The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the unaudited condensed
consolidated financial statements and the related notes thereto included
elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated
financial statements and notes thereto and management's discussion and analysis
of financial condition and results of operations for the year ended December 31,
2021, included in our Annual Report on Form 10-K filed with the Securities and
Exchange Commission ("SEC") on February 22, 2022.

This Quarterly Report on Form 10-Q contains "forward-looking statements" within
the meaning of Section 21E of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). In some cases, you can identify these statements by
forward-looking words such as "may," "will," "expect," "believe," "anticipate,"
"intend," "could," "should," "estimate," or "continue," and similar expressions
or variations, but these words are not the exclusive means for identifying such
statements. Such forward-looking statements are subject to risks, uncertainties
and other factors that could cause actual results and the timing of certain
events to differ materially from future results and timing expressed or implied
by such forward-looking statements. Factors that could cause or contribute to
such differences include, but are not limited to, those identified below, and
those discussed in the section titled "Risk Factors" in Part I, Item 1A of our
Annual Report on Form 10-K for the year ended December 31, 2021. The
forward-looking statements in this Quarterly Report on Form 10-Q represent our
views as of the date of this Quarterly Report on Form 10-Q. Except as may be
required by law, we assume no obligation to update these forward-looking
statements or the reasons that results could differ from these forward-looking
statements. You should, therefore, not rely on these forward-looking statements
as representing our views as of any date subsequent to the date of this
Quarterly Report on Form 10-Q.

Overview



Penumbra is a global healthcare company focused on innovative therapies. We
design, develop, manufacture and market novel products and have a broad
portfolio that addresses challenging medical conditions in markets with
significant unmet need. Our team focuses on developing, manufacturing and
marketing novel products for use by specialist physicians and other healthcare
providers to drive improved clinical and health outcomes. We believe that the
cost-effectiveness of our products is attractive to our customers.

Since our founding in 2004, we have had a strong track record of organic product
development and commercial expansion that has established the foundation of our
global organization. We have successfully developed, obtained regulatory
clearance or approval for, and introduced products into the neurovascular market
since 2007, vascular market since 2013, neurosurgical market since 2014, and
immersive healthcare market since 2020.

We expect to continue to develop and build our portfolio of products, including
our thrombectomy, embolization, access and immersive healthcare technologies,
while iterating on our currently available products. Generally, when we
introduce a next generation product or a new product designed to replace a
current product, sales of the earlier generation product or the product replaced
decline. Our research and development activities are centered around the
development of new products and clinical activities designed to support our
regulatory submissions and demonstrate the effectiveness of our products.

To address the challenging and significant clinical needs of our key markets, we have developed products that fall into the following broad product families:

Our neuro products fall into four broad product families:

•Neuro thrombectomy - Penumbra System, including Penumbra RED, JET, ACE and the 3D Revascularization Device, Penumbra ENGINE and other components and accessories

•Neuro embolization - Penumbra SMART COIL, Penumbra Coil 400, POD400 and PAC400

•Neuro access - delivery catheters, consisting of Neuron, Neuron MAX, Select, BENCHMARK, BMX96, DDC and PX SLIM

•Neurosurgical - Artemis Neuro Evacuation Device

Our vascular products fall into two broad product families:



•Vascular thrombectomy - INDIGO System designed for mechanical thrombectomy,
including aspiration catheters, separators, aspiration pump and accessories and
Lightning, our next-generation aspiration system for peripheral thrombectomy

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•Peripheral embolization - RUBY Coil System, Ruby LP, LANTERN Delivery Microcatheter and the POD System (POD and POD Packing Coil)

Our immersive healthcare products fall into one broad product family:

•REAL Immersive System - portfolio of products that leverages immersive computer-based technologies to deliver engaging, immersive therapeutics to promote better health, motor function and cognition



We support healthcare providers, hospitals and clinics in more than 100
countries. In the nine months ended September 30, 2022 and 2021, 30.6% and 29.5%
of our revenue, respectively, was generated from customers located outside of
the United States. Our sales outside of the United States are denominated
principally in the euro and Japanese yen, with some sales being denominated in
other currencies. As a result, we have foreign exchange exposure but do not
currently engage in hedging.

We generated revenue of $625.9 million and $543.6 million for the nine months
ended September 30, 2022 and 2021, respectively, an increase of $82.3 million.
We generated operating income of $1.2 million and $32.6 million for the nine
months ended September 30, 2022 and 2021, respectively.

COVID-19 Pandemic



In March 2020, the World Health Organization declared the outbreak of COVID-19
as a pandemic, which continues to spread throughout the U.S. and the world. In
response, governments have issued orders restricting certain activities, and
while our business falls within the category of healthcare operations, which are
essential businesses permitted to continue operating during the COVID-19
pandemic, we have experienced, and expect to continue to experience, disruptions
to our operations as a result of the pandemic. For example, hospital resources
have been diverted to fight the pandemic, and many government agencies in
conjunction with healthcare systems have recommended the deferral of elective
and semi-elective medical procedures during the pandemic. Some of Penumbra's
medical devices are used in certain procedures that the United States Centers
for Medicare & Medicaid Services ("CMS") has indicated are "high-acuity"
procedures that should not be postponed during the pandemic in its March 18,
2020 recommendations, while other Penumbra devices are used in elective
procedures that physicians may consider postponing. Many of the procedures in
which our vascular products are used are elective in nature, whereas procedures
in which our neuro products are used, such as stroke, tend to be more emergent
in nature.

The impact of COVID-19 on our business remains fluid, and we continue to actively monitor the dynamic situation. We will continue to undertake the following specific actions and strategic priorities to navigate the pandemic:



•We have made changes to how we manufacture, inspect and ship our products to
prioritize the health and safety of our employees and to operate under the
protocols mandated by our local and state governments. While we are committed to
continue to meet demand for our essential devices, we have implemented social
distancing and other measures to protect the health and safety of our employees,
which have reduced, and may continue to reduce, our manufacturing capacity.

•We further strengthened our liquidity position by entering into a Credit
Agreement (the "Credit Agreement") on April 24, 2020, with JPMorgan Chase Bank,
N.A., as administrative agent and lender, and Bank of America, N.A. and
Citibank, N.A. as lenders. The Credit Agreement is secured and provides for up
to $100 million in available revolving borrowing capacity with an option,
subject to certain conditions, for us to increase the aggregate borrowing
capacity to up to $150 million. This revolving line of credit provides access to
capital beyond the $184.4 million in cash, cash equivalents and marketable
investments on our balance sheet as of September 30, 2022, and we believe this
will allow us to both navigate the current environment and emerge in a strong
liquidity position after the pandemic. During the three months ended March 31,
2021, we entered into an amended one-year credit agreement with JPMorgan Chase
Bank, N.A., as administrative agent and lender, and Bank of America, N.A. and
Citibank, N.A. as lenders. The amended Credit Agreement extended the maturity
date from April 23, 2021 to February 21, 2022 and had substantially the same
terms and conditions as the prior credit agreement with certain changes
including the exclusion of certain one-time charges and expenses incurred during
the fiscal quarters ended September 30, 2020 and December 31, 2020 from the
calculation of the financial covenants, reductions in interest rate floors
applicable to revolving loans and other changes to borrowing mechanics under the
Credit Agreement. In the first quarter of 2022, we entered into a further
amended one-year credit agreement with JPMorgan Chase Bank, N.A., as
administrative agent and lender, and Bank of America, N.A. and Citibank, N.A. as
lenders. The amended Credit Agreement extended the maturity date from
February 21, 2022 to February 17, 2023 and has substantially the same terms and
conditions as the prior credit agreement with certain changes to the reference
benchmark interest rates, applicable margins and borrowing mechanics under the
Credit Agreement, having the overall effect of lowering the interest rates
payable by the Company on amounts borrowed under the Credit Agreement, and a
reduction of the commitment fee payable on the average daily unused amount under
the Credit Agreement to 0.25% per annum. As of September 30, 2022, the

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Company was in compliance with the requirements in the amended Credit Agreement.
As of September 30, 2022, there were no borrowings outstanding under the Credit
Agreement.

•We will continue to prioritize investments in our production capacity and
flexibility, commercial channels, preparation for new product launches, and new
product developments to help patients.

While we began to see positive trends in certain areas of our business in May
2020, we remain mindful of the negative impacts on business trends we
experienced in April 2020 due to the COVID-19 pandemic. The general impact of
COVID-19 on our business has been negative and we are unable to reliably predict
the full impact that the COVID-19 pandemic will have on our business due to
numerous uncertainties, including the severity and duration of the pandemic, the
global resurgences of cases, particularly as new variants of the virus spread,
additional actions that may be taken by governmental authorities in response to
the pandemic, the impact of the pandemic on the business of our customers,
distributors and suppliers, other businesses and worldwide economies in general,
our ability to have access to our customers to provide training and case
support, and other factors identified in Part I, Item 1A "Risk Factors" in our
Annual Report on Form 10-K for the year ended December 31, 2021. We will
continue to evaluate the nature and extent of the impact of COVID-19 on our
business, consolidated results of operations, and financial condition.

Factors Affecting Our Performance

There are a number of factors that have impacted, and we believe will continue to impact, our results of operations and growth. These factors include:



•The COVID-19 pandemic and measures taken in response thereto, which have
negatively affected, and we expect will continue to negatively affect, our
revenues and results of operations. Due to these impacts and measures, we may
experience significant and unpredictable fluctuations in demand for certain of
our products as hospital customers re-prioritize the treatment of patients and
distributors adjust their operations to support the current demand level.

•The rate at which we grow our salesforce and the speed at which newly hired
salespeople become fully effective can impact our revenue growth or our costs
incurred in anticipation of such growth.

•Our industry is intensely competitive and, in particular, we compete with a
number of large, well-capitalized companies. We must continue to successfully
compete in light of our competitors' existing and future products and their
resources to successfully market to the specialist physicians and other
healthcare providers who use our products.

•We must continue to successfully introduce new products that gain acceptance
with specialist physicians and other healthcare providers and successfully
transition from existing products to new products, ensuring adequate supply. In
addition, as we introduce new products and expand our production capacity, we
anticipate additional personnel will be hired and trained to build our inventory
of components and finished goods in advance of sales, which may cause quarterly
fluctuations in our operating results and financial condition.

•Publications of clinical results by us, our competitors and other third parties
can have a significant influence on whether, and the degree to which, our
products are used by specialist physicians and other healthcare providers and
the procedures and treatments those physicians and other healthcare providers
choose to administer for a given condition.

•The specialist physicians who use our interventional products may not perform
procedures during certain times of the year, such as those periods when they are
at major medical conferences or are away from their practices for other reasons,
the timing of which occurs irregularly during the year and from year to year.

•Most of our sales outside of the United States are denominated in the local
currency of the country in which we sell our products. As a result, our revenue
from international sales can be significantly impacted by fluctuations in
foreign currency exchange rates.

•The availability and levels of reimbursement within the relevant healthcare
payment system for healthcare providers for procedures in which our products are
used.

In addition, we have experienced and expect to continue to experience meaningful
variability in our quarterly revenue, gross profit and gross margin percentage
as a result of a number of factors, including, but not limited to: the impact of
COVID-19, the number of available selling days, which can be impacted by
holidays; the mix of products sold; the geographic mix of where products are
sold; the demand for our products and the products of our competitors, which can
be impacted by

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hospitals' ability to maintain sufficient staffing to treat patients; the timing
of or failure to obtain regulatory approvals or clearances for products;
increased competition; the timing of customer orders; inventory write-offs due
to obsolescence; costs, benefits and timing of new product introductions; costs,
benefits and timing of the acquisition and integration of businesses and product
lines we may acquire; the availability and cost of components and raw materials;
and fluctuations in foreign currency exchange rates. Additionally, certain
unique macroeconomic and geopolitical factors, including those as a result of
the Russian invasion of Ukraine, may cause instability and volatility in the
global financial markets and disruptions within the healthcare industry that may
negatively impact our business. We may experience quarters in which we have
significant revenue growth sequentially followed by quarters of moderate or no
revenue growth. Additionally, we may experience quarters in which operating
expenses, in particular research and development expenses, fluctuate depending
on the stage and timing of product development.

Components of Results of Operations



Revenue. We sell our interventional products directly to hospitals and other
healthcare providers and through distributors for use in procedures performed by
specialist physicians to treat patients in two key markets: neuro and vascular
disease. We sell our products through purchase orders, and we do not have long
term purchase commitments from our customers. Revenue from product sales is
recognized either on the date of shipment or the date of receipt by the
customer, but is deferred for certain transactions when control has not yet
transferred. With respect to products that we consign to hospitals, which
primarily consist of coils, we recognize revenue at the time hospitals utilize
products in a procedure. Revenue also includes shipping and handling costs that
we charge to customers.

Cost of Revenue. Cost of revenue consists primarily of the cost of raw materials
and components, personnel costs, including stock-based compensation, inbound
freight charges, receiving costs, inspection and testing costs, warehousing
costs, royalty expense, shipping and handling costs, and other labor and
overhead costs incurred in the manufacturing of products. In addition, we record
write-downs or write-offs of inventory in the event that a portion of our
inventory becomes excess or obsolete.

We manufacture substantially all of our products in our manufacturing facilities in Alameda and Roseville, California.

Operating Expenses



Research and Development ("R&D"). R&D expenses primarily consist of product
development, clinical and regulatory expenses, materials, depreciation and other
costs associated with the development of our products. R&D expenses also include
salaries, benefits and other related costs, including stock-based compensation,
for personnel and consultants. We generally expense R&D costs as they are
incurred, with the exception of certain costs incurred for the development of
computer software for internal use related to our REAL Immersive System
offerings. We capitalize certain costs when it is determined that it is probable
that the project will be completed and the software will be used to perform the
function intended, and the preliminary project stage is completed. Capitalized
internal use software development costs are included in property and equipment,
net within the condensed consolidated balance sheets.

Sales, General and Administrative ("SG&A"). SG&A expenses primarily consist of
salaries, benefits and other related costs, including stock-based compensation,
for personnel and consultants engaged in sales, marketing, finance, legal,
compliance, administrative, facilities, information technology and human
resource activities. Our SG&A expenses also include marketing trials, medical
education, training, commissions, generally based on sales, to direct sales
representatives, amortization of acquired intangible assets and
acquisition-related costs.

(Benefit from) Provision For Income Taxes



We are taxed at the rates applicable within each jurisdiction in which we
operate. The composite income tax rate, tax provisions, deferred tax assets
("DTAs") and deferred tax liabilities will vary according to the jurisdiction in
which profits arise. Tax laws are complex and subject to different
interpretations by management and the respective governmental taxing
authorities, and require us to exercise judgment in determining our income tax
provision, our deferred tax assets and deferred tax liabilities and the
potential valuation allowance recorded against our net DTAs. Deferred tax assets
and liabilities are determined using the enacted tax rates in effect for the
years in which those tax assets are expected to be realized. A valuation
allowance is established when it is more likely than not that the future
realization of all or some of the DTAs will not be achieved.

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Results of Operations

The following table sets forth the components of our condensed consolidated
statements of operations in dollars and as a percentage of revenue for the
periods presented:
                                                       Three Months Ended September 30,                                               Nine Months Ended September 30,
                                                   2022                                   2021                                    2022                                   2021
                                                    (in thousands, except for percentages)                                         (in thousands, except for percentages)
Revenue                             $       213,678            100.0  %       $ 190,117            100.0  %       $        625,917            100.0  %       $ 543,579            100.0  %
Cost of revenue                              78,351             36.7             70,205             36.9                   229,137             36.6            193,644             35.6
Gross profit                                135,327             63.3            119,912             63.1                   396,780             63.4            349,935             64.4
Operating expenses:
Research and development                     21,320             10.0             16,734              8.8                    61,443              9.8             52,548              9.7
Sales, general and administrative           108,573             50.8             94,397             49.7                   334,088             53.4            264,831             48.7

Total operating expenses                    129,893             60.8            111,131             58.5                   395,531             63.2            317,379             58.4
Income from operations                        5,434              2.5              8,781              4.6                     1,249              0.2             32,556              6.0
Interest (expense) income, net                  (43)             0.0                138              0.1                      (162)               -                917              0.2
Other expense, net                           (2,356)            (1.1)            (1,137)            (0.6)                   (4,323)            (0.7)            (3,021)            (0.6)
Income (loss) before income taxes             3,035              1.4              7,782              4.1                    (3,236)            (0.5)            30,452              5.6
Provision for (benefit from) income
taxes                                         5,306              2.5               (249)            (0.1)                    2,643              0.4              3,196              0.6

Consolidated net (loss) income      $        (2,271)            (1.1) %       $   8,031              4.2  %       $         (5,879)            (0.9) %       $  27,256              5.0  %
Net loss attributable to
non-controlling interest                          -                -               (819)            (0.4)                        -                -             (2,661)            (0.5)
Net (loss) income attributable to
Penumbra, Inc.                      $        (2,271)            (1.1) %       $   8,850              4.7  %       $         (5,879)            (0.9) %       $  29,917              5.5  %


Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021



Revenue
                   Three Months Ended September 30,                    Change
                         2022                      2021            $             %
                             (in thousands, except for percentages)
Vascular   $         123,361                    $ 105,465      $ 17,896        17.0  %
Neuro                 90,317                       84,652         5,665         6.7  %
Total      $         213,678                    $ 190,117      $ 23,561        12.4  %


Revenue increased $23.6 million, or 12.4%, to $213.7 million in the three months
ended September 30, 2022, from $190.1 million in the three months ended
September 30, 2021. Overall revenue growth is primarily due to an increase in
sales of new and existing products within our vascular and neuro businesses.

Revenue from our vascular products increased $17.9 million, or 17.0%, to $123.4
million in the three months ended September 30, 2022, from $105.5 million in the
three months ended September 30, 2021. This increase was primarily attributable
to increased revenue in China and the United States, sales of new products and
further market penetration of our existing products. The increase in product
sales was driven by sales of our vascular thrombectomy products and peripheral
embolization products, which globally increased by 19.8% and 12.4%, respectively
in the three months ended September 30, 2022. Prices for our vascular products
remained substantially unchanged during the period.

Revenue from our neuro products increased $5.7 million, or 6.7%, to $90.3
million in the three months ended September 30, 2022, from $84.7 million in the
three months ended September 30, 2021. This increase in revenue was primarily
attributable to China and sales of new products. The increase in sales of new
products was driven by an increase in sales of our neuro thrombectomy products
and neuro access products, which globally increased by 16.0% and 1.2%,
respectively, in the three months ended September 30, 2022, partially offset by
a decrease in sales of our neuro embolization products, which decreased by 21.0%
in the three months ended September 30, 2022. Prices for our neuro products
remained substantially unchanged during the period.

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Revenue by Geographic Area

The following table presents revenue by geographic area, based on our customers'
shipping destinations, for the three months ended September 30, 2022 and 2021:

                                      Three Months Ended September 30,                               Change
                                      2022                                 2021                  $             %
                                                (in thousands, except for percentages)
United States      $       148,819                    69.6  %    $ 134,834        70.9  %    $ 13,985        10.4  %

International               64,859                    30.4  %       55,283        29.1  %       9,576        17.3  %
Total              $       213,678                   100.0  %    $ 190,117       100.0  %    $ 23,561        12.4  %


Revenue from product sales in international markets increased $9.6 million, or
17.3%, to $64.9 million in the three months ended September 30, 2022, from $55.3
million in the three months ended September 30, 2021. Revenue from international
sales represented 30.4% and 29.1% of our total revenue for the three months
ended September 30, 2022 and 2021, respectively.

Gross Margin
                         Three Months Ended September 30,                    Change
                         2022                            2021            $             %
                                    (in thousands, except for percentages)
Cost of revenue   $        78,351                    $  70,205       $  8,146        11.6  %
Gross profit      $       135,327                    $ 119,912       $ 15,415        12.9  %
Gross margin %               63.3   %                     63.1  %


Gross margin remained relatively flat, increasing by 0.2 percentage points to
63.3% in the three months ended September 30, 2022, from 63.1% in the three
months ended September 30, 2021. Gross margin is impacted by our ability to
scale production capacity to support our expanding portfolio of products, which
enabled us to navigate through some macroeconomic factors such as labor
shortage, inflation and supply chain headwinds in the three months ended
September 30, 2022, as well as our continued investments in COVID-19 related
safety measures. We may see continued productivity improvements to offset higher
inflation and supply chain pressures resulting in expansion of our gross margin
in the future.

Research and Development ("R&D")


                                                 Three Months Ended September 30,                       Change
                                                     2022                   2021                $                   %
                                                                  (in thousands, except for percentages)
R&D                                           $        21,320           $  16,734          $   4,586                 27.4  %
R&D as a percentage of revenue                           10.0   %           

8.8 %




R&D expenses increased by $4.6 million, or 27.4%, to $21.3 million in the three
months ended September 30, 2022, from $16.7 million in the three months ended
September 30, 2021. The increase was primarily due to a $3.5 million increase in
personnel-related expenses driven by an increase in headcount and a $0.4 million
increase in infrastructure costs to support our growth.

We have continued to make investments, and plan to continue to make investments,
in the development of our products. As part of our ongoing investment in the
development of our products, we are anticipating future payments related to
research and development milestones. As a result of being more disciplined with
spending, we anticipate a reduction in our ongoing quarterly immersive
healthcare related R&D expenses of approximately $1.5 million beginning in the
fourth quarter of 2022. In addition, we have experienced in the past, and may
continue to experience in the future, variability in expenses incurred due to
the timing and costs of clinical trials and product development, which may
include additional personnel-related expenses in conjunction with the launch of
new products.

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Sales, General and Administrative ("SG&A")


                                              Three Months Ended September 30,                     Change
                                                   2022                2021                $                   %
                                                               (in thousands, except for percentages)
SG&A                                          $  108,573           $  94,397          $  14,176                 15.0  %
SG&A as a percentage of revenue                     50.8   %            

49.7 %




SG&A expenses increased by $14.2 million, or 15.0%, to $108.6 million in the
three months ended September 30, 2022, from $94.4 million in the three months
ended September 30, 2021. The increase was primarily due to a $7.6 million
increase in personnel-related expenses driven by an increase in headcount and
related expenses to support our growth, a $2.7 million increase in
infrastructure costs, and a $2.3 million amortization expense of finite lived
intangible assets acquired in connection with the Sixense acquisition.

As we continue to invest in our growth, we have expanded and may continue to
expand our sales, marketing, and general and administrative teams through the
hiring of additional employees in critical roles that support our strategic
initiatives. As a result of being more disciplined with spending, we anticipate
a reduction in our ongoing quarterly immersive healthcare related SG&A expenses
of approximately $1.0 million beginning in the fourth quarter of 2022. In
addition, we have experienced in the past, and may continue to experience in the
future, variability in expenses incurred due to the timing and costs of
investments in infrastructure to support the business.

Provision for (benefit from) income taxes


                                                 Three Months Ended September 30,                         Change
                                                     2022                    2021                $                    %
                                                                   (in thousands, except for percentages)
Provision for (benefit from) income taxes    $          5,306            $    (249)         $   5,555               (2,230.9) %
Effective tax rate                                      174.8    %            (3.2) %


Generally during interim periods, including the three months ended September 30,
2021, we utilize the estimated annual effective tax rate ("AETR") method to
calculate our provision for (benefit from) income taxes, which involves the use
of forecasted information. However, for the three months ended September 30,
2022, we used the discrete effective tax rate method, which involved the use of
year-to-date information, as it provided a more reliable estimate of income
taxes for the current period than the estimated AETR method. Our provision for
income taxes was $5.3 million for the three months ended September 30, 2022,
which was primarily due to tax expenses attributable to our worldwide profits
during the period, combined with tax deficiencies (shortfalls) expenses from
stock-based compensation attributable to our U.S. jurisdiction as a result of
stock price fluctuation. Our benefit from income taxes was $0.2 million for the
three months ended September 30, 2021, which was primarily due to tax expenses
attributable to our worldwide profits during the period, offset by excess tax
benefit from stock-based compensation attributable to our U.S. jurisdiction. The
effective tax rate was 174.8% for the three months ended September 30, 2022,
compared to (3.2)% for the three months ended September 30, 2021. Our change in
effective tax rate was primarily attributable to large tax expenses over
relatively smaller worldwide profits for the three months ended September 30,
2022, when compared to small tax benefits over relatively larger worldwide
profits for the three months ended September 30, 2021.

Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September
30, 2021

Revenue
                  Nine Months Ended September 30,                    Change
                        2022                     2021            $             %
                            (in thousands, except for percentages)
Vascular   $        369,712                   $ 295,314      $ 74,398        25.2  %
Neuro               256,205                     248,265         7,940         3.2  %
Total      $        625,917                   $ 543,579      $ 82,338        15.1  %


Revenue increased $82.3 million, or 15.1%, to $625.9 million in the nine months
ended September 30, 2022, from $543.6 million in the nine months ended September
30, 2021. Overall revenue growth is primarily due to an increase in sales of new
and existing products within our vascular and neuro businesses.

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Revenue from our vascular products increased $74.4 million, or 25.2%, to $369.7
million in the nine months ended September 30, 2022, from $295.3 million in the
nine months ended September 30, 2021.This increase in revenue from our vascular
products was primarily attributable to increased revenue in China and the United
States and was driven by sales of our vascular thrombectomy products and
peripheral embolization products, which globally increased by 30.4% and 17.1%,
respectively, in the nine months ended September 30, 2022. These increases were
primarily due to higher sales volume as a result of sales of new products and
further market penetration of our existing products. Prices for our vascular
products remained substantially unchanged during the period.

Revenue from our neuro products increased $7.9 million, or 3.2%, to $256.2
million in the nine months ended September 30, 2022, from $248.3 million in the
nine months ended September 30, 2021. This increase in revenue from our neuro
products was primarily attributable to increased revenue in the United States,
sales of new products, and further market penetration of our existing products.
This increase was driven by an increase in sales of our neuro thrombectomy
products and neuro access products, which globally increased by 5.9% and 5.3%,
respectively, in the nine months ended September 30, 2022, partially offset by a
decrease in sales of our neuro embolization products of 17.0% in the nine months
ended September 30, 2022. Prices for our neuro products remained substantially
unchanged during the period.

Revenue by Geographic Area

The following table presents revenue by geographic area, based on our customer's
shipping destination, for the nine months ended September 30, 2022 and 2021:
                                      Nine Months Ended September 30,                               Change
                                     2022                                 2021                  $             %
                                                (in thousands, except for percentages)
United States      $       434,583                   69.4  %    $ 383,306        70.5  %    $ 51,277        13.4  %

International              191,334                   30.6  %      160,273        29.5  %      31,061        19.4  %
Total              $       625,917                  100.0  %    $ 543,579       100.0  %    $ 82,338        15.1  %


Revenue from sales in international markets increased $31.1 million, or 19.4%,
to $191.3 million in the nine months ended September 30, 2022, from $160.3
million in the nine months ended September 30, 2021. Revenue from international
sales represented 30.6% and 29.5% of our total revenue for the nine months ended
September 30, 2022 and 2021, respectively.

Gross Margin
                         Nine Months Ended September 30,                    Change
                         2022                           2021            $             %
                                   (in thousands, except for percentages)
Cost of revenue   $       229,137                   $ 193,644       $ 35,493        18.3  %
Gross profit      $       396,780                   $ 349,935       $ 46,845        13.4  %
Gross margin %               63.4   %                    64.4  %


Gross margin decreased 1.0 percentage point to 63.4% in the nine months ended
September 30, 2022, from 64.4% in the nine months ended September 30, 2021,
primarily due to higher labor and logistics costs as a result of manufacturing
transfer activities and higher labor absenteeism due to the Omicron variant
during the three months ended March 31, 2022. Gross margin is impacted by our
ability to scale production capacity to support our expanding portfolio of
products as well as our continued investments in COVID-19 related safety
measures. We may see continued productivity improvements to offset higher
inflation and supply chain pressures resulting in expansion of our gross margin
in the future.

Research and Development ("R&D")


                                                 Nine Months Ended September 30,                        Change
                                                     2022                   2021                $                   %
                                                                  (in thousands, except for percentages)
R&D                                           $        61,443           $  52,548          $   8,895                 16.9  %
R&D as a percentage of revenue                            9.8   %           

9.7 %




R&D expenses increased by $8.9 million, or 16.9%, to $61.4 million in the nine
months ended September 30, 2022, from $52.5 million in the nine months ended
September 30, 2021. The increase was primarily due to a $11.4 million increase
in personnel-related expenses driven by an increase in headcount, and a $1.8
million increase in infrastructure costs to support our growth, partially offset
by a $5.7 million decrease in product development and testing costs.

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We have continued to make investments, and plan to continue to make investments,
in the development of our products. As part of our ongoing investment in the
development of our products, we are anticipating future payments related to
research and development milestones. As a result of being more disciplined with
spending, we anticipate a reduction in our ongoing quarterly immersive
healthcare related R&D expenses of approximately $1.5 million beginning in the
fourth quarter of 2022. In addition, we have experienced in the past, and may
continue to experience in the future, variability in expenses incurred due to
the timing and costs of clinical trials and product development, which may
include additional personnel-related expenses in conjunction with the launch of
new products.

Sales, General and Administrative (SG&A)


                                                 Nine Months Ended September 30,                        Change
                                                     2022                   2021                $                   %
                                                                  (in thousands, except for percentages)
SG&A                                          $       334,088           $ 264,831          $  69,257                 26.2  %
SG&A as a percentage of revenue                          53.4   %           

48.7 %




SG&A expenses increased by $69.3 million, or 26.2%, to $334.1 million in the
nine months ended September 30, 2022, from $264.8 million in the nine months
ended September 30, 2021. The increase was primarily due to a $30.9 million
increase in personnel-related expense driven by an increase in headcount and
related expenses to support our growth, a $10.4 million increase in
infrastructure costs, a $8.4 million increase in travel and other in-person
expenses, a $7.9 million increase in cost related to marketing events, a $5.8
million amortization expense of finite lived intangible assets acquired in
connection with the Sixense acquisition, and a $5.1 million increase in
information technology expenses and other professional services primarily
associated with our ERP system implementation.

As we continue to invest in our growth, we have expanded and may continue to
expand our sales, marketing, and general and administrative teams through the
hiring of additional employees in critical roles that support our strategic
initiatives. As a result of being more disciplined with spending, we anticipate
a reduction in our ongoing quarterly immersive healthcare related SG&A expenses
of approximately $1.0 million beginning in the fourth quarter of 2022. In
addition, we have experienced in the past, and may continue to experience in the
future, variability in expenses incurred due to the timing and costs of
investments in infrastructure to support the business.

Provision for income taxes
                                     Nine Months Ended September 30,                   Change
                                    2022                             2021          $            %
                                              (in thousands, except for percentages)
Provision for income taxes   $        2,643                       $ 3,196       $ (553)      (17.3) %
Effective tax rate                    (81.7)  %                      10.5  %


Generally during interim periods, including the nine months ended September 30,
2021, we utilize the AETR method to calculate our provision for (benefit from)
income taxes, which involves the use of forecasted information. However, for the
nine months ended September 30, 2022, we used the discrete effective tax rate
method, which involved the use of year-to-date information, as it provided a
more reliable estimate of income taxes for the current period than the estimated
AETR method. Our provision for income taxes was $2.6 million for the nine months
ended September 30, 2022, which was primarily due to tax expenses attributable
to our foreign profits during the periods, combined with tax deficiencies
(shortfalls) expenses from stock-based compensation attributable to our U.S.
jurisdiction as a result of stock price fluctuation. Our provision for income
taxes was $3.2 million for the nine months ended September 30, 2021, which was
primarily due to tax expenses attributable to our worldwide profits during the
period, offset by excess tax benefits from stock-based compensation attributable
to our U.S. jurisdiction. The effective tax rate was (81.7)% for the nine months
ended September 30, 2022, compared to 10.5% for the nine months ended September
30, 2021. Our change in effective tax rate was primarily attributable to tax
expenses over small worldwide losses for the nine months ended September 30,
2022, when compared to tax expenses over large worldwide profits for the nine
months ended September 30, 2021.

Prospectively, our effective tax rate will likely be driven by (1) permanent
differences in taxable income for tax and financial reporting purposes, (2) tax
expense or benefit attributable to our worldwide financial results, and (3)
discrete tax adjustments such as excess tax expenses or benefits related to
stock-based compensation. Our income tax provision can be volatile as the amount
of excess tax expenses or benefits can fluctuate from period to period due to
the price of our stock, the volume of share-based grants exercised or vested,
and the fair value assigned to equity awards under U.S. GAAP. In addition,
changes in tax law or our interpretation thereof, and changes to our valuation
allowance could result in fluctuations in our effective tax rate.

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Liquidity and Capital Resources

As of September 30, 2022, we had $585.3 million in working capital, which included $54.8 million in cash and cash equivalents and $129.6 million in marketable investments. As of September 30, 2022, we held approximately 23.3% of our cash and cash equivalents in foreign entities.



In addition to our existing cash and cash equivalents and marketable investment
balances, our principal source of liquidity is our accounts receivable. In order
to further strengthen our liquidity position and financial flexibility during
the COVID-19 pandemic, on April 24, 2020 we entered into a Credit Agreement (the
"Credit Agreement") with JPMorgan Chase Bank, N.A., as administrative agent and
lender, and Bank of America, N.A. and Citibank, N.A. as lenders. The Credit
Agreement is secured and provides for up to $100 million in available revolving
borrowing capacity with an option, subject to certain conditions, for us to
increase the aggregate borrowing capacity to up to $150 million, and was set to
mature on April 23, 2021. During the three months ended March 31, 2021, we
entered into an amended one-year credit agreement with JPMorgan Chase Bank,
N.A., as administrative agent and lender, and Bank of America, N.A. and
Citibank, N.A. as lenders. The amended Credit Agreement extended the maturity
date from April 23, 2021 to February 21, 2022 and had substantially the same
terms and conditions as the prior credit agreement with certain changes
including the exclusion of certain one-time charges and expenses incurred during
the fiscal quarters ended September 30, 2020 and December 31, 2020 from the
calculation of the financial covenants, reductions in interest rate floors
applicable to revolving loans and other changes to borrowing mechanics under the
Credit Agreement. In the first quarter of 2022, the Company entered into a
further amended one-year credit agreement with JPMorgan Chase Bank, N.A., as
administrative agent and lender, and Bank of America, N.A. and Citibank, N.A. as
lenders. The amended Credit Agreement extended the maturity date from February
21, 2022 to February 17, 2023 and has substantially the same terms and
conditions as the prior credit agreement with certain changes to the reference
benchmark interest rates, applicable margins and borrowing mechanics under the
Credit Agreement, having the overall effect of lowering the interest rates
payable by the Company on amounts borrowed under the Credit Agreement, and a
reduction of the commitment fee payable on the average daily unused amount under
the Credit Agreement to 0.25% per annum. See Note "8. Indebtedness" to our
condensed consolidated financial statements in Part I, Item 1 of this Quarterly
Report on Form 10-Q for more information.

We believe our sources of liquidity will be sufficient to meet our liquidity
requirements for at least the next 12 months. Our principal liquidity
requirements are to fund our operations, expand manufacturing operations which
includes, but is not limited to, maintaining sufficient levels of inventory to
meet the anticipated demand of our customers, fund research and development
activities and fund our capital expenditures. We may also lease or purchase
additional facilities to facilitate our growth. We expect to continue to make
investments as we launch new products, expand our manufacturing operations and
information technology infrastructures and further expand into international
markets. We may, however, require or elect to secure additional financing as we
continue to execute our business strategy. If we require or elect to raise
additional funds, we may do so through equity or debt financing, which may not
be available on favorable terms, could result in dilution to our stockholders,
could result in changes to our capital structure, and could require us to agree
to covenants that limit our operating flexibility.

While we have strengthened our liquidity position, we cannot reliably estimate
the extent to which the COVID-19 pandemic and other macroeconomic factors may
impact our cash flow from operations in the fourth quarter and beyond.

The following table summarizes our cash and cash equivalents, marketable
investments and selected working capital data as of September 30, 2022 and
December 31, 2021:

                             September 30, 2022       December 31, 2021
                                           (in thousands)
Cash and cash equivalents   $            54,844      $           59,379
Marketable investments                  129,583                 195,496
Accounts receivable, net                189,006                 133,940
Accounts payable                         25,365                  13,421
Accrued liabilities                     101,672                  99,796
Working capital(1)                      585,293                 558,277



(1) Working capital consists of total current assets less total current liabilities.


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The following table sets forth, for the periods indicated, our beginning balance
of cash and cash equivalents, net cash flows provided by (used in) operating,
investing and financing activities and our ending balance of cash and cash
equivalents:

                                                                     Nine Months Ended September 30,
                                                                        2022                    2021
                                                                            

(in thousands) Cash and cash equivalents and restricted cash at beginning of period

                                                           $         59,379          $    69,670
Net cash (used in) provided by operating activities                       (56,998)              18,772
Net cash provided by (used in) investing activities                        46,157              (20,396)
Net cash provided by (used in) financing activities                         5,887               (2,125)
Cash and cash equivalents and restricted cash at end of period             54,844               66,290


Net Cash (Used In) Provided By Operating Activities

Net cash (used in) provided by operating activities consists primarily of consolidated net income adjusted for certain non-cash items (including depreciation and amortization, stock-based compensation expense, inventory write-downs, and changes in deferred tax balances), and the effect of changes in working capital and other activities.



Net cash used in operating activities was $57.0 million during the nine months
ended September 30, 2022 and consisted of consolidated net loss of $5.9 million
and non-cash items of $51.0 million, offset by net changes in operating assets
and liabilities of $102.1 million. The change in operating assets and
liabilities includes an increase in inventories of $62.3 million to support our
growth, an increase in accounts receivable of $57.4 million due to timing of
receipt of payment, and an increase in prepaid expenses and other current and
non-current assets of $2.0 million. This was partially offset by an increase in
accounts payable of $13.1 million, an increase in accrued expenses and other
non-current liabilities of $6.2 million, and proceeds of $0.3 million received
related to lease incentives from operating leases.

Net cash provided by operating activities was $18.8 million during the nine
months ended September 30, 2021 and consisted of consolidated net income of
$27.3 million and non-cash items of $39.6 million, offset by net changes in
operating assets and liabilities of $48.0 million. The change in operating
assets and liabilities includes an increase in inventories of $45.8 million to
support our growth, an increase in prepaid expenses and other current and
non-current assets of $7.1 million, an increase in accounts receivable of $7.0
million, and a decrease in accounts payable of $1.2 million. This was partially
offset by an increase in accrued expenses and other non-current liabilities of
$9.8 million and proceeds of $3.2 million received related to lease incentives
from operating leases.

Net Cash Provided By (Used In) Investing Activities

Net cash provided by (used in) investing activities relates primarily to proceeds from maturities of marketable investments, net of purchases, and capital expenditures.

Net cash provided by investing activities was $46.2 million during the nine months ended September 30, 2022 and primarily consisted of proceeds from maturities and sales of marketable investments of $61.9 million, partially offset by capital expenditures of $15.7 million.



Net cash used in investing activities was $20.4 million during the nine months
ended September 30, 2021 and primarily consisted of purchases of marketable
investments, net of proceeds from maturities and sales, of $7.2 million, and
capital expenditures of $13.1 million.

Net Cash Provided By (Used In) Financing Activities



Net cash provided by (used in) financing activities primarily relates to
payments of employee taxes related to vested restricted stock units, payments
towards the reduction of our finance lease obligations, and proceeds from
exercises of stock options and issuance of common stock under our employee stock
purchase plan.

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Net cash provided by financing activities was $5.9 million during the nine
months ended September 30, 2022 and primarily consisted of proceeds from the
issuance of common stock under our employee stock purchase plan of $8.0 million
and proceeds from exercises of stock options of $6.3 million. This was partially
offset by $7.0 million of payments of employee taxes related to vested
restricted stock units and $1.3 million in payments towards finance leases.

Net cash used in financing activities was $2.1 million during the nine months
ended September 30, 2021 and primarily consisted of $10.5 million of payments of
employee taxes related to vested restricted stock and restricted stock units and
$1.1 million in payments towards finance leases. This was partially offset by
proceeds from the issuance of common stock under our employee stock purchase
plan of $7.4 million and proceeds from exercises of stock options of $2.2
million.

Contractual Obligations and Commitments



During the nine months ended September 30, 2022, the Company entered into new
leases and modified existing leases for certain properties. See Note "9. Leases"
to our condensed consolidated financial statements in Part I, Item 1 of this
Quarterly Report on Form 10-Q for more information regarding our future lease
obligations.

There have been no other material changes to our contractual obligations and
commitments as of September 30, 2022 from those disclosed in our Annual Report
on Form 10-K for the year ended December 31, 2021.

Critical Accounting Policies and Estimates



We have prepared our financial statements in accordance with U.S. GAAP. Our
preparation of these financial statements requires us to make estimates,
assumptions, and judgments that affect the reported amounts of assets,
liabilities, expenses, and related disclosures at the date of the financial
statements, as well as revenue and expenses recorded during the reporting
periods. We evaluate our estimates and judgments on an ongoing basis. We base
our estimates on historical experience and on various other factors that we
believe are reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources. Actual results could therefore
differ materially from these estimates under different assumptions or
conditions.

There have been no material changes to our critical accounting policies from
those described in "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included in our Annual Report on Form 10-K for the
year ended December 31, 2021.

Recently Issued Accounting Standards



For information with respect to recently issued accounting standards and the
impact of these standards on our condensed consolidated financial statements,
see Note "2. Summary of Significant Accounting Policies" to our condensed
consolidated financial statements in Part I, Item 1 of this Quarterly Report on
Form 10-Q.

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