, is teaching us so much about the myriad ways our technology can improve healthcare across rehab, mental and cognitive health, and aging, while also helping us 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.
Maggie Yuen (CFO)
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 31st, 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 neural 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., continuous 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 one-point improvement from higher vascular thrombectomy product mix sales offset by higher startup 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 onto our non-GAAP operating expenses, which exclude the amortization of acquired intangible assets of $2.4 million, $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 a 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. Now I'd like to turn the call over to Jason to discuss our guidance.
Jason Mills (EVP, Strategy)
Thank you, Maggie, Good afternoon, everybody. For 2023, we are increasing our revenue guidance to a range of $1.04 billion-$1.06 billion, representing year-over-year growth of 23%-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%-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. We continue to target over 70% gross margins within a few years. 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.
Adam Elsesser (Chairman and CEO)
Thank you, Jason, Maggie, and Chief. 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 are 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 have 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 (participant)
At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Our first question comes from Robbie Marcus from JPMorgan. Please go ahead. Your line is open.
Robbie Marcus (Managing Director and Senior Analyst)
Oh, great. Hey, congrats on a nice quarter. Thanks for taking the questions.
Adam Elsesser (Chairman and CEO)
Thanks.
Robbie Marcus (Managing Director and Senior Analyst)
Maybe to start, I wanted to spend some time on the peripheral thrombectomy line, particularly FLASH. You gave a couple numbers in there, but really the question is two-part. One, how are you thinking about the adoption of FLASH relative to market expansion versus share gains, and how can we think about, you know, 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? Thanks.
Adam Elsesser (Chairman and CEO)
Yeah. Robbie, first of all, thanks for the I was gonna say two-part question, but I think it's a three or four-part question. Let me try to articulate this way. I think you could 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. We went out of our way to say that just from a pure numbers standpoint, the peripheral thrombectomy tools, both FLASH and Lightning Bolt, are gonna have a larger role in that growth. Obviously, the numbers support that.
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. That's our goal. As it relates to, you know, 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 wanna 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. I think we're gonna 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, you know, share gain from those procedures or is it 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. As it relates to the venous side, both PE and DVT, it's gonna be both. You know, 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.
Jason Mills (EVP, Strategy)
Yeah, 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. Of course, that was primarily FLASH. As we move forward, as Adam mentioned, we expect FLASH and Lightning Bolt 7 to hold similar, you know, sort of share of the growth and acceleration we're expecting. Just a couple of other reminders to help you out. We mentioned that on the Venus and PE side, just from a procedural volume standpoint, we believe we increased over 30% sequentially from the fourth quarter in our U.S. Venus franchise.
Robbie Marcus (Managing Director and Senior Analyst)
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 how sustainable is this? And any one-time items to call out there. Thanks a lot.
Adam Elsesser (Chairman and CEO)
Yeah. It's a great question. Really, there's no one time sort of distributor order per se, that's out of sort of cycle. The real issue, you know, 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.
I think, I think you add to that what we're starting to see, and again, I don't wanna jinx it, you know, by saying we have, you know, 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. We're optimistic about it. We think we're in a pretty good spot on our stroke business. Again, obviously, you know, the main topic, you know, that we've been getting from most people our quarter is around FLASH and Bolt.
Jason Mills (EVP, Strategy)
Yeah.
Adam Elsesser (Chairman and CEO)
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, you know, from customers that we've had for a long time, but also the myriad of customers that aren't, you know, that are new to our thrombectomy tools. It's just a lot of fun.
Jason Mills (EVP, Strategy)
Yeah. 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, you know, were a little easier. 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.
Robbie Marcus (Managing Director and Senior Analyst)
Appreciate the color. Thanks a lot.
Jason Mills (EVP, Strategy)
Of course.
Operator (participant)
Our next question comes from Larry Biegelsen from Wells Fargo. Please go ahead. Your line is open.
Larry Biegelsen (Managing Director and Senior Medical Device Equity Research Analyst)
Good afternoon.
Jason Mills (EVP, Strategy)
Good afternoon.
Larry Biegelsen (Managing Director and Senior Medical Device Equity Research Analyst)
Thanks for taking the question. Hi, Adam, Jason-
Jason Mills (EVP, Strategy)
Hi.
Larry Biegelsen (Managing Director and Senior Medical Device Equity Research Analyst)
Maggie, and Sandra.
Jason Mills (EVP, Strategy)
Hey.
Larry Biegelsen (Managing Director and Senior Medical Device Equity Research Analyst)
Jee. I don't wanna forget anybody.
Jason Mills (EVP, Strategy)
Well done.
Larry Biegelsen (Managing Director and Senior Medical Device Equity Research Analyst)
Adam, I was curious about your comments on the arterial side for Bolt. You know, you have a very strong position there. I don't know if there's any significant competition in mechanical thrombectomy. I saw this as more of kind of a, maybe a mixed benefit, but you talked about getting procedures from lytics and open procedures.
You know, the last slides, the last numbers you presented on this is about 50,000 procedures out of about 260,000 patients or 20% penetration. How are you, I guess, how are you thinking about converting lytics and open procedures? Kinda what's driving that, and what do you think you need to do, in addition to, you know, offering a better product here, to drive that, you know, conversion?
I had one follow-up.
Adam Elsesser (Chairman and CEO)
Yeah. Larry, thank you. That's a really, really great question. You know, it's early on, we'll sort of, you know, 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. The real most. The most important fact there is what we described. You know, if this product continues to do what it's done, and we've done enough cases to be way past, you know, worrying, you know, that it's, we don't know. You know, we know.
If it's as simple as putting the catheter in the clot, you know, 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. That's pretty fast, that's pretty safe, that's pretty easy. 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? You know, we'll see. You know, that's the question. Obviously we're focused with all of our energy, and I said that over and over on the call to do that. 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, you know, 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. That to me is what gives us the confidence that we have a fairly a long runway with this product.
Larry Biegelsen (Managing Director and Senior Medical Device Equity Research Analyst)
That's helpful. Just two quick ones, and I mean very quick ones. One, on Flash, are you no longer supply constrained? The second is on the THUNDER trial, just any update on the enrollment and when you expect to complete. Thanks for taking the questions.
Adam Elsesser (Chairman and CEO)
Yeah. Well, let me start on the THUNDER trial. Enrollment is still going. The cases are going well. We'll get an update on, you know, 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, you know, people are focused again on stroke and so on.
We do see, you know, 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're, you know, the trial has an eight-hour window in it. I think that's actually a positive that there's energy around focusing on the trial and going.
Again, so far, very optimistic, we'll get you more of a definitive update as soon as we have a better sense of that. As it relates to supply constraint for Flash, we're in a much better spot. We've been working really hard to get on top of that. I don't think we feel that we're supply constrained for either Flash or both at this point.
Larry Biegelsen (Managing Director and Senior Medical Device Equity Research Analyst)
Thank you. Thanks, guys.
Adam Elsesser (Chairman and CEO)
Thanks, Larry.
Jason Mills (EVP, Strategy)
Our next question comes from Joanne Wuensch from Citi. Please go ahead, your line is open.
Joanne Wuensch (Managing Director and Senior Equity Analyst)
Good evening.
Adam Elsesser (Chairman and CEO)
Hi, Joanne.
Joanne Wuensch (Managing Director and Senior Equity Analyst)
A couple of questions. Hi, how are you? A couple of questions. I wanna make sure I got these numbers right. Total vascular was up 17.2% constant currency, US up 23%. What was OUS?
Adam Elsesser (Chairman and CEO)
OUS, we didn't give that number, but obviously it was less than that, less than the total number, just, you know, as averages work. Just to sort of give you a broader answer to that question, clearly the vascular number globally was driven by the US vascular thrombectomy franchise. It drove the majority of that $20 million sequential increase in our global quarterly revenue. We mentioned our US vascular business grew 23%. I think we also mentioned that our US vascular thrombectomy piece specifically grew 26% on a year-over-year basis.
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, you know, excluding the distributor variance that we saw year-over-year in vascular internationally that Maggie alluded to. 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. 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.
Joanne Wuensch (Managing Director and Senior Equity Analyst)
Got it. As a follow-up, Thunderbolt still on track to be approved at the end of the year? If so or if not, what are your expectations for uptake of that particular product? Thank you.
Adam Elsesser (Chairman and CEO)
Yeah. As I said just now to Larry, we'll give a more thoughtful and 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 whole stroke field, we sort of wanna play that out over a bit to give you a more accurate.
Notwithstanding that, what we've said over and over again is, you know, that product, we're excited about it, we can't wait for it. 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. 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.
Jason Mills (EVP, Strategy)
Yeah. Just to add to that, Joanne Wuensch, just to reiterate that point, I think the most important point here is that the renewed energy around stroke and these new products, SENDit is, it is really doing quite well with RED 43. 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 RED 43 is performing very, very well, so we're excited about that.
Joanne Wuensch (Managing Director and Senior Equity Analyst)
Thank you.
Jason Mills (EVP, Strategy)
Our next question comes from Imron Zafar from Deutsche Bank. Please go ahead, your line is open.
Imron Zafar (Equity Research Analyst, Medical Technology)
Hey, good afternoon, everybody. Thanks so much for taking my question.
Adam Elsesser (Chairman and CEO)
Hey, Araman.
Imron Zafar (Equity Research Analyst, Medical Technology)
Hey, Jason. 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, you know, the big rates of blood loss in their data set. I just wondered, you know, with the benefit of having a presumably much bigger data set, you know, what you're seeing in your commercial experience specifically on this endpoint of blood loss with Flash.
Adam Elsesser (Chairman and CEO)
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.
Imron Zafar (Equity Research Analyst, Medical Technology)
Okay. Just in terms of gross margin, I think last time you talked about 1 points-2 points of year-over-year improvement this year. Now that we have, you know, better volume leverage, inflationary pressures seem to be abating a little bit, I just wonder, is the year-over-year improvement therefore gonna be, you know, materially better than that 100 basis points-200 basis points that you talked about last quarter? When do you think you can get to that 70% gross margin level in terms of, you know, timeframe? Thanks.
Maggie Yuen (CFO)
Thanks for the question. So far we see a pretty positive trend in the first quarter. We're excited to see that all the new product launch have accreted to the growth margin. We are on track to all of our productivity progress. We are seeing more margin improvement opportunities. In the near terms, 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 startup costs with all the new product launches, we are still on track to our target of 100 basis points-200 basis point improvement for the year.
Imron Zafar (Equity Research Analyst, Medical Technology)
Okay. Thank you. do you have a timeframe on when do you think you can achieve that 70% aspirational target for gross margin?
Maggie Yuen (CFO)
Yeah. We'll continue to see favorable mix and productivity improvement in the next few years. Within a few years, we're still on track to the 70%+ gross margin target.
Imron Zafar (Equity Research Analyst, Medical Technology)
Great. Thank you so much.
Maggie Yuen (CFO)
Thank you.
Adam Elsesser (Chairman and CEO)
Thanks, Aram.
Operator (participant)
Our next question comes from Margaret Kaczor from William Blair. Please go ahead. Your line is open.
Margaret Kaczor (Partner and Senior Equity Research Analyst)
Hey, good afternoon, everyone.
Adam Elsesser (Chairman and CEO)
Hi, Margaret.
Margaret Kaczor (Partner and Senior Equity Research Analyst)
taking the questions. I'm not gonna try to do Larry and mention everyone just for the sake of time. I appreciate it.
Adam Elsesser (Chairman and CEO)
It's all good.
Margaret Kaczor (Partner and Senior Equity Research Analyst)
Maybe the first one is just on reorder rates as a follow-up, you know, for the new and existing accounts? You know, you mentioned you're seeing those go up. Specifically for existing, you know, can you give us a sense of how much that's going up and maybe how that might compare, you know, to the potential addressable markets in some of these existing accounts? Maybe your 10% within that 100, et cetera.
Adam Elsesser (Chairman and CEO)
Yeah. Margaret, I apologize for not fully understanding. You're saying with our existing accounts, how much that's gone up?
Margaret Kaczor (Partner and Senior Equity Research Analyst)
Yeah.
Adam Elsesser (Chairman and CEO)
Yeah. With Flash, let's talk about Flash versus Lightning Bolt 7. With Flash, you know, the first bit of work in the first quarter, you know, again, was getting the product into people's hands, getting them to order it and use it. There, you know, it's hard to sort of quantify that people who otherwise were using Lightning 12, you know, now are 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, I wouldn't probably have quantified that. I don't know that. I think, you know, 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 reordering is very high, and it's the same between those new customers and customers who used Lightning 12 before. 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.
That was the point that we were making. You know, we're not seeing. You know, I'm sure you can come up with one person, you know, 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, new customers.
Margaret Kaczor (Partner and Senior Equity Research Analyst)
Okay. I think part of it from my perspective was utilization as well, but we can talk about that later. The second question, you know, you mentioned the PEDVT 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, you know, can that trajectory, I guess, keep going in April and beyond? Thanks.
Adam Elsesser (Chairman and CEO)
Yeah. The, the most important thing here is, you know, to, again, without taking away any of the excitement and enthusiasm that we feel or anyone else feels, you know, these things aren't 100% linear, you know? We'll I'm sure spend the next better part of, you know, time walking through how launches work and so on, because they're not just straight line linear things.
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. That's the most important message, you know, that we're trying to convey is that these products work. They're relatively... You know, they're transformational at a scale that you don't typically see.
It's pretty rare. 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, you know, we're now getting closer to having the products that can go out there and fundamentally, you know, be viable to treat everybody that should be treated.
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. That's really exciting. That's sort of why we're here, you know, 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. That's what we're trying to do, and I think we're getting really close to that, and that's what the excitement's about right now. We're getting to work.
Operator (participant)
Our next question comes from Michael Sarcone from Jefferies. Please go ahead. Your line is open.
Michael Sarcone (Equity Analyst)
Hey, good afternoon.
Adam Elsesser (Chairman and CEO)
Hi, Michael.
Michael Sarcone (Equity Analyst)
Thanks for taking my questions. Hello.
Adam Elsesser (Chairman and CEO)
Hi, Michael. Thank you.
Michael Sarcone (Equity Analyst)
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?
Adam Elsesser (Chairman and CEO)
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. You know, 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. It was, you know, higher than that number that we gave you for the total U.S. thrombectomy business is a fair way to put it.
Michael Sarcone (Equity Analyst)
Okay. That's helpful. Thanks, Jason. I was just curious, in arterial for Lightning Bolt, you know, 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?
Adam Elsesser (Chairman and CEO)
Yeah. It's a good, really good question for Lightning Bolt 7. There are different, You know, if you just look at material costs, you know, obviously the cost of Lightning Bolt is more than what you would do from a quote, materials cost in open surgery. If you look at it the way most hospital administrators look at it, where you're looking at the total cost to the hospital, you know, the OR, which many of them are billed sort of by the hour. You look at, you know, post-stay and how long that is if you have those kind of, you know, open surgeries versus interventional surgeries. Same with lytic. Two days in ICU on average.
We, we have a pretty compelling argument that we are significantly more cost effective on a total cost basis than either of those two. I think, you know, we're getting, we're gonna get some real traction. Again, you know, 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. You know, there's gonna be a group that we probably have to convince. 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. Again, that comes from the successful cases that we're seeing every day.
Michael Sarcone (Equity Analyst)
Got it. Thank you very much.
Adam Elsesser (Chairman and CEO)
Thank you.
Michael Sarcone (Equity Analyst)
Thanks, Mike.
Operator (participant)
Our next question comes from Shagun Singh from RBC Capital Markets. Please go ahead. Your line is open.
Shagun Singh (Director and Senior Equity Research Analyst)
Great. Thank you so much, and congratulations on a good quarter.
Adam Elsesser (Chairman and CEO)
Thank you, Shagun.
Shagun Singh (Director and Senior Equity Research Analyst)
Yeah, you know, I just was looking for some clarification here. You know, I thought it was interesting that the beat relative to expectations was driven by neurovascular and not peripheral. You did call out that U.S. thrombectomy uptake, it sounds like it was better than at least what we were expecting. Were there any offsets on the vascular side for us to consider either internationally or elsewhere?
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, you know, much for Thunderbolt in it, but what about Lightning Bolt? How much of that is in it? Then I have a follow-up.
Adam Elsesser (Chairman and CEO)
Yeah. Thank you, Shagun. Please, you know, chime in if I missed any of this, but I'll try to address both the vascular question and the guidance question.
Jason Mills (EVP, Strategy)
First on vascular, I, you know, as I, 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. We didn't give guidance specific to neuro versus vascular. There was, you know, there was upside to the US vascular business relative to what you, what you were modeling. The international business, as Maggie pointed out, there was a distributor variances that was favorable to neuro and the opposite, unfavorable to vascular, which is why we called out our US vascular business and our US vascular thrombectomy business, so you could get a sense for that.
We also said that Flash drove the majority of that $20 million sequential increase. 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.
Shagun Singh (Director and Senior Equity Research Analyst)
Got it. You know, just, in terms of your commentary here, you guys have been talking about, you know, your portfolio of products in 2023 and that they're transformational. You know, you're guiding to 24% growth in 2023. I'm just wondering, you know, what does that mean for your sales growth trajectory beyond 2023? You know, is there?
You know, should we think of you as a, you know, ±20% grower? You know, just any floor you're willing to put out there. Also on margins, you know, you talked about exiting at +10%. Should we think of a similar magnitude of increase in 2024, you know, as we are looking for in 2023? Thank you for taking the questions.
Jason Mills (EVP, Strategy)
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 3x or 4x, 5+ years. 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+ years. 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. 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.
Shagun Singh (Director and Senior Equity Research Analyst)
Thank you.
Operator (participant)
Our next question comes from Bill Plovanic from Canaccord Genuity. Please go ahead. Your line is open.
Bill Plovanic (Managing Director and Equity Research Medical Technology Analyst)
Yeah, great. Great. Thanks for taking my questions.
Jason Mills (EVP, Strategy)
You're welcome.
Bill Plovanic (Managing Director and Equity Research Medical Technology Analyst)
Good evening. Hey, just a couple of things. One, you know, at this point in the launch, you know, do you think that you've gotten Lightning Flash and BOLT to all the accounts? Because I think on the last call, you were still kind of in the LMR on BOLT. Then, kind of a follow-up to that is, you know, are you seeing an acceleration of the BOLT launch or benefit? 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.
Jason Mills (EVP, Strategy)
Yeah. With Lightning Bolt, you know, we launched the product, what is it? May second, we launched the product, you know, within, you know, three weeks ago or something like that. I've lost exact track of time. 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, you know, 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. That's in April, and we launched that in January. The process takes time. That being said, we're pretty darn excited about the reaction to it.
Without a positive reaction, you can have all the time in the world, no one's gonna care. People care. They're excited about it. 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. That's pretty exciting for us. I think hopefully, our physicians and the customers are gonna get the product.
Bill Plovanic (Managing Director and Equity Research Medical Technology Analyst)
Great. Thanks. 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? Should we kind of bring it back into the discussion or still hold off maybe until next year to start really thinking about it?
Adam Elsesser (Chairman and CEO)
Yeah, there's a lot of work to be done. I can't wait to share some of what is happening yet. Some of it, you know, we will be able to share, but some of it I can't yet share. I gotta tell you, I'm really confident and excited about finding the 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. I'm very excited about it, very optimistic.
From a contributing revenue standpoint, particularly on a year like this where we have Lightning Bolt 7 Lightning Flash in our neuro business, you know, it's not gonna 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.
Mike Matson (Senior Equity Research Analyst and Managing Director)
Great. Thanks.
Adam Elsesser (Chairman and CEO)
Thank you. Thanks, Phil.
Operator (participant)
Our next question comes from Richard Newitter from Truist Securities. Please go ahead. Your line is open.
Richard Newitter (Managing Director and Senior Equity Research Analyst)
Hi. Thanks for taking the question.
Adam Elsesser (Chairman and CEO)
Hi, Richard.
Richard Newitter (Managing Director and Senior Equity Research Analyst)
Hi. I was just wondering, just following up to an earlier question, the question, just 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, you know, the launch wasn't the entire quarter or not full scale the entire quarter. Can you just characterize that for us?
Adam Elsesser (Chairman and CEO)
Yeah. Look, what we said is, and I wanna be crystal clear, we said 30% increase in cases done. You know, obviously, you know, we're getting product out there. We're, you know, having orders. We were pretty clear that we were talking about cases, and that's a, an important, piece of information. We also said we were seeing acceleration throughout the quarter. 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.
Richard Newitter (Managing Director and Senior Equity Research Analyst)
Okay, thanks. That's helpful. Then just as I think about the range that you provided, you know, thanks for that, for the, for the guidance, the $1.04-$1.06. I'm just curious if any benchmarks that you can give us for kind of how you came up with those upper and lower bounds, what's it take to get you to the upper end? You know, 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. Thanks.
Adam Elsesser (Chairman and CEO)
Well, we know our business very well. We've been given guidance now for eight years. I don't mean to come across terse, but that is important to know. We take into account lots of things. 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 through the year and a lot higher than what we did in the 1st quarter. We feel good about where we are now with that guidance.
Operator (participant)
Our next question comes from Mike Matson from Needham & Company. Please go ahead. Your line is open.
Mike Matson (Senior Equity Research Analyst and Managing Director)
Thanks. I just wanna ask one about the value analysis committee process. You know, kind of how long does it typically take? How receptive have they been to Flash and Bolt and, you know, do they ask for data? I mean, I don't think you have much kinda human data on these products, but...
Adam Elsesser (Chairman and CEO)
Yeah. That's, that's a great question. Someday I should, we should have a little class on how these products, these things launch and sell and so on. You know, 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, none of those are excuses. You know, we are doing fine. This is working. I just... There is a, you know, a gate here that everyone just has to remember. You can't just sell to everyone who wants it immediately. That process is just... You know, we're talking about it simply to remind everyone, you know, that there's a process here.
That being said, yeah, things are working really well. The physicians are advocates. They want us. You know, they want the product. We know how to go through this. We've been selling product now, you know, the company has for, you know, well over a decade, and we know how to do this. There's nothing unusual about this process than any other product that we've ever launched, and we've launched, you know, dozens and dozens and dozens of products over the course of the years. Nothing other than the process. It means we have to go through it over time.
Mike Matson (Senior Equity Research Analyst and Managing Director)
Okay, I understand. Just wanted to ask one on China. Just curious, I didn't really hear any comments about that market in the quarter. You know, just curious if you're seeing any impact from the VBP stuff over there?
Adam Elsesser (Chairman and CEO)
Yeah. Thanks for the question, Mike. Yeah, we certainly, like other companies, have seen the VBP process, starting to play out, and that's playing out. 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. All of that taken together, I think the future is bright in China for Genesis and therefore as their partner, for us.
Jee Hamlyn-Harris (Investor Relations)
Okay. Got it. Thank you.
Adam Elsesser (Chairman and CEO)
Thank you.
Operator (participant)
Our next question comes from Matt O'Brien from Piper Sandler. Please go ahead. Your line is open.
Adam Elsesser (Chairman and CEO)
Hey, Matt.
Speaker 16
Hi. Thank you. Hey, this is Sam on for Matt. I guess one of our questions, we just wanted to follow up on, you know, you mentioned the rate of reorders. Maybe could you provide a little bit more color and maybe put it into context with historical launches?
Adam Elsesser (Chairman and CEO)
Historical, it depends. You know, 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 is 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, you know, quote with specificity.
If I did have that number, you would think something was, you know, wrong, that I would walk around with that in my head. I just don't. 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.
That's an important metrics 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. 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, you know, of the dozens of products we've launched, I don't know that.
Speaker 16
Great. Thank you so much for taking our question.
Adam Elsesser (Chairman and CEO)
Sure. Thank you.
Operator (participant)
Our last question will come from Ryan Zimmerman from BTIG. Please go ahead. Your line is open.
Ryan Zimmerman (Managing Director and Medical Technology Analyst)
Oh my gosh. Thanks for squeezing me in. I promise-
Adam Elsesser (Chairman and CEO)
Hey, Ryan.
Ryan Zimmerman (Managing Director and Medical Technology Analyst)
This will not be a 30-part question squeezed into one question. This will be a one question squeezed in one question. Just I want to talk about Lightning Flash briefly. The one thing we didn't talk about was pricing. I know you're not going to give pricing, Adam, but I'd love for you just to talk, you know, qualitatively about unit growth versus pricing as Lightning Flash does commercialize and what impact that pricing could have relative, you know, to the unit growth or the market expansion and how important that is to kind of what you're implying in your guidance.
Adam Elsesser (Chairman and CEO)
Yeah, I really appreciate the question. It's a great question. There's been some misinformation out there on our pricing. You know, 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 a fundamentally different price. They're very close to the price.
Not exactly, but close enough that you're not gonna see significant, you know, gain just because of mix or price between the two. This is real gain. You know, this is products that are being used in cases that we wouldn't otherwise have necessarily done. That's really important to hear. Our price isn't, this is not all price gain from existing customers.
In fact, it's very, very minimal as part of the mix, if at all. Again, we haven't quantified it.
Ryan Zimmerman (Managing Director and Medical Technology Analyst)
Okay.
Adam Elsesser (Chairman and CEO)
Thank you.
Ryan Zimmerman (Managing Director and Medical Technology Analyst)
I'll leave it there. Thanks.
Adam Elsesser (Chairman and CEO)
Thank you.
Jee Hamlyn-Harris (Investor Relations)
Thanks, Ryan.
Operator (participant)
There are no further questions at this time. This is Jee Hamlyn-Harris. I turn the call back over to you.
Jee Hamlyn-Harris (Investor Relations)
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.
Operator (participant)
This concludes today's conference call. You may now disconnect.