Penumbra Inc.
02/25/2026 | Press release | Distributed by Public on 02/25/2026 12:28
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this Form 10-K. This discussion and other parts of this report contain forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations, and intentions. As a result of many factors, including those factors set forth in the "Risk Factors" section of this Form 10-K, our actual results could differ materially from the results described in or implied by these forward-looking statements. A discussion of our results of operations for the year ended December 31, 2024 as compared to the year ended December 31, 2023 is included in Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 18, 2025, and is incorporated by reference into this Form 10-K.
Overview
References herein to "we," "us," "our," the "Company," and "Penumbra," refer to Penumbra, Inc. and its consolidated subsidiaries unless expressly indicated or the context requires otherwise.
Penumbra, the world's leading thrombectomy company, is focused on developing the most innovative technologies for challenging medical conditions such as ischemic stroke, venous thromboembolism such as pulmonary embolism, and acute limb ischemia. Our broad portfolio, which includes computer assisted vacuum thrombectomy (CAVT), centers on removing blood clots from head-to-toe with speed, safety, and simplicity. 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 invested heavily in our 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 thrombectomy market since 2007, access market since 2008, embolization market since 2011, and neurosurgical market since 2014.
We expect to continue to develop and build our portfolio of products, including our thrombectomy, embolization, and access 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.
We attribute our success to our culture built on cooperation, our highly efficient product innovation process, our disciplined approach to product and commercial development, our deep understanding of our target end markets and our relationships with specialist physicians and other healthcare providers. We believe these factors have enabled us to rapidly innovate in a highly efficient manner.
We sell our products to healthcare providers primarily through our direct sales organization in the United States, most of Europe, Canada, Australia and Singapore, as well as through distributors in select international markets. We generated revenue of $1,403.7 million, $1,194.6 million and $1,058.5 million for the years ended December 31, 2025, 2024 and 2023, respectively. This represents an annual increase of 17.5% and of 12.9%, respectively. We generated income from operations of $189.2 million, $9.3 million and $73.6 million for the years ended December 31, 2025, 2024 and 2023, respectively.
During the year ended December 31, 2024, we made the strategic decision to wind down and exit our immersive healthcare business, and as a result we incurred $115.3 million in impairment and other charges in connection with this decision. Refer to Note "4. Exit of Immersive Healthcare Business" to our consolidated financial statements in Part II, Item 8 of this Form 10-K for more details. During the year ended December 31, 2024, we permanently ceased sales of our immersive healthcare products and related commercial operations. There were no impairment or other charges in connection with the wind down and exit of our immersive healthcare business during the year ended December 31, 2025.
On January 14, 2026, we entered into the Merger Agreement with Boston Scientific Corporation and Merger Sub, pursuant to which Boston Scientific Corporation has agreed to acquire us in the Merger at an enterprise value of approximately $14.5 billion. Under the terms of the Merger Agreement, which has been approved by the board of directors of each of the Company and Boston Scientific Corporation, the transaction values each share of our common stock at $374 per share, with our stockholders having the right to elect, for each share of our common stock held by them, to receive $374 in cash or 3.8721 shares of Boston Scientific Corporation's common stock (valued at $374 based on the volume weighted average price of Boston Scientific Corporation's common stock over the 10 trading days ending January 13, 2026), subject to proration, so that the total
transaction consideration is paid approximately 73% in cash and approximately 27% in shares of Boston Scientific's common stock. The Merger is expected to close by the end of 2026, subject to customary closing conditions, including approval by our stockholders and regulatory approvals. See Note "20. Subsequent Events" to our consolidated financial statements in Part II, Item 8 of this Form 10-K for more information.
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 rate at which we grow our salesforce and the speed at which newly hired salespeople become fully effective can impact our revenue growth or our costs incurred in anticipation of such growth.
•Our industry is intensely competitive and, in particular, we compete with a number of large, well-capitalized companies. We must continue to successfully compete in light of our competitors' existing and future products and their resources to successfully market to the specialist physicians who use our products.
•We must continue to successfully introduce new products that gain acceptance with specialist physicians and 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 the procedures and treatments those physicians 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 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; the timing of or failure to obtain regulatory approvals or clearances for products; increased competition; the timing of customer orders; inventory or other asset write-offs or write-downs; 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. 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.
Critical Accounting Policies and Use of Estimates
Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP"). The preparation of our consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the applicable periods. Management bases its estimates, assumptions and judgments on historical experience and on various other factors that it believes to be reasonable under the circumstances. Different assumptions and judgments would change the estimates used in the preparation of our consolidated financial statements, which, in turn, could materially change our results from those reported. Management evaluates its estimates, assumptions and judgments on an ongoing basis. Historically, our critical accounting estimates have not differed materially from actual results. However, if our assumptions change, we may need to revise our estimates, or take other corrective actions, either of which may also have a material adverse effect on our consolidated statements of operations, liquidity and financial condition.
We believe the following critical accounting policies involve significant areas where management applies judgments and estimates in the preparation of our consolidated financial statements.
Revenue Recognition
Revenue is primarily comprised of product revenue net of returns, discounts, administration fees and sales rebates. We recognize revenue when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. 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. Refer to Note "19. Revenues" to our consolidated financial statements in Part II, Item 8 of this Form 10-K for more information and disclosures on our revenue.
Certain arrangements with customers contain multiple performance obligations. For these contracts, each promise is evaluated to determine if it is a performance obligation. We consider a number of factors when determining whether a promise is a contractual performance obligation, including whether the customer can benefit from the good or service on its own or together with other resources that are readily available to the customer or whether the goods or services are highly interdependent. Revenue is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are based on observable prices at which we separately sell the products or services. If a standalone selling price is not directly observable, then we estimate the standalone selling prices considering market conditions and entity-specific factors including, but not limited to, the expected cost and margin of the products and services, geographies, and other market conditions. The use of alternative estimates could result in a different amount of revenue deferral.
We defer revenue for amounts that we have already invoiced our customers for and are ultimately expected to be recognized as revenue, but for which not all revenue recognition criteria have been met.
Revenue is recorded at the net sales price, which includes estimates of variable consideration such as product returns utilizing historical return rates, rebates, discounts, and other adjustments to net revenue. To the extent the transaction price includes variable consideration, we estimate the amount of variable consideration that should be included in the transaction price. Variable consideration is included in revenue only to the extent that it is probable that a significant reversal of the revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. During the year ended December 31, 2025, we made no material changes in estimates for variable consideration.
Our terms and conditions permit product returns and exchanges. We base our estimates for sales returns on actual historical returns and they are recorded as reductions in revenue at the time of sale. Upon recognition, we reduce revenue and cost of revenue for the estimated return. Return rates can fluctuate over time, but are sufficiently predictable to allow us to estimate expected future product returns.
Income Taxes
We account for income taxes using the asset and liability method, whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. We provide a valuation allowance to reduce the net deferred tax assets ("DTAs") to their estimated realizable value.
The calculation of our DTAs involves the use of estimates, assumptions and judgments while taking into account estimates of the amounts and type of future taxable income. DTAs are reduced to their estimated realizable value by a valuation allowance when it is more likely than not that the future realization of all or some of the DTAs will not be achieved. Valuation allowances related to DTAs can be affected by changes to tax laws, statutory tax rates, and projections of future taxable income.
The calculation of our current provision for income taxes involves the use of estimates, assumptions and judgments while taking into account current tax laws, interpretation of current tax laws and possible outcomes of future tax audits. We have established reserves to address potential exposures related to tax positions that could be challenged by tax authorities. Although we believe our estimates, assumptions and judgments to be reasonable, any changes in tax law or interpretation of tax law and the resolutions of potential tax audits could significantly impact the amounts provided for income taxes in our consolidated financial statements.
We follow FASB ASC 740-10 "Accounting for Uncertainty in Income Taxes" that prescribes a financial statement recognition threshold and measurement attribute for uncertain tax positions taken or expected to be taken on our income tax returns, and also provides guidance on derecognition, classification, interest and penalty accrual, accounting in interim periods,
and disclosure requirements. We include interest and penalties related to unrecognized tax benefits within income tax expense in the accompanying consolidated statements of operations.
As of December 31, 2025, our net DTA balance on a consolidated basis was $78.7 million, after reduction of a valuation allowance of $28.8 million. The Company had $43.9 million of state net operating loss ("NOL") carryforwards available to offset future taxable income as of December 31, 2025. The state NOL carryforwards have different carryover periods and will begin to expire as early as 2037. As of December 31, 2025, we had federal research and development tax credits of $3.3 million which are carried forward for 20 years and will expire beginning in 2044. We had California state research and development tax credits of $35.4 million that may be carried forward indefinitely.
As of December 31, 2025, we measured our current DTA balances against estimates of future income based on objectively verifiable operating results from our recent history, and concluded that sufficient future taxable income will be generated to realize the benefits of our federal DTAs. We continue to maintain a valuation allowance against our California tax credit DTAs until new evidence becomes available to justify realization of the asset.
We do not maintain valuation allowance against any of our foreign DTAs as we believe, at the required more-likely-than-not level of certainty, that our foreign subsidiaries will generate sufficient future taxable income to realize the benefit of their DTAs in full.
In December 2021, the Organization for Economic Co-operation and Development ("OECD") released guidance on the new global minimum tax regime known as Pillar Two. Subsequently, safe harbor provisions were introduced to temporarily alleviate administrative compliance burden of multinational enterprises. As of December 31, 2025, we have evaluated the tax impact in relevant countries and concluded that there is no impact to our income taxes. We acknowledge potential uncertainties in global implementation of Pillar Two and will continue to monitor future tax legislation to determine their impact accordingly.
Goodwill
Goodwill represents the excess of the purchase price of an acquired business or assets over the fair value of the identifiable assets acquired and liabilities assumed. Goodwill is not amortized, but is tested for impairment at least annually, or more frequently if events or circumstances indicate the carrying value may no longer be recoverable and that an impairment loss may have occurred. Circumstances that could trigger an impairment test include, but are not limited to, a significant adverse change in the business climate or legal factors, an adverse action or assessment by a regulator, change in customers, target market and strategy, unanticipated competition, loss of key personnel, or change in reporting units. We operate as one segment, which is considered to be the sole reporting unit, and therefore goodwill is tested for impairment at the consolidated level.
The authoritative guidance allows an entity to assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. If an entity determines that as a result of the qualitative assessment that it is more likely than not (i.e. greater than 50% likelihood) that the fair value of a reporting unit is less than its carrying amount, then the quantitative test is required. Otherwise, no further testing is required. The quantitative goodwill impairment test requires us to estimate and compare the fair value of our reporting unit with its carrying value.
Application of the goodwill impairment test requires judgments, including: identification of the reporting units, assigning goodwill to reporting units, a qualitative assessment to determine whether there are any impairment indicators, and determining the fair value of each reporting unit. Qualitative factors may include, but are not limited to, macroeconomic conditions, industry conditions, the competitive environment, changes in the market for our products and services, regulatory and political developments, cost factors, and entity specific factors such as strategies, overall financial performance (both current and projected) and market capitalization. In the fourth quarter of 2025, 2024 and 2023, we performed qualitative assessments for goodwill impairment and determined there were no indicators of impairment. Refer to Note "8. Goodwill" to our consolidated financial statements in Part II, Item 8 of this Form 10-K for more information.
Loss Contingencies
We are subject to certain legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business. We review the status of each significant matter quarterly and assess our potential financial exposure. Significant judgment is required in the determination of whether a potential loss is probable, reasonably possible, or remote as well as in the determination of whether a potential exposure is reasonably estimable. We base our judgments on the best information available at the time. As additional information becomes available, we reassess the potential liability related to our pending claims and litigation and may revise our estimates. Any revision of our estimates of potential liability could have a material impact on our financial position and operating results. For information with respect to legal proceedings, see Note "10. Commitments and Contingencies" to our consolidated financial statements in Part II, Item 8 of this Form 10-K.
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: thrombectomy and embolization and access. 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, handling costs, which are costs incurred to handle products by a third-party shipper to the customers, and other labor and overhead costs incurred in the manufacturing of products. 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 expense R&D costs as they are incurred.
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 and 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.
Income Tax Expense.We are taxed at the rates applicable within each jurisdiction in which we operate. The composite income tax rate, tax provisions, deferred tax assets 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.
Results of Operations
The following table sets forth the components of our consolidated statements of operations in U.S. dollars and as a percentage of revenue for the periods presented:
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| (in thousands, except for percentages) | |||||||||||||||||||||||||||||||||||
| Revenue | $ | 1,403,665 | 100.0 | % | $ | 1,194,615 | 100.0 | % | $ | 1,058,522 | 100.0 | % | |||||||||||||||||||||||
| Cost of revenue | 461,228 | 32.9 | % | 439,620 | 36.8 | % | 375,879 | 35.5 | % | ||||||||||||||||||||||||||
| Gross profit | 942,437 | 67.1 | % | 754,995 | 63.2 | % | 682,643 | 64.5 | % | ||||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||||||||
| Research and development | 89,766 | 6.4 | % | 94,783 | 7.9 | % | 84,423 | 8.0 | % | ||||||||||||||||||||||||||
| Sales, general and administrative | 663,422 | 47.3 | % | 573,988 | 48.0 | % | 506,454 | 47.8 | % | ||||||||||||||||||||||||||
| Acquired in-process research and development | - | - | % | - | - | % | 18,215 | 1.7 | % | ||||||||||||||||||||||||||
| Impairment charge | - | - | % | 76,945 | 6.5 | % | - | - | % | ||||||||||||||||||||||||||
| Total operating expenses | 753,188 | 53.7 | % | 745,716 | 62.4 | % | 609,092 | 57.5 | % | ||||||||||||||||||||||||||
| Income from operations | 189,249 | 13.5 | % | 9,279 | 0.8 | % | 73,551 | 6.9 | % | ||||||||||||||||||||||||||
| Interest and other income | 15,876 | 1.1 | % | 11,590 | 0.9 | % | 6,099 | 0.6 | % | ||||||||||||||||||||||||||
| Income before income taxes | 205,125 | 14.6 | % | 20,869 | 1.7 | % | 79,650 | 7.5 | % | ||||||||||||||||||||||||||
| Provision for (benefit from) income taxes | 27,438 | 1.9 | % | 6,857 | 0.5 | % | (11,304) | (1.1) | % | ||||||||||||||||||||||||||
| Net income | $ | 177,687 | 12.7 | % | $ | 14,012 | 1.2 | % | $ | 90,954 | 8.6 | % | |||||||||||||||||||||||
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
Revenue
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except for percentages) | |||||||||||||||||||||||
| Thrombectomy | $ | 947,918 | $ | 815,475 | $ | 132,443 | 16.2 | % | |||||||||||||||
| Embolization and Access | 455,747 | 379,140 | 76,607 | 20.2 | % | ||||||||||||||||||
| Total | $ | 1,403,665 | $ | 1,194,615 | $ | 209,050 | 17.5 | % | |||||||||||||||
Revenue increased $209.1 million, or 17.5%, to $1,403.7 million in 2025, from $1,194.6 million in 2024. Overall revenue growth was primarily due to an increase in sales of our new and existing thrombectomy and embolization and access products.
Revenue from our global thrombectomy products increased $132.4 million, or 16.2%, to $947.9 million in 2025, from $815.5 million in 2024. This increase in our global thrombectomy products was primarily attributable to higher sales volume in the United States as a result of sales of new products and further market penetration of our existing products. Sales of our U.S. thrombectomy products increased by 19.3% in the year ended December 31, 2025. Prices for our thrombectomy products remained substantially unchanged during the period.
Revenue from our global embolization and access products increased $76.6 million, or 20.2%, to $455.7 million in the year ended December 31, 2025, from $379.1 million in the year ended December 31, 2024. The increase in our global embolization and access products was primarily attributable to higher sales volume in the United States as a result of sales of new products and further market penetration of our existing products. Sales of our U.S. embolization and access products increased by 25.4% in the year ended December 31, 2025. Prices for our embolization and access products remained substantially unchanged during the period.
Revenue by Geographic Area
The following table presents revenue by geographic area, based on our customers' shipping destinations:
| Year Ended December 31, | Change | ||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||||||||||||||
| (in thousands, except for percentages) | |||||||||||||||||||||||||||||||||||
| United States | $ | 1,091,761 | 77.8 | % | $ | 902,067 | 75.5 | % | $ | 189,694 | 21.0 | % | |||||||||||||||||||||||
| International | 311,904 | 22.2 | % | 292,548 | 24.5 | % | 19,356 | 6.6 | % | ||||||||||||||||||||||||||
| Total | $ | 1,403,665 | 100.0 | % | $ | 1,194,615 | 100.0 | % | $ | 209,050 | 17.5 | % | |||||||||||||||||||||||
Revenue from sales in international markets increased $19.4 million, or 6.6%, to $311.9 million in 2025, from $292.5 million in 2024. Revenue from international sales represented 22.2% and 24.5% of our total revenue in 2025 and 2024, respectively.
Gross Margin
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except for percentages) | |||||||||||||||||||||||
| Cost of revenue | $ | 461,228 | $ | 439,620 | $ | 21,608 | 4.9 | % | |||||||||||||||
| Gross profit | $ | 942,437 | $ | 754,995 | $ | 187,442 | 24.8 | % | |||||||||||||||
| Gross margin % | 67.1 | % | 63.2 | % | |||||||||||||||||||
Gross margin increased by 3.9 percentage points to 67.1% in 2025. This compares to gross margin of 63.2% in 2024, which included a one-time $33.4 million inventory charge to cost of revenue in connection with the impairment of our immersive healthcare asset group (refer to Note "4. Exit of Immersive Healthcare Business" to our consolidated financial statements in Part II, Item 8 of this Form 10-K for more information). The impact of the one-time $33.4 million inventory charge decreased our gross margin by 2.8 percentage points in 2024. Gross margin is impacted by product mix, regional mix, and production initiatives to support demand and create future efficiencies. As such, with favorable product mix, improvement
in productivity, and by leveraging our fixed costs on higher volume of new product sales during the year, our gross margin may be positively impacted in the future.
Research and Development ("R&D")
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except for percentages) | |||||||||||||||||||||||
| R&D | $ | 89,766 | $ | 94,783 | $ | (5,017) | (5.3) | % | |||||||||||||||
| R&D as a percentage of revenue | 6.4 | % | 7.9 | % | |||||||||||||||||||
R&D expenses decreased by $5.0 million or 5.3%, to $89.8 million in 2025, from $94.8 million in 2024. The decrease was primarily due to a $14.2 million decrease in expenses associated with our immersive healthcare business. Excluding these costs, R&D expenses increased by $9.2 million in 2025 to support our continued 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 may incur additional expenses related to research and development milestones. 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")
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except for percentages) | |||||||||||||||||||||||
| SG&A | $ | 663,422 | $ | 573,988 | $ | 89,434 | 15.6 | % | |||||||||||||||
|
SG&A as a percentage of revenue
|
47.3 | % | 48.0 | % | |||||||||||||||||||
SG&A expenses increased by $89.4 million, or 15.6%, to $663.4 million in 2025, from $574.0 million in 2024. The increase was primarily due to a $74.5 million increase in personnel-related expenses driven by an increase in headcount and related expenses to support our growth, a $10.4 million increase in costs related to marketing events, and a $7.7 million increase in travel-related expenses. This was partially offset by a $4.8 million decrease in non-recurring litigation related expenses, including settlement costs and legal fees, associated with wage and hour complaints filed against the Company in 2023 and a $4.7 million decrease in amortization expense of finite lived intangible assets acquired in connection with the Sixense acquisition due to the impairment of long-lived assets associated with the immersive healthcare business in the second quarter of 2024.
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. 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 to support the business.
Exit of Immersive Healthcare Business
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except for percentages) | |||||||||||||||||||||||
| Cost of revenue | $ | - | $ | 33,362 | $ | (33,362) | (100.0) | % | |||||||||||||||
| Impairment charge | - | 76,945 | (76,945) | (100.0) | % | ||||||||||||||||||
| Severance and other associated costs | - | 4,971 | (4,971) | (100.0) | % | ||||||||||||||||||
| Impact of Immersive Healthcare Business Exit | $ | - | $ | 115,278 | $ | (115,278) | (100.0) | % | |||||||||||||||
| Exit impact as a percentage of revenue | - | % | 9.6 | % | |||||||||||||||||||
There were no impairment or other charges related to the immersive healthcare business during the year ended December 31, 2025. During the year ended December 31, 2024, we made the strategic decision to wind down and exit our immersive healthcare business, and as a result we incurred $115.3 million in impairment and other charges in connection with this decision. The Company incurred a $33.4 million charge to cost of revenue for the write-down of immersive healthcare inventory to net realizable value, an impairment charge to long-lived assets consisting of $58.9 million in finite-lived intangible
assets and $18.0 million in property and equipment, and severance and other associated costs of $5.0 million included in research and development and sales, general and administrative within the consolidated statement of operations. Refer to Note "4. Exit of Immersive Healthcare Business" to our consolidated financial statements in Part II, Item 8 of this Form 10-K for more information.
Provision for income taxes
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except for percentages) | |||||||||||||||||||||||
| Provision for income taxes | $ | 27,438 | $ | 6,857 | $ | 20,581 | 300.1 | % | |||||||||||||||
| Effective tax rate | 13.4 | % | 32.9 | % | |||||||||||||||||||
Our provision for income taxes was $27.4 million in 2025, which was primarily due to income taxes imposed on our worldwide profits, partially offset by excess tax benefits from stock-based compensation attributable to our U.S. jurisdiction. Our provision for income taxes was $6.9 million in 2024, which was primarily due to income taxes imposed on our worldwide profits. Our effective tax rate was 13.4% in 2025, compared to 32.9% in 2024. Our change in effective tax rate was primarily attributable to an increase in excess tax benefits from stock-based compensation.
Our effective tax rate is driven by (1) income or loss before taxes, (2) permanent differences in taxable income for tax and financial reporting purposes, (3) tax expense attributable to our foreign jurisdictions, (4) changes to the valuation allowance maintained against our deferred tax assets, and (5) discrete tax adjustments such as excess tax expenses or benefits related to stock-based compensation. Our income tax provision is subject to volatility as the amount of excess tax expenses and benefits can fluctuate from period to period based on the price of our stock, the volume of share-based grants settled 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 cause us to experience an effective tax rate significantly different from previous periods.
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act ("OBBBA") into law, which extends and modifies various domestic and international business tax framework originally enacted under the Tax Cuts and Jobs Act ("TCJA"). The legislation includes multiple effective dates, with certain provisions taking effect in 2025 and others through 2027. We evaluated the OBBBA and included its impact within our consolidated financial statements. We will continue to evaluate the full impact of these legislative changes as additional supplemental guidance becomes available.
Liquidity and Capital Resources
As of December 31, 2025, we had $1,033.6 million in working capital, which included $186.9 million in cash and cash equivalents and $357.9 million in marketable investments. As of December 31, 2025, we held approximately 11.3% of our cash and cash equivalents in foreign entities.
We believe our current 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. For example, during the year ended December 31, 2025, the Company entered into agreements to acquire property in Costa Rica and construct a manufacturing facility and warehouse for the production of medical devices. Refer to Note "5. Balance Sheet Components" to our consolidated financial statements in Part II, Item 8 of this Form 10-K for more information. 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, and could require us to agree to covenants that limit our operating flexibility.
Share Repurchase Program
On August 5, 2024, the Company's Board of Directors approved a share repurchase authorization in the amount of up to $200.0 million, allowing the Company to repurchase its common stock from time to time at such prices as it deems appropriate through open market purchases, block transactions, privately negotiated transactions, including accelerated share repurchase transactions, or otherwise. The repurchase authorization originally expired on July 31, 2025. Under this authorization, the Company entered into an accelerated share repurchase agreement ("ASR") with JPMorgan Chase Bank, National Association to repurchase $100.0 million of the Company's common stock during the three months ended September 30, 2024. During the
three months ended September 30, 2024, the Company repurchased an aggregate of 517,763 shares under the ASR at an aggregate cost of $100.4 million, including legal and financial advisor fees of $0.4 million associated with the repurchase. During the three months ended September 30, 2025 and December 31, 2025, the Company's Board of Directors extended the repurchase authorization for the remaining $100.0 million to December 31, 2025 and December 31, 2026, respectively. As of December 31, 2025, the Company had remaining authority to purchase $100.0 million of its common stock under the share repurchase authorization. Refer to Note "12. Share Repurchase Program" to our consolidated financial statements in Part II, Item 8 of this Form 10-K for more information.
The following table summarizes our cash and cash equivalents, marketable investments and selected working capital data as of December 31, 2025 and December 31, 2024:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Cash and cash equivalents | $ | 186,897 | $ | 324,404 | |||||||
| Marketable investments | 357,919 | 15,727 | |||||||||
| Accounts receivable, net | 190,021 | 167,668 | |||||||||
| Accounts payable | 34,736 | 31,326 | |||||||||
| Accrued liabilities | 132,163 | 112,429 | |||||||||
|
Working capital(1)
|
1,033,551 | 792,780 | |||||||||
(1)Working capital consists of total current assets less total current liabilities.
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:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Cash and cash equivalents at beginning of year | $ | 324,404 | $ | 167,486 | $ | 69,858 | |||||||||||
| Net cash provided by operating activities | 238,663 | 168,481 | 97,333 | ||||||||||||||
| Net cash (used in) provided by investing activities | (404,590) | 77,624 | (16,076) | ||||||||||||||
| Net cash provided by (used in) financing activities | 26,532 | (87,006) | 16,203 | ||||||||||||||
| Effect of foreign exchange rate changes on cash and cash equivalents | 1,888 | (2,181) | 168 | ||||||||||||||
| Cash and cash equivalents at end of year | 186,897 | 324,404 | 167,486 | ||||||||||||||
Net Cash Provided By Operating Activities
Net cash provided by operating activities consists primarily of net income adjusted for certain non-cash items (including depreciation and amortization, stock-based compensation expense, impairment charges, inventory write-offs and write-downs, changes in deferred tax balances, acquired in-process research and development, and the effect of changes in working capital and other activities).
Net cash provided by operating activities was $238.7 million in 2025 and consisted of net income of $177.7 million and non-cash items of $103.7 million offset by net changes in operating assets and liabilities of $42.7 million. The change in operating assets and liabilities includes an increase in inventories of $26.5 million to support our growth, an increase in accounts receivable of $19.5 million, and an increase in prepaid expenses and other current and non-current assets of $12.7 million. This was partially offset by an increase in accrued expenses and other non-current liabilities of $12.9 million and an increase in accounts payable of $3.1 million.
Net cash provided by operating activities was $168.5 million in 2024 and consisted of net income of $14.0 million and non-cash items of $178.2 million offset by net changes in operating assets and liabilities of $23.8 million. The change in operating assets and liabilities includes an increase in inventories of $65.7 million to support our revenue growth, a decrease in accounts receivable of $26.6 million due to timing of invoicing and collections, an increase in accrued expenses and other non-current liabilities of $14.1 million primarily as a result of the growth in our business activities, and an increase in accounts payable of $4.2 million. This was partially offset by an increase in prepaid expenses and other current and non-current assets of $2.9 million.
Net cash provided by operating activities was $97.3 million in 2023 and consisted of net income of $91.0 million and net changes in operating assets and liabilities of $79.1 million offset by non-cash items of $85.5 million. The change in operating assets and liabilities includes an increase in inventories of $67.7 million to support our revenue growth, an increase in prepaid expenses and other current and non-current assets of $18.9 million, and an increase in accounts receivable of $0.3 million. This was partially offset by an increase in accrued expenses and other non-current liabilities of $6.2 million primarily as a result of the growth in our business activities, an increase in accounts payable of $1.1 million, and proceeds of $0.5 million received related to lease incentives from operating leases.
Net Cash (Used In) Provided By Investing Activities
Net cash (used in) provided by investing activities primarily relates to purchases of marketable and non-marketable investments, capital expenditures, payments in connection with asset acquisitions, partially offset by sales of marketable investments and proceeds from maturities of marketable investments.
Net cash used in investing activities was $404.6 million in 2025 and primarily consisted of purchases of marketable investments, net of proceeds from maturities and sales of marketable investments, of $340.9 million and capital expenditures of $63.7 million primarily driven by investments related to the construction of our Costa Rica manufacturing facility.
Net cash provided by investing activities was $77.6 million in 2024 and primarily consisted of proceeds from maturities of marketable investments, net of purchases, of $107.7 million, partially offset by capital expenditures of $21.2 million and non-marketable investments of $10.0 million.
Net cash used in investing activities was $16.1 million in 2023 and primarily consisted of capital expenditures of $15.2 million and cash paid in an asset acquisition of $1.0 million, partially offset by proceeds from maturities of marketable investments, net of purchases, of $0.6 million.
Net Cash Provided By (Used In) Financing Activities
Net cash provided by (used in) financing activities primarily relates to proceeds from issuances of common stock under our employee stock purchase plan and exercises of stock options, partially offset by payments of employee taxes related to vested restricted stock units, payments towards the reduction of our finance lease obligations, and repurchases of our common stock.
Net cash provided by financing activities was $26.5 million in 2025 and primarily consisted of proceeds from the issuance of common stock under our employee stock purchase plan of $16.4 million and proceeds from exercises of stock options of $15.4 million, partially offset by payments of employee taxes related to vested restricted stock units of $2.5 million and payments towards finance leases obligations of $2.5 million.
Net cash used in financing activities was $87.0 million in 2024 and primarily consisted of repurchases of common stock of $100.4 million, including legal and financial advisor fees, payments towards finance leases obligations of $2.3 million, and payments of employee taxes related to vested restricted stock units of $1.5 million. This was partially offset by proceeds from the issuance of common stock under our employee stock purchase plan of $15.3 million and proceeds from exercises of stock options of $1.9 million.
Net cash provided by financing activities was $16.2 million in 2023 and primarily consisted of proceeds from the issuance of stock under our employee stock purchase plan of $14.9 million and proceeds from exercises of stock options of $5.5 million. This was partially offset by $2.1 million of payments of employee taxes related to vested restricted stock units and payments related to finance lease obligations of $2.0 million.
Contractual Obligations and Commitments
In the normal course of business, the Company enters into contracts and commitments that obligate us to make payments in the future. Our contractual obligations consist primarily of: non-cancelable operating and finance leases and purchase commitments. Information regarding our obligations relating to lease arrangements and purchase commitments, as well as amounts recorded for uncertain tax positions, are provided in Part II, Item 8, "Financial Statements and Supplementary Data" of this Form 10-K in Note "9. Leases", Note "10. Commitments and Contingencies", and Note "15. Income Taxes", respectively.
Recently Issued Accounting Standards
For information with respect to recently issued accounting standards and the impact of these standards on our consolidated financial statements, refer to Note "2. Summary of Significant Accounting Policies" to our consolidated financial statements in Part II, Item 8 of this Form 10-K.
Penumbra Inc. published this content on February 25, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on February 25, 2026 at 18:28 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]