Good afternoon. My name is Aaron, and I will be your conference operator for today. At this time, I would like to welcome everybody to Penumbra's Second Quarter 2024 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. With that, I would like to introduce Ms. Cecilia Furlong, Business Development and Investor Relations for Penumbra. Ms. Furlong, you may now begin your conference.

Thank you, operator, and thank you all for joining us on today's call to discuss Penumbra's earnings release for the second quarter of 2024. A copy of the press release and financial tables, which includes the GAAP to non-GAAP reconciliation, can be viewed under the Investors tab on our company website at www.penumbrainc.com. During the course of this conference call, the company will make forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding our financial performance, commercialization, clinical trials, regulatory status, quality compliance and business trends. Actual results could differ materially from those stated or implied by our forward-looking statements due to certain risks and uncertainties, including those referenced in our 10-K for the year ended December 31, 2023, 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, financial results for revenue are presented on a GAAP basis, while gross margin, operating expenses, operating income and adjusted EBITDA 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. Non-GAAP gross margin, operating expenses and operating income exclude amortization of acquired intangible assets in the second quarter of 2024 and 2023, and an impairment of our Immersive Healthcare business in the second quarter of 2024. Adjusted EBITDA excludes impairment expenses, stock compensation expense, depreciation and amortization, benefit from income taxes and interest income expenses. Adam Elsesser, Penumbra's Chairman and CEO will provide a business update. Maggie Yuen, our Chief Financial Officer, will then discuss our financial results for the second quarter of 2024, and Jason Mills, our Executive Vice President of Strategy, will discuss our updated 2024 guidance. With that, I would like to turn the call over to Adam Elsesser.

Thank you, Cecilia. Good afternoon. Thank you for joining Penumbra's second quarter 2024 conference call. Our total revenue for the second quarter was $299.4 million, a year-over-year increase of 14.5% as reported, and 14.7% on a constant currency basis. Our U.S. thrombectomy revenue grew 25%, compared to the same quarter a year ago, to $153.7 million, and 29.8% year-over-year in the first-half of 2024 driven by our CAVT products in VTE and arterial. Our international thrombectomy revenue was $49.8 million, growing 26% year-over-year. On a worldwide basis, total thrombectomy revenue was $203.5 million, growing 25% year-over-year. Our global embolization and access revenue declined slightly year-over-year to $95.9 million, but improved sequentially by 5% driven by our U.S. business which grew 9% sequentially and 1% year-over-year to $64.5 million. This strong sequential growth in the U.S. was due to our sales team responding to the first quarter competitive launches. Non-GAAP gross margins expanded to 65.5%, up 170 basis points year-over-year. Non-GAAP operating income in the second quarter was $31.7 million, representing 10.6% of revenue, increasing 280 basis points over the same period a year ago, and 370 basis points improvement sequentially. We continue to see a path to gross margins over 70% over the next 21 to 27 months, and we expect operating margin expansion to outpace gross margin expansion for the foreseeable future. Clinically significant clot burden in the arteries and veins of the body and the brain is still one of the most under-treated acute issues in healthcare today. For 20 years, Penumbra has innovated, and innovated our thrombectomy products to make them effective in removing clot in the safest, fastest, and simplest way possible. With the launch of CAVT last year, we can now say that our products are the safest and most effective in removing blood clots…

Thank you, Adam. Good afternoon, everyone. Today, I will discuss the financial results for the second quarter of 2024. Financial results on this call for revenue are on a GAAP basis, while gross margin, operating expenses, and operating income are on a non-GAAP basis. GAAP measures and our reconciliation of GAAP to non-GAAP financial measures are provided in our posted press release. For the second quarter and the June 30, 2024, our total revenues were $299.4 million, an increase of 14.5% reported and 14.7% in constant currency compared to the second quarter of 2023. Our geographic mix of sales for the second quarter of 2024 was 72.9% U.S. and 27.1% international. Our U.S. region reported growth of 16.8%, driven by 24.9% growth in our thrombectomy franchise. Our international regions increased 8.7% reported and 9.4% in constant currency, primarily driven by growth in overall thrombectomy revenue, partially offset by decline in embolization and access franchise in several regions. The sequential growth in our total revenues of 7.4% was primarily driven by an increase in our global thrombectomy revenue of $15.8 million or 8.4%. Moving to revenue byproducts, revenue from global thrombectomy business grew to $203.5 million in the second quarter of 2024, an increase of 25.2% reported and 25.4% in constant currency compared to the same period last year. Our U.S. growth of 24.9%m driven by volume growth in newer accounts since last year, and our international growth of 26.2% compared to the same period last year reflect continuous strong momentum in CAVT products. Revenue from embolization and access business was $95.9 million in the second quarter of 2024, a decline of 3.1% reported and 3% in constant currency, primarily driven by an overall decline in international regions as we indicated at the beginning of the year. Non-GAAP gross margin, operating…

Thank you, Maggie. Our updated guidance range for 2024 includes total revenue of $1,180 million to $1,200 million, which is a reduction of $60 million at the midpoint from our previous guidance range. The $60 million change in guidance comes from four distinct components impacting our revenue in the second-half of the year; $20 million reduction to our business in China due to much more challenging economic backdrop for medical devices in the near term. $15 million from our European business primarily as a result of a slight delay to our expected launch timing of Flash and Bolt 7 CAVT products in Europe; $5 million in revenue from our Immersive Healthcare business due to our strategic move. And approximately $20 million change to our guidance for U.S. thrombectomy growth for full-year 2024, which is now expected to be 23% to 25% year-over-year compared to 2023. This change aligns with our new guidance philosophy. We continue to expect non-GAAP gross margin expansion in the range of 100 to 150 basis points in 2024 compared to full-year 2023. We also continue to expect non-GAAP operating margin expansion of 100 to 200 basis points in 2024 with the timing of the reduction of Immersive Healthcare expenses being a primary driver of where we will land relative to this range. I will wrap up our prepared remarks there to allow ample time for Q&A. We look forward to your questions. Operator, we can now open the call to questions.

Thank you. [Operator Instructions] Our first question comes from the line of Michael Sarcone with Jefferies. Your line is live.

Good afternoon, and thanks for taking the question. Just to start, do you think maybe you could delve a little bit more into the new guidance philosophy that you mentioned, Jason or Adam, you also mentioned you're taking a more conservative [tack] (ph), but would love if you could flesh that out a little bit more for us, and really just curious about the moving pieces that got you from U.S. thrombectomy plus 27 to 30 to down 23 to 25? Thank you.

Yes, thank you, Michael, for the question. It's Adam. Look, we've, over the course of the almost 10 years, not quite, that we've been a public company, we've obviously evolved a great deal from the kind of -- what we sold, we started out focusing just on stroke, and expanded pretty dramatically almost the size of the company over that time. And, by definition, it's time obviously for our guidance philosophy to expand and grow with that. When we were a much smaller company, guiding was a lot easier, there was very few moving parts. And we did a pretty credible job of guiding based on what we knew we could achieve. I think we're at a point now where there are a lot of variables. We've obviously heard the market talk about that and how we guide, and we wanted to build a little bit more comfort into the way we guide. That being said, I'm not saying guides are now like lay-ups, but we still have a lot of work to do every quarter to continue to grow the business at the rate we think we can grow. But I think it's an important acknowledgment and moment in our time to make sure that that's not the topic that we're talking about all the time. I think we've lost something in the story of the company when we're spending most of our time talking about our guide and not the extraordinary strength of the innovation that has brought us here with products that have totally transformed the way thrombectomy works. That's the story of the company. That's the success that we have. That's our future. And it's time we don't spend a lot of time talking about the guiding philosophy of our company, more the innovation and the extraordinary road ahead we have through this year, into 2025, and beyond.

Understood. Thanks, Adam. And just as my follow-up I figured out I'd try for it. You talked about some of the tougher comps that you're facing this year. When we look to 2025, particularly on U.S. thrombectomy, do you think you could talk about, either quantitatively what we might be versus '24 for U.S. thrombectomy growth, or if not, qualitatively, what are the key moving pieces for that trajectory? And thank you.

Yes. Well, first of all, I absolutely appreciate the question, and I don't think you would expect me to potentially make maybe the mistake I made in 2024 by answering that with a quantitative answer. So, I will respectfully decline. But I will tell you what we did -- what we have looking forward to. And I alluded to this a little bit in the prepared remarks. There are things about 2025 that are a little different. First of all, we don't have some of the same transient headwinds that we talked about on the last quarter's call and we reiterated on this related to the embo and access business and existing some of those markets that will be -- well, the anniversary, that that will be behind us. There are some issues with China that we've talked about in the past on the last call, we highlighted again with a particular number this time. That will sort of be behind us. And then, we will have the benefit of new product launches that we've talked about in terms of new products in the U.S., but also in Europe with Flash 2.0 and Lightning Bolt coming. So, there's a lot to look forward to in the back-half of this year, but there's also, I think, a lot to look forward to in 2025. And again, I'm not going to quantify that, but I hope you can hear that I think, with 2024 and some of the things we're working through this year, to get past 2025 is going to be another really fun year for us.

Got it. Figured I'd try. Thanks, Adam.

Thank you, I appreciate that.

Thank you for your question. Our next question comes from the line of Matthew O'Brien with Piper Sandler. Your line is live.

Hey, this is [Phil] (ph) on for Matt. Thanks for taking our questions. And I guess for starters, on U.S. thrombectomy, how should we think about, call it, the 20% growth for the second-half of the year in the context of the rest of market understanding you're lapping some difficult comps, but is this more on just your general shift to the conservative guidance philosophy? And I guess more acutely, any further commentary on some incremental competitive pressures?

Yes, I think what we were talking about on our guidance was pretty clear. If you look at what we just did this quarter, we're trying to leap right out of that. I mean let's start and sort of go through it. Our stroke business, which is now pretty mature, still grew 19% year-over-year. So, I hope people understand that that is a position of strength that is not what other companies that we compete against, as you'll remember there's something like 30-some-odd catheters in the market we compete against. To do that is pretty significant. And the feeling, and the mood, and the morale at the SNIS meeting just last week was -- I've been going to that meeting I think 21 years, and I've never seen it around our technology and our success. It was a lot of fun to be at SNIS this year. So, that's on the stroke side. On VTE, what I said is we grew in the higher end of our pre-stated range, so that's in the very high 20% range. Obviously that meant we took share and the market grew significantly. That's a great setup for the back-half of the year when we have four quarters with Flash 2.0, and we really move into this next phase. And again the feedback I laid out, not only on the speed of the cases which is really the first thing people recognize, and then some of the issues around safety and performance that I highlighted in prepared remarks. And then, we also have arterial, which grew way above that range, and that's a year into the launch. So, that's coming up against the launch quarter comparing to, and we still did really, really well. So, I think we're really set up, again, for an extraordinary rest of this year, but into a really great 2025. And we might just have gotten ahead of ourselves a little bit. It's pretty hard not to when you get the kind of feedback we get every day from customers. And that's on me personally. Obviously I take that responsibility. But it really doesn't have an impact in the underlying success in innovation and performance of our company right now.

That's helpful, thank you. And then, just a quick follow-up, on the solid U.S. thrombectomy growth in Q2, as we start to lap some of the ASP mix benefits, can you help parse out the underlying volumes and how those trended in the quarter, and your expectations for the rest of the year?

Yes, in those -- in our thrombectomy business, the underlying volumes are all up in correlation to the numbers that I was talking about. As you know, we've anniversaried a lot of the price aspect. So, at this point it's -- the vast majority is solely volume and unit-based, and that will continue, obviously, going forward.

Yes, this is Jason, just adding to that, we get asked a lot about that with respect to our VTE business. And indeed the entirety of the growth of this quarter year-over-year was increasing cases or our unit volume.

Great to hear it. Thanks so much.

Thank you.

Thanks for your question. Our next question comes from the line of Larry Biegelsen with Wells Fargo. Your line is live.

Hi, it's [Leigh] (ph) calling in for Larry. Thanks for taking the question. Your Q2 OUS thrombectomy numbers came in stronger than we expected, up 25% plus year-over-year. Can you just talk about what drove was there anything one-time? And related to that, if you can comment at outlook for OUS thrombectomy, I think you were looking for mid- to high-single-digit growth for the year. What does that mean now given the delay in Lightning Bolt Lightning Flash, but Speech was strong? And if you can just comment generally about U.S. and OUS, embo, and access for the rest of the year, if your growth outlook has changed for any of those segments?

All right. So, great question, the way I interpret it is we're going to talk about our thrombectomy business worldwide and our embo and access business worldwide. So, let me try to make the best of that. Our OUS thrombectomy business was inside the general range, give or take a little. There's nothing unique to call out about what happened this quarter. And again, going forward, we called out both China and then, Europe. Europe is very clear, just so you know, as we go forward, which is a slight delay in regulatory clearance of both Lightning Flash 2.0 and Lightning Bolt 7. Nothing about that has given us any indication at all that there's any issue with the approvals that that they're not in jeopardy, and we fully expect them to launch later this year, just not with the same timeframe to generate that full amount of expected revenue. So, that will, again, come to help. That revenue is not lost. Obviously, it'll just come to help more in 2025 and beyond. And in China, that business as you know, we have three revenue streams there. We have licensing. We have royalties and distribution, and we're moving as we move from the licensing from our older generation products that are sort of labeled for local use, we're moving, we have gotten approval for sort of more of our current flagship products that come with a higher price and given the economy and everything else that that is not going to be as viable revenue stream in the short term. But everything we've talked to, we have an incredible partner in China. They think that likely will come back, sometime next year and again will continue to be a valuable part of our business. Just as a level-setting, China's sort of 2% or so of our business. It's not a substantial amount of to put us at risk. As it relates to embo and access, it's really related to our getting out of certain countries with both those product categories, and moving through that this year. And again, without that as the comparable, we'll be in really good shape for growth in that those markets. And again, just to finally call out the one thing, last quarter, there was discussion and obviously our embo and access business came slightly under the expected numbers. And this time, we responded to the competitive threats and launches. And I got to tell you, I'm extremely proud of our team. It helps to have the best product in the market. It certainly helps to remind physicians to that they always want to use the best product. And I think that business is in really good shape moving forward.

Yes, and Leigh, just to add a little bit to what Adam said. Again, echoing his comments about the comps in 2025, being much better. He mentioned that, in China, the economic conditions affect mostly our distribution and royalty streams of our business. And that is, that $20 million that I called out in my prepared remarks, and that's about $10 million per quarter. And if you couple that with the delay, in the European CAVT launch, that will result in relative to the second quarter, our OUS thrombectomy coming down sequentially about $10 million from the second and then you know sort of flat into the fourth again will benefit from all this as we turn into 2025 but that should give you a little bit more context.

That's super helpful. If I can just sneak in one more, Jason you mentioned the 100 to 200 basis points of operating margin improvement year-over-year and where land depends on Immersive Health, I guess I'm a little surprised it's the margin guidance doesn't change with the Immersive Health decision so 100 to 200 basis point in person was something you talked about earlier in the year, I assume the move in Immersive Health was not in those numbers to begin with?

Yes, Leigh, this is Maggie. Thanks for the question. There's actually quite a few factors that affect our range of operating margin especially with our updated revenue guidance that will have approximately $30 million of reduced growth profit that the impact will pull through to the bottom line in the operating profit but at the same time I mean given our first-half of the year we are more than 200 basis point operating margin expansion, so we are already in a good start and then so it depends on the timing of the Immersive Healthcare savings in the second-half of the year, this will give us a good range between 100 and 200 basis point expansion.

That's helpful. Thank you so much.

Thank you, Leigh.

Our next question comes from the line of Pito Chickering with Deutsche Bank. Your line is live.

Hey, good afternoon. Back short of the guidance question for U.S. clinical thrombectomy. The 24% growth rate still implies a pretty steep sequential growth for you U.S. thrombectomy and the inverse of what we saw in 2Q. What gives you guys confidence you can get to that sequential growth sort of embedded within the guidance?

So, Pito, the 23% to 25% for U.S. thrombectomy is an annual number. And so, what that implies for the third and fourth quarter year-over-year growth respectively, is about the same, about 20% growth on a year-over-year basis.

Right. So, I guess, let me ask about sequentially, U.S., it grew $3 million sequentially in 2Q, this 19% growth at the midpoint applies $6 million growth in the third quarter, and then $9 million in the fourth quarter is a pretty steep sequential ramp. So, I guess what gives you guys the confidence that you can get to that growth rate?

Yes, this is Adam. I mean, on the prepared remarks we laid out how are the first of our new products are doing Flash 2.0 and what we're seeing with that so now we are not just guessing, we have a half plus of a quarter, six weeks plus to really understand how that's going, we did not put a lot of revenue on the other new products for obvious reasons because we don't totally control the regulatory process but obviously that's not impossible, one of them is under submission and it's not possible it can add to it. When you add that up and add the level of discussion around the speed of Flash, the success with Lightning Bolt on the arterial side, some of the safety issues I brought up, I think the momentum is clearly on our side, I think you can see that obviously today in a broader review of the field and the market, we're in the driver seat on this now. And I think that's crystal clear and I think that the new numbers obviously are we wouldn't have put them out and not thought they were very doable.

Okay, great. And then, it's a question on '25, and I understand that we're not going to add in here, but your third, fourth quarter growth rates are applying 10%, you talked about the transient issues, the China comping out and new launches, is it fair to still think about an acceleration from the 10% exit rate into 2025?

So, again, I'm going to stick with my more qualitative language and not actually use the terms that you just said or quantify them for obvious reasons and I please hope you will respect that and indulge me. But yes, you obviously understood the point of of what 2025 looks like through my qualitative discussion.

Great, thanks so much.

Thank you.

Our next question comes from Robbie Marcus with J.P. Morgan. Your line is live.

Hi, this is [Alan] (ph) on for Robbie. I had one question and then a quick follow-up. I hate to belabor it, but kind of just looking at the back half guide, right, the kind of paraphrase your new guidance, because it sounds like you're talking to a range that you feel like should be conservative and should be achievable. So, when we think about how you get to maybe the guidance range that you had previously, right, if we're talking about potentially outperforming that, what really gets you there? And are there any market dynamics you would call out that led you to take a bit of a more conservative route on the guide this quarter?

Yes, it's a really good question. There aren't anything new or unexpected in the market. And I think if you look at our if you just focus, for example, on VTE we did better than anyone else, we did really well this quarter. Obviously, arterial is a little bit different dynamic. We're not competing really with other companies and products, but sort of decades of tradition around treatment. And then, stroke continued to do well with a crowded field. Those are the positive dynamics that have played out now. And really we think will continue to play out throughout the quarter. What I said earlier is, given the success of where we are, given the strength of our innovation, given the continued innovation coming, it just seemed to not make sense that we would be spending all of our time talking about our guidance and our justification for our guidance. Let's just spend our time performing and putting up the kind of numbers that we just described. So, that's really the point more than anything. And I know more than anything that you guys appreciate that and respect it. So, now we get to work. And that's where we're in our best spot when we're out in the field doing the work, talking about the success of the products, the safety element of the products. And it's more important than ever right now that we have those conversations.

Got it. And then, just a quick follow-up is again, to kind of maybe get to some upside, how should we think about you talked about how you had some competitive dynamics that surfaced in the quarter in response to the new launch at least relative to our expectations, it looks like U.S. thrombectomy still good year-over-year growth, but definitely looks like it's slowed down a little bit sequentially. So, when we think about the potential for those competitive dynamics to continue into the back half, and even for your new product launches that you have benefiting in 2025, the potential for heightened competitive dynamics, how do you plan to work through those going forwards? Thank you.

Yes, look, I want to make sure when we talk about competitive dynamics we've always competed. And obviously, you guys have covered us since we went public. And we competed against some of the biggest, best companies in medtech and in stroke, and we emerged, obviously, in a pretty good spot. So, we're not -- this was not unexpected. I think the only thing that may be unexpected was the tactics given the circumstances. I would, I think we were a little surprised at some of those tactics. I'm not sure that it made sense. But that's okay, we're used to that. I think the other thing that changed that on the other side of the ledger is the level of interest, the level of conversations physicians are having, physicians are initiating, not us, we're not talking about this, around the safety elements, particularly around cardiac decompensation, particularly around putting in compromised blood. Those are conversations that are happening with physicians all over the place. And I think that's great because it's information that we knew about, but it wasn't really our place to talk about other people's products. And now physicians are doing it, not us. And I think that is great for the field in the long run, because obviously the field needs to grow, and it's only going to grow if you're using safe products. So, I think it puts us in the field in a really good spot going forward.

Thanks for your question. Thanks for your questions.

Thank you.

Our next question is from the line of Richard Newitter with Truist Securities. Your line is live.

Great. Thanks for taking the question. Maybe to start off, with respect to the U.S. thrombectomy business, I'm just looking at the components that we have modeled. Obviously, venous is growing faster in the U.S. thrombectomy than neuro, but neuro is really posting some nice performance in the first-half, 27% 1Q, 19% 2Q. That's above what we were thinking. I guess the question here is, should we be thinking about the components of the U.S. thrombectomy being a little more maybe driven relative to your thoughts heading into the year with the boost up for U.S. neuro thrombectomy? And that maybe to get to the earlier question of sequential growth, that buoys the sequential growth pattern a little bit into the back half, and that allows the venous maybe to come down a little bit, but you still are able to get to that healthy 23% to 25%?

Yes. To give you answers to that detailed modeling question is not something I can do right now. I can tell you qualitatively, again, sort of going through it, the momentum we have with Flash 2.0 and VTE is great. I don't expect that momentum to abate, so that's just a qualitative answer. The success of our arterial franchise with Lightning Bolt, obviously, you've seen the numbers now. It's done incredibly well. I don't have the exact number, but I think we've done over 20,000 cases with Lightning Bolt 7 technology, which, by the way, is very similar technology, almost identical to what we're using with Thunderbolt, so it bodes really well for when Thunderbolt comes, obviously, but to speak to specifically the success of Neuro, we have -- we're pretty proud of our products. We've done a really good job. I alluded to the feeling at SNIS. There was, again, a year or two where we had a ton of competitors, and everyone was coming, 30-some-odd catheters, all these large catheters, this and that, and I think that moment has now passed. People are coming back to the best products. They've tried stuff. They know what works best, and I think that sets us up, again, for some real success going forward, and then the setup for Thunderbolt is exactly what I had hoped for, which is the more and more people are using our catheter, the easier it is to launch Thunderbolt because Thunderbolt then is just an add-on. We don't have to convince them to switch catheters, so, again, I can't totally predict exactly the future, but I like our chances. The setup is really good for us.

And, Rich, just to add to that as well, and what's implicit in our updated guidance is a trend, because we don't guide by category of U.S. thrombectomy, but just to qualitatively help, is a similar pattern to what we've seen in the first-half of the year, where VTE and arterial are expected to grow above that range, stroke close to it, and coronary likely in the double digits, but low double digits.

Okay. Thank you for that, Jason. And then, just going back to the competitive dynamic questions that you talked to in venous, I'm trying to just understand what the underlying market rate is and kind of where you are relative to that rate, and did you just gain a little less share? I understand it's not always going to be linear, and do you feel good in the first few weeks of 3Q that you're back on a share gain trajectory that you were on, but what's the message that we should be taking around competition, underlying market growth, and kind of where you were and where you're going?

Well, listen, I mean, obviously, in Q1, the market grew well and was healthy, and we also took share. We are -- I'm at a touch of a disadvantage, because our VTE competitor is having their call at the exact same time, so I can't tell you all the details of their number at this point, but from the headline that I seemed to get right before we went on to this call, we, again, the market grew and we took share. And so, as long as those two things are happening, the first is critical that the market's growing, and the second is equally critical that we're taking share two quarters in a row. Now we're going to have a couple of full quarters of Lightning Flash 2.0. I think it really sets us up, again, for a really good continued improvement in share as well as market growth.

Thank you.

Thank you.

Our next question comes from the line of Bill Plavonic with Canaccord Genuity. Your line is live.

Hey, it's [Zachary] (ph) on for Bill. Thanks for taking the question. To dive a little more on the coronary performance, I know you just touched on it briefly there, but can you provide any incremental details on the growth? Do you think you'll need to conduct another trial to drive that?

Yes, that's a good question. So, and we haven't spent a lot of time talking about the coronary space. As you remember, we don't have CAVT in the coronary. And I think if you remember, the trial that we did run showed a case time of around one minute for the product sort of being in the body; hard to get faster than that. So, the product already works. Coronary clot's mostly different. There are some exceptions and there's a small category of cases where it's a little harder to get out and maybe having a CAVT product, but it's a small number comparatively. So, really you're looking at a dynamic where you're seeing steady sort of movement toward our product because obviously it works incredibly well, but it's just a different animal. And the question that you're asking is, would that work better? Would we get more share if we ran like a randomized trial that could affect guidelines? We've looked at that. We had talked about that a few years ago. I think you remember that. The decision around the cost trade-off of that product, again, doesn't use CAVT. It doesn't have its own reimbursement. It's sort of tucked into a procedural reimbursement. We made a decision that wasn't a logical thing to do, but we constantly look at that issue and if it changes or there are elements of that decision that change, we would potentially make a different decision. But right now, if you think about the benefit that we can have to patients, the benefit is in the vascular beds, VTE, PE, arterial, and stroke, where CAVT will be front and center, the reimbursements unique and separate, and I think that's where we can have the biggest impact. So, that's where our focus is going to be in the short term. That being said Cataracts, which is the product for coronary, is still an extraordinary product, and those who use it, it remains tied as one of the stickiest products with our new CAVT products of anything we've ever done.

Great. Thank you very much. And just as a follow-up, is there any update that you can provide on the THUNDER study?

Well, I sort of did. In my prepared remarks, Dr. Fiorella did a great job of summarizing the trial and the design and the technology, I'm showed some cases. So, I think we're, and we're very excited. I'm going to not give particularly commentary around timing. I obviously, particularly with the THUNDER study, have made that mistake in the past as well. So, I'm going to be disciplined, which is kind of an awesome thing to not give you an update. But, I think if you listen to my words particularly you would get a sense of my excitement about it.

Thank you very much.

Thanks for your question.

Thanks.

We have a final question from the line of Margaret Kaczor-Andrew from William Blair. Your line is live.

Hi, everyone. This is [McCoy] (ph) on for Margaret. Thanks for taking our question. So, one on margins, you obviously reiterated the growth and operating guide for this year. Wondering if you could kind of help bridge the gap toward the 70% longer-term gross margin, which kind of put it around that first-half 2026 time frame. Should we think of that as expedited now that the decision with the Immersive Healthcare exit, and what could we see within leverage, specifically within that OPEX line that you mentioned in the prepared remarks?

Thanks for the question. For gross margin, the decision on Immersive Healthcare will have minimal impact on our gross margin. But since the last few quarters, since we launched of CAVT, we have seen quite a gradual expansion on our gross margin due to product mix. So, we expect in the near term to continue to see that trend. But then I'm also very pleased to see that our operation team actually continue to execute and improve on their manufacturing process. So, I think in the longer term, it will allow us to achieve a larger scale cost improvement to take us to the 70% plus target. In terms of operating expense, as I discussed in the remarks, within the next 12 months, we'll see more than $20 million of operating savings from the Immersive Healthcare business.

Got it. And then, if I could add one more real quick. I know you mentioned the competitive dynamics weren't necessarily different and you've gone through similar dynamics in stroke. So, what steps, I guess, have you taken more recently within that thrombectomy kind of competitive dynamics and VTE overall? Is it more about being aggressive with the new sales force or more about the continuous generation of the clinical data that you expect to produce?

Yes, I think it's a fair question. Obviously, some of what we're doing, I'm not going to announce on a call so that we're alerting our competitors to what we're doing. And I know that you would appreciate and understand that. I think it really comes down to allowing and engaging with customers around what is happening, what are people doing, what are the products actually doing? And I think when you do that, and again, we've not always done that, but I think doors open. And for people who have been really pretty adamant that they're fine with what they use a year ago to see their openness now to using Flash 2.0 and then their openness to talk about the benefit of 2.0 in comparison, that's the most heartening thing. And I think that's given us the ability to really go after business everywhere versus we have our accounts, somebody else has their accounts. I think it's permission. And I think if you were to do work in the field and talk to folks, that's happening. It's happening everywhere. And you can talk to former reps, everything, the mood, the morale is clearly moving in our direction. And that's because at the end of the day, and look, competition isn't so much about tactics. You can have them. They don't always work. It's always about having the best products in the field. At the end of the day, I will tell you honestly, 20-some-odd years of doing this, I've always known that physicians ultimately use the best product. And for that, that's how you compete. You have the best products and you're not shy about talking about them and educating people about them. And that's the winning strategy. And it's gotten us this far for 20 years, and that's what we're going to do going forward.

Very helpful. Thanks again for spending the time.

Thank you for your question. And with that, Ms. Furlong, I'll turn the call back over to you.

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