Document and Entity Information

6 Months Ended

Jun. 30, 2017

Jul. 18, 2017

Document and Entity Information [Abstract]

Entity Registrant Name

Penumbra Inc

Entity Central Index Key

0001321732

Current Fiscal Year End Date

--12-31

Entity Filer Category

Large Accelerated Filer

Document Type

10-Q

Document Period End Date

Jun. 30, 2017

Document Fiscal Year Focus

2017

Document Fiscal Period Focus

Q2

Amendment Flag

false

Entity Common Stock, Shares Outstanding

33,772,018

Condensed Consolidated Balance Sheets (USD $)

In Thousands, unless otherwise specified

Jun. 30, 2017

Dec. 31, 2016

Current assets:

Cash and cash equivalents

$ 76,576

$ 13,236

Marketable investments

142,068

115,517

Accounts receivable, net of doubtful accounts of $949 and $684 at June 30, 2017 and December 31, 2016, respectively.

48,714

43,335

Inventories

81,141

73,012

Prepaid expenses and other current assets

14,399

18,727

Restricted cash

1,819

0

Total current assets

364,717

263,827

Property and equipment, net

24,419

21,464

Deferred taxes

22,496

22,476

Other non-current assets

5,371

487

Total assets

417,003

308,254

Current liabilities:

Accounts payable

4,334

4,110

Accrued liabilities

33,177

31,690

Total current liabilities

37,511

35,800

Deferred Rent Credit, Noncurrent

5,682

5,083

Other non-current liabilities

832

824

Total liabilities

44,025

41,707

Commitments and contingencies

Stockholders’ equity:

Common stock

33

31

Additional paid-in capital

384,965

273,865

Accumulated other comprehensive loss

(4,695)

(4,688)

Accumulated deficit

(7,325)

(2,661)

Total stockholders’ equity

372,978

266,547

Total liabilities and stockholders’ equity

$ 417,003

$ 308,254

Condensed Consolidated Balance Sheets (Parenthetical) (USD $)

In Thousands, unless otherwise specified

Jun. 30, 2017

Dec. 31, 2016

Statement of Financial Position [Abstract]

Allowance for doubtful accounts

$ 949

$ 684

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (USD $)

In Thousands, except Share data, unless otherwise specified

3 Months Ended

6 Months Ended

Jun. 30, 2017

Jun. 30, 2016

Jun. 30, 2017

Jun. 30, 2016

Income Statement [Abstract]

Revenue

$ 80,589

$ 65,106

$ 153,802

$ 123,025

Cost of revenue

29,660

23,636

55,164

41,650

Gross profit

50,929

41,470

98,638

81,375

Operating expenses:

Research and development

8,094

6,264

15,128

11,265

Sales, general and administrative

44,163

35,876

86,884

68,945

Total operating expenses

52,257

42,140

102,012

80,210

(Loss) income from operations

(1,328)

(670)

(3,374)

1,165

Interest income, net

624

559

1,268

1,069

Other expense, net

(372)

(272)

(721)

(496)

(Loss) income before income taxes

(1,076)

(383)

(2,827)

1,738

Provision for (Benefit from) income taxes

482

(3,396)

1,837

(3,566)

Net (loss) income

(1,558)

3,013

(4,664)

5,304

Foreign currency translation adjustments, net of tax

(766)

(1,881)

(74)

(833)

Unrealized (loss) gains on available-for-sale securities, net of tax

(3)

88

67

369

Comprehensive (loss) income

(2,327)

1,220

(4,671)

4,840

Net income attributable to common stockholders

$ (1,558)

$ 3,013

$ (4,664)

$ 5,304

Net (loss) income per share attributable to common stockholders — Basic (in dollars per share)

$ (0.05)

$ 0.10

$ (0.14)

$ 0.18

Net (loss) income per share attributable to common stockholders — Diluted (in dollars per share)

$ (0.05)

$ 0.09

$ (0.14)

$ 0.16

Weighted average shares used to compute net (loss) income per share attributable to common stockholders — Basic (in shares)

33,219,487

30,210,322

32,420,105

30,100,162

Weighted average shares used to compute net (loss) income per share attributable to common stockholders — Diluted (in shares)

33,219,487

33,308,193

32,420,105

33,137,364

Condensed Consolidated Statements of Cash Flows (USD $)

In Thousands, unless otherwise specified

6 Months Ended

Jun. 30, 2017

Jun. 30, 2016

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income

$ (4,664)

$ 5,304

Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:

Depreciation and amortization

1,422

1,146

Amortization of premium on marketable investments

436

445

Stock-based compensation

8,605

6,537

Inventory write downs

440

824

Deferred taxes

0

(207)

Other

367

129

Changes in operating assets and liabilities:

Accounts receivable

(4,551)

(5,058)

Inventories

(6,827)

(12,035)

Prepaid expenses and other current and non-current assets

2,903

(9,847)

Accounts payable

293

1,330

Accrued expenses and other non-current liabilities

4,420

3,250

Net cash provided by (used in) operating activities

2,844

(8,182)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of non-marketable investments

(5,074)

0

Purchase of marketable investments

(90,384)

(27,467)

Proceeds from sales of marketable investments

28,167

2,504

Proceeds from maturities of marketable investments

35,669

28,962

Purchases of property and equipment

(5,364)

(3,695)

Deposit payments for acquisition

(454)

0

Change in restricted cash

(1,714)

0

Net cash (used in) provided by investing activities

(39,154)

304

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock, net of issuance cost

106,265

0

Proceeds from exercises of stock options

2,625

1,493

Proceeds from issuance of stock under employee stock purchase plan

2,914

3,783

Payment of employee taxes related to vested restricted stock

(9,190)

(1,846)

Net cash provided by financing activities

102,614

3,430

Effect of foreign exchange rate changes on cash and cash equivalents

(2,964)

(1,185)

Net Increase (Decrease) in Cash and Cash Equivalents

63,340

(5,633)

CASH AND CASH EQUIVALENTS—Beginning of period

13,236

19,547

CASH AND CASH EQUIVALENTS—End of period

76,576

13,914

NONCASH INVESTING AND FINANCING ACTIVITIES:

Purchase of property and equipment funded through accounts payable and accrued liabilities

$ 411

$ 560

Organization and Description of Business

1. Organization and Description of Business

Penumbra, Inc. (the “Company”) is a global healthcare company focused on interventional therapies. The Company designs, develops, manufactures and markets innovative devices and has a broad portfolio of products that addresses challenging medical conditions and significant clinical needs across two major markets, neuro and peripheral vascular. The conditions that the Company’s products address include, among others, ischemic stroke, hemorrhagic stroke and various peripheral vascular conditions that can be treated through thrombectomy and embolization procedures.

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying condensed consolidated balance sheet as of June 30, 2017, the condensed consolidated statements of operations and comprehensive (loss) income for the three and six months ended June 30, 2017 and 2016, and the condensed consolidated statements of cash flows for the six months ended June 30, 2017 and 2016 are unaudited. The unaudited condensed consolidated financial statements included herein have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The condensed consolidated balance sheet as of December 31, 2016 was derived from the audited financial statements as of that date.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments of a normal recurring nature considered necessary to state fairly the Company’s financial position as of June 30, 2017, the results of its operations for the three and six months ended June 30, 2017 and 2016, and the cash flows for the six months ended June 30, 2017 and 2016. The results for the three and six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017 or for any other future annual or interim period. Certain changes in presentation were made in the condensed consolidated financial statements for the three and six months ended June 30, 2016, to conform to the presentation for the three and six months ended June 30, 2017.

The Company elected to early adopt Accounting Standards Update (“ASU”) 2016-09 in the fourth quarter of 2016 which requires the Company to reflect any adjustments as of January 1, 2016, the beginning of the annual period that includes the interim period of adoption. The impact of adoption was the creation of deferred tax assets (“DTAs”) in the balance sheet and recognition of excess tax benefits in our provision for (benefit from) income taxes rather than paid-in capital for all periods in fiscal year 2016. The Company’s adoption of ASU 2016-09 resulted in the recognition of excess tax benefits in the Company’s benefit from income taxes rather than paid-in capital of $2.9 million and $4.4 million for the three and six months ended June 30, 2016, respectively. In addition, the Company elected to apply the presentation requirements for cash flows related to excess tax benefits retrospectively to all periods presented.

Adoption of the new standard resulted in adjustments to our 2016 unaudited selected financial data previously reported in our Quarterly Report on Form 10-Q as follows:



	June 30, 2016
(In thousands)	As Reported			As Adjusted
Condensed Consolidated Balance Sheet Data:
Prepaid expenses and other current assets	$	17,406		$	17,371
Total current assets	$	260,252		$	260,217
Total assets	$	283,979		$	283,944
Additional paid-in-capital	$	266,650		$	262,276
Accumulated deficit	$	(16,510	)	$	(12,171	)
Total stockholders’ equity	$	247,591		$	247,556
Total liabilities and stockholders’ equity	$	283,979		$	283,944



	Three Months Ended June 30, 2016						Six Months Ended June 30, 2016
(In thousands, except percentage and per share amounts)	As Reported			As Adjusted			As Reported		As Adjusted
Condensed Consolidated Statements of Operations Data:
(Benefit from) provision for income taxes	$	(568	)	$	(3,396	)	$	773	$	(3,566	)
Net income	$	185		$	3,013		$	965	$	5,304
Net income per share from:
Basic	$	0.01		$	0.10		$	0.03	$	0.18
Diluted	$	0.01		$	0.09		$	0.03	$	0.16
Weighted average shares used to compute net income (loss) per share attributable to common stockholders for:
Basic	30,210,322			30,210,322			30,100,162		30,100,162
Diluted	32,693,684			33,308,193			32,542,253		33,137,364



	Six Months Ended June 30, 2016
(In thousands)	As Reported			As Adjusted
Condensed Consolidated Statement of Cash Flow Data:
Net cash (used in) operating activities	$	(12,555	)	$	(8,182	)
Net cash provided by financing activities	$	7,803		$	3,430

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K. During the six months ended June 30, 2017, the Company added an accounting policy for non-marketable equity investments. There have been no other changes to the Company’s significant accounting policies during the six months ended June 30, 2017, as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and equity accounts; disclosure of contingent assets and liabilities at the date of the financial statements; and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to marketable investments, provisions for doubtful accounts, sales return reserve, warranty reserve, valuation of inventories, useful lives of property and equipment, income taxes, and contingencies, among others. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other data. Actual results could differ from those estimates.

Non-Marketable Equity Investments

Entities in which the Company has at least a 20%, but not more than a 50%, interest are accounted for under the equity method unless it is determined that the Company has a controlling financial interest in the entity, in which case the entity would be consolidated. Non-marketable equity investments are classified as investments and included in other non-current assets on the condensed consolidated balance sheet. The Company’s proportionate share of the operating results of its non-marketable equity method investments are recorded as profit or loss and included as a component of other expense, net, in the condensed consolidated statements of operations and comprehensive (loss) income. See Note 4 “Balance Sheet Components” for further details.

Segments

The Company determined its operating segment on the same basis that it uses to evaluate its performance internally. The Company has one business activity: the design, development, manufacturing and marketing of innovative medical devices, and operates as one operating segment. The Company’s chief operating decision-maker, its Chief Executive Officer, reviews its operating results for the purpose of allocating resources and evaluating financial performance. The Company determines revenue by geographic area, based on the destination to which it ships its products.

Recent Accounting Guidance

Recently Adopted Accounting Standards

In July 2015, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2015-11, Simplifying the Measurement of Inventory, which requires an entity to measure most inventory at the lower of cost and net realizable value, thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market. In January 2017, the Company adopted the standard on a prospective basis and the adoption did not have a material impact on its financial position.

Recently Issued Accounting Standards

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which outlines a comprehensive new revenue recognition model designed to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers—Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which further clarifies the implementation guidance on principal versus agent considerations contained in ASU 2014-09. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers—Identifying Performance Obligations and Licensing, which further clarifies the implementation guidance relating to identifying performance obligations and the licensing implementation guidance. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers—Narrow-Scope improvements and Practical Expedients, which further clarifies the implementation on narrow scope improvements and practical expedients. In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606—Revenue from Contracts with Customers, which makes minor corrections or minor improvements to the Codification related to ASU No. 2014-09 that are not expected to have a significant effect on the Company’s current accounting practice. These standards will be effective for the Company in the first quarter of 2018 pursuant to ASU No. 2015-14, Revenue from Contracts with Customers-Deferral of the Effective Date, issued by the FASB in August 2015. The Company intends to adopt the new standard on a modified retrospective basis on January 1, 2018. Under this method, the Company will record a cumulative-effect adjustment to the opening balance of retained earnings in the initial year of adoption. The timing of revenue recognition based on the guidance related to transfer of control may result in acceleration of revenue recognition for some contracts. The Company does not expect the impact of the new standard to be material, but it may result in expanded financial statement disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. As we continue our assessment through the remainder of 2017, our preliminary assessment is subject to change.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which amends the existing accounting standards for leases. Under the new guidance, a lessee will be required to recognize a lease liability and right-of-use asset for all leases with terms in excess of twelve months. The new guidance also modifies the classification criteria and accounting for sales-type and direct financing leases, and requires additional disclosures to enable users of financial statements to understand the amount, timing, and uncertainty of cash flows arising from leases. Consistent with current guidance, a lessee’s recognition, measurement, and presentation of expenses and cash flows arising from a lease will continue to depend primarily on its classification. The accounting standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and must be applied using a modified retrospective approach. Early adoption is permitted. While the Company is continuing to assess all potential impacts of the standard, it expects that most of its lease commitments will be subject to the updated standard and recognized as lease liabilities and right-of-use assets upon adoption.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses. The standard changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The Company will recognize an allowance for credit losses on available-for-sale securities rather than deductions in amortized cost. The standard is effective for fiscal years and interim periods beginning after December 15, 2019. Early adoption is permitted for all periods beginning after December 15, 2018. The Company is currently evaluating the impact of adopting this standard.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows: Restricted Cash, a consensus of the FASB Emerging Issues Task Force. The standard requires companies to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling the total beginning and end of period amounts shown on the statement of cash flows. The standard is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. The Company does not expect the adoption of ASU 2016-18 to have a material impact on its consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation - Scope of Modification Accounting. The standard provides clarification on when modification accounting should be used for changes to the terms or conditions of a share-based payment award. This standard does not change the accounting for modifications but clarifies that modification accounting guidance should only be applied if there is a change to the value, vesting conditions, or award classification and would not be required if the changes are considered non-substantive. The standard is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted. The guidance will be applied prospectively upon adoption. The Company does not expect the adoption of ASU 2017-09 to have a material impact on its consolidated financial statements, however the impact to share-based compensation expense will depend on the terms specified in any new changes to share-based payment awards subsequent to the adoption.

Fair Value of Financial Instruments

3. Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The categorization of a financial instrument within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The Company classifies its cash equivalents and marketable investments within Level 1 and Level 2, as it uses quoted market prices or alternative pricing sources and models utilizing market observable inputs.

The Company determined the fair value of its Level 1 financial instruments, which are traded in active markets, using quoted market prices for identical instruments.

Financial instruments classified within Level 2 of the fair value hierarchy are valued based on other observable inputs, including broker or dealer quotations or alternative pricing sources. When quoted prices in active markets for identical assets or liabilities are not available, the Company relies on non-binding quotes from its investment managers, which are based on proprietary valuation models of independent pricing services. These models generally use inputs such as observable market data, quoted market prices for similar instruments, historical pricing trends of a security relative to its peers. To validate the fair value determination provided by its investment managers, the Company reviews the pricing movement in the context of overall market trends and trading information from its investment managers. In addition, the Company assesses the inputs and methods used in determining the fair value in order to determine the classification of securities in the fair value hierarchy.

The Company did not own any Level 3 financial assets or liabilities as of June 30, 2017 or December 31, 2016.

During the six months ended June 30, 2017 and 2016, the Company did not record impairment charges related to its marketable investments, and the Company did not have any transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy.

The Company did not have any financial assets and liabilities measured at fair value on a non-recurring basis as of June 30, 2017 or December 31, 2016.

The following table sets forth the Company’s financial assets and liabilities measured at fair value by level within the fair value hierarchy (in thousands):



	As of June 30, 2017
	Level 1		Level 2		Total Fair Value
Financial Assets
Cash equivalents:
Commercial paper	$	—	$	19,188	$	19,188
Money market funds	4,546		—		4,546
U.S. Treasury	4,997		—		4,997
U.S. states and municipalities	—		6,500		6,500
Marketable investments:
Commercial paper	—		24,196		24,196
U.S. Treasury	8,997		—		8,997
U.S. agency and government sponsored securities	—		6,837		6,837
U.S. states and municipalities	—		8,256		8,256
Corporate bonds	—		93,782		93,782
Total	$	18,540	$	158,759	$	177,299



	As of December 31, 2016
	Level 1		Level 2		Total Fair Value
Financial Assets
Cash equivalents:
Money market funds	$	873	$	—	$	873
Marketable investments:
Commercial paper	—		4,238		4,238
U.S. Treasury	4,996		—		4,996
U.S. agency and government sponsored securities	—		8,794		8,794
U.S. states and municipalities	—		27,355		27,355
Corporate bonds	—		68,925		68,925
Non-U.S. government debt securities	—		1,209		1,209
Total	$	5,869	$	110,521	$	116,390

Balance Sheet Components

4. Balance Sheet Components

Prepaid Expenses and Other Current Assets

The Company’s prepaid expenses and other current assets as of June 30, 2017 and December 31, 2016 were comprised of the following (in thousands):



	June 30, 2017		December 31, 2016
Prepaid tax	$	1,505	$	4,656
Prepaid expenses	4,729		4,573
Other current assets	8,165		9,498
Prepaid expenses and other current assets	$	14,399	$	18,727

Marketable Investments

The Company’s marketable investments as of June 30, 2017 and December 31, 2016 were as follows (in thousands):



	June 30, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Commercial paper	$	24,198	$	1	$	(3	)	$	24,196
U.S. Treasury	9,003		—		(6		)	8,997
U.S. agency and government sponsored securities	6,850		—		(13		)	6,837
U.S. states and municipalities	8,263		—		(7		)	8,256
Corporate bonds	93,851		35		(104		)	93,782
Total	$	142,165	$	36	$	(133	)	$	142,068



	December 31, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Commercial paper	$	4,237	$	1	$	—		$	4,238
U.S. Treasury	4,996		—		—			4,996
U.S. agency and government sponsored securities	8,803		3		(12		)	8,794
U.S. states and municipalities	27,429		1		(75		)	27,355
Corporate bonds	69,009		36		(120		)	68,925
Non-U.S. government debt securities	1,209		—		—			1,209
Total	$	115,683	$	41	$	(207	)	$	115,517

The following tables present the gross unrealized losses and the fair value for those marketable investments that were in an unrealized loss position for less than twelve months as of June 30, 2017 and December 31, 2016 (in thousands):



	June 30, 2017
	Fair Value		Gross Unrealized Losses
Commercial paper	$	19,769	$	(3	)
U.S. Treasury	8,997		(6		)
U.S. agency and government sponsored securities	6,837		(13		)
U.S. states and municipalities	8,256		(7		)
Corporate bonds	51,843		(104		)
Total	$	95,702	$	(133	)



	December 31, 2016
	Fair Value		Gross Unrealized Losses
U.S. agency and government sponsored securities	$	3,291	$	(12	)
U.S. states and municipalities	22,286		(75		)
Corporate bonds	29,748		(120		)
Total	$	55,325	$	(207	)

As of June 30, 2017 and December 31, 2016, there were no securities that had been in a loss position for more than twelve months.

The contractual maturities of the Company’s marketable investments as of June 30, 2017 and December 31, 2016 were as follows (in thousands):



	June 30, 2017		December 31, 2016
	Fair Value		Fair Value
Due in less than one year	$	121,290	$	71,051
Due in one to five years	20,778		44,466
Total	$	142,068	$	115,517

Non-Marketable Equity Investments

In May 2017, the Company and an unrelated third-party formed a privately-held company, MVI Health Inc. (“MVI”), with each party holding 50% of the issued and outstanding equity of MVI. The Company accounted for its investment under the equity method and is not required to consolidate under the voting model. As of June 30, 2017, the Company determined that MVI was not a variable interest entity (“VIE”). The Company will reassess in subsequent periods whether MVI becomes a VIE due to changes in facts and circumstances, including changes to the sufficiency of the equity investment at risk, management and governance structure or capital structure. As of June 30, 2017, the carrying value of the non-marketable equity investment was approximately $4.9 million, representing the Company’s contributions to MVI offset by the Company’s share of equity method investee losses. The non-marketable equity method investment is included in other non-current assets on the condensed consolidated balance sheet. The Company reflects the equity method investee losses as a component of other expense, net, in the condensed consolidated statements of operations and comprehensive (loss) income. The Company held no non-marketable equity investments in 2016.

Inventories

The components of inventories as of June 30, 2017 and December 31, 2016 consisted of the following (in thousands):



	June 30, 2017		December 31, 2016
Raw materials	$	11,068	$	11,367
Work in process	3,747		3,663
Finished goods	66,326		57,982
Inventories	$	81,141	$	73,012

Accrued Liabilities

The following table shows the components of accrued liabilities as of June 30, 2017 and December 31, 2016 (in thousands):



	June 30, 2017		December 31, 2016
Payroll and employee-related cost	$	18,865	$	16,956
Sales return reserve	2,994		2,753
Preclinical and clinical trial cost	1,305		2,054
Royalty	1,165		802
Product warranty	1,037		1,254
Other accrued liabilities	7,811		7,871
Total accrued liabilities	$	33,177	$	31,690

The estimated product warranty accrual as of June 30, 2017 and December 31, 2016 was as follows (in thousands):



	June 30, 2017			December 31, 2016
Balance at the beginning of the period	$	1,254		$	713
Accruals of warranties issued	142			1,176
Settlements of warranty claims	(359		)	(635		)
Balance at the end of the period	$	1,037		$	1,254

Commitments and Contingencies

5. Commitments and Contingencies

Lease Commitments

The Company leases its offices under non-cancelable operating leases that expire at various dates from 2029 to 2031. Rent expense for non-cancelable operating leases with scheduled rent increases is recognized on a straight-line basis over the lease term. Rent expense for the three months ended June 30, 2017 and 2016 was $1.5 million and $1.3 million, respectively and for the six months ended June 30, 2017 and 2016 was $2.9 million and $2.4 million, respectively. In addition, the Company’s lease commitments also require it to make additional payments during the lease term for taxes, insurance and other operating expenses. The Company leases its other equipment under non-cancelable operating leases that expire at various dates through 2021.

Royalty Obligations

In March 2005, the Company entered into a license agreement that requires the Company to make minimum royalty payments to the licensor on a quarterly basis. As of both June 30, 2017 and December 31, 2016, the license agreement required minimum annual royalty payments of $0.1 million in equal quarterly installments. On each January 1, the quarterly calendar year minimum royalty will be adjusted to equal the prior year’s minimum royalty adjusted by a percentage equal to the percentage change in the “consumer price index for all urban consumers” for the prior calendar year as reported by the U.S. Department of Labor. Unless terminated earlier, the term of the license agreement will continue until the expiration of the last to expire patent that covers that licensed product or 2022, whichever is longer.

In April 2012, the Company entered into an agreement that requires the Company to pay, on a quarterly basis, a 5% royalty on sales of products covered under applicable patents. Unless the agreement is terminated earlier, the royalty term for each applicable product will continue until the expirations of the applicable patent covering such product or 2029, whichever is longer.

In November 2013, the Company entered into an agreement that requires the Company to pay, on a quarterly basis, a 3% royalty on the first $5 million in sales and a 1% royalty on sales thereafter of products covered under applicable patents. Unless the agreement is terminated earlier, the royalty for each covered product shall continue until 2030.

In April 2015, the Company entered into a royalty agreement that requires the Company to pay, on a quarterly basis, a 2% royalty on sales of certain products covered by the agreement. Unless the royalty agreement is terminated earlier, the royalty term for each covered product shall continue until 2035.

Royalty expense included in cost of revenue for the three months ended June 30, 2017 and 2016 was $1.2 million and $0.7 million, respectively and for the six months ended June 30, 2017 and 2016 was $2.0 million and $1.4 million, respectively.

Contingencies

From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of business. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.

Indemnification

The Company enters into standard indemnification arrangements in the ordinary course of business. In many such arrangements, the Company agrees to indemnify, hold harmless, and reimburse the indemnified parties for losses suffered or incurred by the indemnified parties in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third-party with respect to the Company’s technology. The Company also agrees to indemnify many purchasers for product defect and similar claims. The term of these indemnification agreements is generally perpetual. The maximum potential amount of future payments the Company could be required to make under these agreements is not determinable because it involves claims that may be made against the Company in the future, but have not yet been made.

The Company has entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers, other than liabilities arising from willful misconduct of the individual.

The Company has not incurred costs to defend lawsuits or settle claims related to these indemnification agreements. No liability associated with any of these indemnification requirements has been recorded to date.

Litigation

The Company was contacted in 2015 by the attorney for a potential product liability claimant who allegedly suffered injuries as a result of an aneurysm procedure in which the Penumbra Coil 400 was used. On February 19, 2016, a complaint for damages was filed on behalf of this claimant against Penumbra and the hospital involved in the procedure (Montgomery v. Penumbra, Inc., et al., Case No. 16-2-04050-1 SEA, Superior Court of the State of Washington, King County). The suit alleges liability primarily under the Washington Product Liability Act (“WPLA”) and sought both compensatory and punitive damages without a specific damages claim. Based on the Company’s preliminary motion, the punitive damages claim was dismissed in May 2016, along with several of the other causes of action subsumed by the WPLA. In recent submissions, plaintiffs claim economic damages in the $4-6 million range and non-economic damages of at least $20 million. These amounts are substantially in excess of the Company’s insurance coverage. The case is in the discovery phase, and trial is currently set for January 2018. The Company will continue to vigorously defend the litigation, as the Company believes there are substantial questions regarding causation, liability and damages.If the case proceeds to trial, the results of any jury trial and the damages that a jury might award are inherently uncertain.

From time to time, the Company is subject to other claims and assessments in the ordinary course of business. The Company is not currently a party to any such litigation matter that, individually or in the aggregate, is expected to have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.

Stockholder's Equity

6. Stockholders’ Equity

Common Stock

In March 2017, the Company issued and sold an aggregate of 1,495,000 shares of common stock at a public offering price of $76.00 per share, less the underwriters’ discounts and commissions, pursuant to an underwritten public offering. The Company received approximately $106.3 million in net cash proceeds after deducting underwriting discounts and commissions of $6.8 million and other offering expenses of $0.5 million.

Equity Incentive Plans

Stock Options

Activity of stock options under the Penumbra, Inc. 2005 Stock Plan, the Penumbra, Inc. 2011 Equity Incentive Plan and the Amended and Restated Penumbra, Inc. 2014 Equity Incentive Plan (collectively the “Plans”) during the six months ended June 30, 2017 is set forth below:



	Number of Shares		Weighted- Average Exercise Price
Balance at December 31, 2016	2,876,955		$	14.63
Options exercised	(543,972	)	4.79
Options canceled	(2,276	)	15.95
Balance at June 30, 2017	2,330,707		16.93

Restricted Stock and Restricted Stock Units

The following table summarizes the activity of unvested restricted stock and restricted stock units under the Plans during the six months ended June 30, 2017 is set forth below:



	Number of Shares		Weighted Average Grant Date Fair Value
Unvested at December 31, 2016	1,002,944		$	29.44
Granted	77,399		78.16
Vested	(280,262	)	17.14
Canceled/Forfeited	(18,625	)	42.43
Unvested and expected to vest at June 30, 2017	781,456		38.37

Stock-based Compensation

The following table sets forth the stock-based compensation expense included in the Company’s condensed consolidated statements of operations and comprehensive (loss) income for the three and six months ended June 30, 2017 and 2016 (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Cost of revenue	$	191	$	651	$	501	$	660
Research and development	308		281		561		539
Sales, general and administrative	4,094		2,590		7,543		5,338
Total	$	4,593	$	3,522	$	8,605	$	6,537

As of June 30, 2017, total unrecognized compensation cost was $32.9 million related to unvested share-based compensation arrangements which is expected to be recognized over a weighted average period of 2.5 years.

The total stock-based compensation cost capitalized in inventory was $0.3 million and $0.4 million as of June 30, 2017 and December 31, 2016, respectively.

Accumulated Other Comprehensive (Loss) Income

7. Accumulated Other Comprehensive (Loss) Income

Other comprehensive income consists of two components: unrealized gains or losses on the Company’s available-for-sale marketable investments, and gains or losses from foreign currency translation adjustments. Until realized and reported as a component of net income, these comprehensive income items accumulate and are included within accumulated other comprehensive (loss) income. Unrealized gains and losses on the Company’s marketable investments are reclassified from accumulated other comprehensive (loss) income into earnings when realized upon sale, and are determined based on specific identification of securities sold. Gains and losses from the translation of assets and liabilities denominated in non-U.S. dollar functional currencies are included in accumulated other comprehensive (loss) income.

The following table summarizes the changes in the accumulated balances during the three and six months ended June 30, 2017 and 2016, and includes information regarding the manner in which the reclassifications out of accumulated other comprehensive (loss) income into earnings affect the Company’s condensed consolidated statements of operations and comprehensive (loss) income (in thousands):



	Three Months Ended June 30, 2017									Three Months Ended June 30, 2016
	Marketable Investments			Currency Translation Adjustments			Total			Marketable Investments			Currency Translation Adjustments			Total
Balance at beginning of the period	$	(35	)	$	(3,891	)	$	(3,926	)	$	118		$	(904	)	$	(786	)
Other comprehensive income before reclassifications:
Unrealized gains —marketable investments	2			—			2			138			—			138
Foreign currency translation losses	—			(766		)	(766		)	—			(1,875		)	(1,875		)
Income tax effect—expense	—			—			—			(49		)	(6		)	(55		)
Net of tax	2			(766		)	(764		)	89			(1,881		)	(1,792		)
Amounts reclassified from accumulated other comprehensive income to earnings:
Realized gains—marketable investments	(5		)	—			(5		)	(2		)	—			(2		)
Income tax effect—benefit	—			—			—			1			—			1
Net of tax	(5		)	—			(5		)	(1		)	—			(1		)
Net current-year other comprehensive (loss) income	(3		)	(766		)	(769		)	88			(1,881		)	(1,793		)
Balance at end of the period	$	(38	)	$	(4,657	)	$	(4,695	)	$	206		$	(2,785	)	$	(2,579	)



	Six Months Ended June 30, 2017									Six Months Ended June 30, 2016
	Marketable Investments			Currency Translation Adjustments			Total			Marketable Investments			Currency Translation Adjustments			Total
Balance at beginning of the period	$	(105	)	$	(4,583	)	$	(4,688	)	$	(163	)	$	(1,952	)	$	(2,115	)
Other comprehensive income before reclassifications:
Unrealized gains —marketable investments	103			—			103			580			—			580
Foreign currency translation losses	—			(74		)	(74		)	—			(832		)	(832		)
Income tax effect—expense	—			—			—			(209		)	(1		)	(210		)
Net of tax	103			(74		)	29			371			(833		)	(462		)
Amounts reclassified from accumulated other comprehensive income to earnings:
Realized gains—marketable investments	(36		)	—			(36		)	(3		)	—			(3		)
Income tax effect—benefit	—			—			—			1			—			1
Net of tax	(36		)	—			(36		)	(2		)	—			(2		)
Net current-year other comprehensive income (loss)	67			(74		)	(7		)	369			(833		)	(464		)
Balance at end of the period	$	(38	)	$	(4,657	)	$	(4,695	)	$	206		$	(2,785	)	$	(2,579	)

Income Taxes

8. Income Taxes

The Company’s income tax expense, DTAs and liabilities, and reserves for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid. The Company is subject to income taxes in both the United States and foreign jurisdictions. Significant judgment and estimates are required in determining the consolidated income tax expense.

During interim periods, the Company generally utilizes the estimated annual effective tax rate method which involves the use of forecasted information. Under this method, the provision is calculated by applying an estimate of the annual effective tax rate for the full fiscal year to “ordinary” income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. Jurisdictions with tax assets for which the Company believes a tax benefit cannot be realized are excluded from the computation of its annual effective tax rate. The Company’s effective tax rate changed to (44.8)% for the three months ended June 30, 2017, compared to 886.7% for the three months ended June 30, 2016. The Company’s effective tax rate changed to (65.0)% for the six months ended June 30, 2017, compared to (205.2)% for the six months ended June 30, 2016. The change in rate for both reporting periods was primarily attributable to excluding the tax benefits associated with the Company’s U.S. jurisdiction due to the partial valuation allowance recorded against its domestic DTAs as of June 30, 2017, and the year-to-date tax impact associated with intra-entity asset transfers. The effective tax rates for the three and six months ended June 30, 2016 include the retroactive adoption of ASU 2016-09.

The Company generated significant domestic DTAs in the year ended December 31, 2016 and six month period ended June 30, 2017, primarily due to the excess tax benefits from stock option exercises and vesting of restricted stock upon application of ASU 2016-09. The Company assessed its ability to realize the benefits of its domestic DTAs prior to expiration by evaluating all available positive and negative evidence, objective and subjective in nature, including (1) cumulative results of operations in recent years, (2) sources of recent pre-tax losses, (3) estimates of future taxable income, (4) the length of net operating loss (“NOL”) carryforward periods, and (5) the ability to carry back losses to prior years. The Company determined it would be in a three-year cumulative taxable income position, had it not been for the impact of excess tax deductions from stock-based compensation under ASU 2016-09, and attributes recent period operating losses to operating expenses incurred to invest in the future growth of the business. The Company also measured its current DTA balances against estimates of future income based on objectively verifiable operating results from the Company’s recent history, as well as estimates of future income that incorporates the Company’s forecasted operating results for fiscal 2017.

Due to the significant amount of additional stock-based compensation excess tax deductions available upon adoption of ASU 2016-9, the Company could not conclude, at the required more-likely-than-not level of certainty, that sufficient taxable income will be generated to realize the full benefit of its domestic DTAs as of June 30, 2017 prior to expiration. As such, a partial valuation allowance was recorded against the Company’s domestic DTAs as of June 30, 2017 in the amount of $16.8 million, which was approximately the same amount as the stock-based compensation excess tax benefits created during the six months ended June 30, 2017. The Company will continue to closely monitor the need for an additional valuation allowance against its existing domestic DTAs and any additional DTAs that are generated in each subsequent reporting period, which can be impacted by actual operating results compared to the Company’s forecast.

Consistent with prior periods, the Company maintained a full valuation allowance against its California and Canada DTAs as of June 30, 2017.

Net (Loss) Income per Share

9. Net (Loss) Income per Share

The Company’s basic net income per share is calculated by dividing the net income by the weighted average number of shares of common stock outstanding for the period. The diluted net (loss) income per share is computed by giving effect to all potential dilutive common stock equivalents outstanding for the period. For purposes of this calculation, options to purchase common stock, restricted stock, restricted stock units and stock through the Company’s employee stock purchase plan are considered common stock equivalents.

A reconciliation of the numerator and denominator used in the calculation of the basic and diluted net (loss) income per share for the three and six months ended June 30, 2017 and 2016 is as follows (in thousands, except share and per share amounts):



	Three Months Ended June 30,					Six Months Ended June 30,
	2017			2016		2017			2016
Net (loss) income per share:
Numerator
Net (loss) income—basic and diluted	$	(1,558	)	$	3,013	$	(4,664	)	$	5,304
Denominator
Weighted average shares used to compute net (loss) income —Basic	33,219,487			30,210,322		32,420,105			30,100,162
Potential dilutive stock-based awards, as calculated using treasury stock method	—			3,097,871		—			3,037,202
Weighted average shares used to compute net income —Diluted	33,219,487			33,308,193		32,420,105			33,137,364
Net (loss) income per share from:
Basic	$	(0.05	)	$	0.10	$	(0.14	)	$	0.18
Diluted	$	(0.05	)	$	0.09	$	(0.14	)	$	0.16

Outstanding stock-based awards of 3.2 million and 15,210 shares for the three months ended June 30, 2017 and 2016, respectively, and 3.2 million and 37,634 shares for the six months ended June 30, 2017 and 2016, respectively, were excluded from the computation of diluted net income per share because their effect would have been anti-dilutive.

Subsequent Event

10. Subsequent Event

On July 3, 2017, the Company acquired all of the outstanding shares of Crossmed S.p.a. (“Crossmed”), a joint stock company organized under the laws of Italy engaged in the business of distributing medical supplies and equipment in Italy, San Marino, the Vatican, and Switzerland. The Company acquired Crossmed for an initial purchase price of €8.2 million in cash, or approximately $9.3 million, subject to customary post-closing adjustments for working capital and financial debt. The Company will pay additional consideration in the form of milestone payments based on Crossmed’s net revenue, and may pay additional consideration based on incremental net revenue, for each of the years ending December 31, 2017, 2018 and 2019. The required disclosures have not been provided as the Company is currently in the process of completing the accounting for this transaction due to the timing of the acquisition. The Company expects to complete the preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed and the pro forma impact of this acquisition by the end of its third quarter of fiscal 2017.

Summary of Significant Accounting Policies (Policies)

Basis of Presentation and Consolidation

The accompanying condensed consolidated balance sheet as of June 30, 2017, the condensed consolidated statements of operations and comprehensive (loss) income for the three and six months ended June 30, 2017 and 2016, and the condensed consolidated statements of cash flows for the six months ended June 30, 2017 and 2016 are unaudited. The unaudited condensed consolidated financial statements included herein have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The condensed consolidated balance sheet as of December 31, 2016 was derived from the audited financial statements as of that date.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments of a normal recurring nature considered necessary to state fairly the Company’s financial position as of June 30, 2017, the results of its operations for the three and six months ended June 30, 2017 and 2016, and the cash flows for the six months ended June 30, 2017 and 2016. The results for the three and six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017 or for any other future annual or interim period. Certain changes in presentation were made in the condensed consolidated financial statements for the three and six months ended June 30, 2016, to conform to the presentation for the three and six months ended June 30, 2017.

The Company elected to early adopt Accounting Standards Update (“ASU”) 2016-09 in the fourth quarter of 2016 which requires the Company to reflect any adjustments as of January 1, 2016, the beginning of the annual period that includes the interim period of adoption. The impact of adoption was the creation of deferred tax assets (“DTAs”) in the balance sheet and recognition of excess tax benefits in our provision for (benefit from) income taxes rather than paid-in capital for all periods in fiscal year 2016. The Company’s adoption of ASU 2016-09 resulted in the recognition of excess tax benefits in the Company’s benefit from income taxes rather than paid-in capital of $2.9 million and $4.4 million for the three and six months ended June 30, 2016, respectively. In addition, the Company elected to apply the presentation requirements for cash flows related to excess tax benefits retrospectively to all periods presented.

Adoption of the new standard resulted in adjustments to our 2016 unaudited selected financial data previously reported in our Quarterly Report on Form 10-Q as follows:



	June 30, 2016
(In thousands)	As Reported			As Adjusted
Condensed Consolidated Balance Sheet Data:
Prepaid expenses and other current assets	$	17,406		$	17,371
Total current assets	$	260,252		$	260,217
Total assets	$	283,979		$	283,944
Additional paid-in-capital	$	266,650		$	262,276
Accumulated deficit	$	(16,510	)	$	(12,171	)
Total stockholders’ equity	$	247,591		$	247,556
Total liabilities and stockholders’ equity	$	283,979		$	283,944



	Three Months Ended June 30, 2016						Six Months Ended June 30, 2016
(In thousands, except percentage and per share amounts)	As Reported			As Adjusted			As Reported		As Adjusted
Condensed Consolidated Statements of Operations Data:
(Benefit from) provision for income taxes	$	(568	)	$	(3,396	)	$	773	$	(3,566	)
Net income	$	185		$	3,013		$	965	$	5,304
Net income per share from:
Basic	$	0.01		$	0.10		$	0.03	$	0.18
Diluted	$	0.01		$	0.09		$	0.03	$	0.16
Weighted average shares used to compute net income (loss) per share attributable to common stockholders for:
Basic	30,210,322			30,210,322			30,100,162		30,100,162
Diluted	32,693,684			33,308,193			32,542,253		33,137,364



	Six Months Ended June 30, 2016
(In thousands)	As Reported			As Adjusted
Condensed Consolidated Statement of Cash Flow Data:
Net cash (used in) operating activities	$	(12,555	)	$	(8,182	)
Net cash provided by financing activities	$	7,803		$	3,430

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K. During the six months ended June 30, 2017, the Company added an accounting policy for non-marketable equity investments. There have been no other changes to the Company’s significant accounting policies during the six months ended June 30, 2017, as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and equity accounts; disclosure of contingent assets and liabilities at the date of the financial statements; and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to marketable investments, provisions for doubtful accounts, sales return reserve, warranty reserve, valuation of inventories, useful lives of property and equipment, income taxes, and contingencies, among others. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other data. Actual results could differ from those estimates.

Segments

The Company determined its operating segment on the same basis that it uses to evaluate its performance internally. The Company has one business activity: the design, development, manufacturing and marketing of innovative medical devices, and operates as one operating segment. The Company’s chief operating decision-maker, its Chief Executive Officer, reviews its operating results for the purpose of allocating resources and evaluating financial performance. The Company determines revenue by geographic area, based on the destination to which it ships its products.

Recently Issued Accounting Standards

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which outlines a comprehensive new revenue recognition model designed to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers—Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which further clarifies the implementation guidance on principal versus agent considerations contained in ASU 2014-09. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers—Identifying Performance Obligations and Licensing, which further clarifies the implementation guidance relating to identifying performance obligations and the licensing implementation guidance. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers—Narrow-Scope improvements and Practical Expedients, which further clarifies the implementation on narrow scope improvements and practical expedients. In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606—Revenue from Contracts with Customers, which makes minor corrections or minor improvements to the Codification related to ASU No. 2014-09 that are not expected to have a significant effect on the Company’s current accounting practice. These standards will be effective for the Company in the first quarter of 2018 pursuant to ASU No. 2015-14, Revenue from Contracts with Customers-Deferral of the Effective Date, issued by the FASB in August 2015. The Company intends to adopt the new standard on a modified retrospective basis on January 1, 2018. Under this method, the Company will record a cumulative-effect adjustment to the opening balance of retained earnings in the initial year of adoption. The timing of revenue recognition based on the guidance related to transfer of control may result in acceleration of revenue recognition for some contracts. The Company does not expect the impact of the new standard to be material, but it may result in expanded financial statement disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. As we continue our assessment through the remainder of 2017, our preliminary assessment is subject to change.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which amends the existing accounting standards for leases. Under the new guidance, a lessee will be required to recognize a lease liability and right-of-use asset for all leases with terms in excess of twelve months. The new guidance also modifies the classification criteria and accounting for sales-type and direct financing leases, and requires additional disclosures to enable users of financial statements to understand the amount, timing, and uncertainty of cash flows arising from leases. Consistent with current guidance, a lessee’s recognition, measurement, and presentation of expenses and cash flows arising from a lease will continue to depend primarily on its classification. The accounting standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and must be applied using a modified retrospective approach. Early adoption is permitted. While the Company is continuing to assess all potential impacts of the standard, it expects that most of its lease commitments will be subject to the updated standard and recognized as lease liabilities and right-of-use assets upon adoption.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses. The standard changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The Company will recognize an allowance for credit losses on available-for-sale securities rather than deductions in amortized cost. The standard is effective for fiscal years and interim periods beginning after December 15, 2019. Early adoption is permitted for all periods beginning after December 15, 2018. The Company is currently evaluating the impact of adopting this standard.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows: Restricted Cash, a consensus of the FASB Emerging Issues Task Force. The standard requires companies to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling the total beginning and end of period amounts shown on the statement of cash flows. The standard is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. The Company does not expect the adoption of ASU 2016-18 to have a material impact on its consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation - Scope of Modification Accounting. The standard provides clarification on when modification accounting should be used for changes to the terms or conditions of a share-based payment award. This standard does not change the accounting for modifications but clarifies that modification accounting guidance should only be applied if there is a change to the value, vesting conditions, or award classification and would not be required if the changes are considered non-substantive. The standard is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted. The guidance will be applied prospectively upon adoption. The Company does not expect the adoption of ASU 2017-09 to have a material impact on its consolidated financial statements, however the impact to share-based compensation expense will depend on the terms specified in any new changes to share-based payment awards subsequent to the adoption.

Summary of Significant Accounting Policies (Tables)

Schedule of New Accounting Pronouncements and Changes in Accounting Principles

Adoption of the new standard resulted in adjustments to our 2016 unaudited selected financial data previously reported in our Quarterly Report on Form 10-Q as follows:



	June 30, 2016
(In thousands)	As Reported			As Adjusted
Condensed Consolidated Balance Sheet Data:
Prepaid expenses and other current assets	$	17,406		$	17,371
Total current assets	$	260,252		$	260,217
Total assets	$	283,979		$	283,944
Additional paid-in-capital	$	266,650		$	262,276
Accumulated deficit	$	(16,510	)	$	(12,171	)
Total stockholders’ equity	$	247,591		$	247,556
Total liabilities and stockholders’ equity	$	283,979		$	283,944



	Three Months Ended June 30, 2016						Six Months Ended June 30, 2016
(In thousands, except percentage and per share amounts)	As Reported			As Adjusted			As Reported		As Adjusted
Condensed Consolidated Statements of Operations Data:
(Benefit from) provision for income taxes	$	(568	)	$	(3,396	)	$	773	$	(3,566	)
Net income	$	185		$	3,013		$	965	$	5,304
Net income per share from:
Basic	$	0.01		$	0.10		$	0.03	$	0.18
Diluted	$	0.01		$	0.09		$	0.03	$	0.16
Weighted average shares used to compute net income (loss) per share attributable to common stockholders for:
Basic	30,210,322			30,210,322			30,100,162		30,100,162
Diluted	32,693,684			33,308,193			32,542,253		33,137,364



	Six Months Ended June 30, 2016
(In thousands)	As Reported			As Adjusted
Condensed Consolidated Statement of Cash Flow Data:
Net cash (used in) operating activities	$	(12,555	)	$	(8,182	)
Net cash provided by financing activities	$	7,803		$	3,430

Fair Value of Financial Instruments (Tables)

Schedule of Fair Value of Assets and Liabilities

The following table sets forth the Company’s financial assets and liabilities measured at fair value by level within the fair value hierarchy (in thousands):



	As of June 30, 2017
	Level 1		Level 2		Total Fair Value
Financial Assets
Cash equivalents:
Commercial paper	$	—	$	19,188	$	19,188
Money market funds	4,546		—		4,546
U.S. Treasury	4,997		—		4,997
U.S. states and municipalities	—		6,500		6,500
Marketable investments:
Commercial paper	—		24,196		24,196
U.S. Treasury	8,997		—		8,997
U.S. agency and government sponsored securities	—		6,837		6,837
U.S. states and municipalities	—		8,256		8,256
Corporate bonds	—		93,782		93,782
Total	$	18,540	$	158,759	$	177,299



	As of December 31, 2016
	Level 1		Level 2		Total Fair Value
Financial Assets
Cash equivalents:
Money market funds	$	873	$	—	$	873
Marketable investments:
Commercial paper	—		4,238		4,238
U.S. Treasury	4,996		—		4,996
U.S. agency and government sponsored securities	—		8,794		8,794
U.S. states and municipalities	—		27,355		27,355
Corporate bonds	—		68,925		68,925
Non-U.S. government debt securities	—		1,209		1,209
Total	$	5,869	$	110,521	$	116,390

Balance Sheet Components (Tables)

Schedule of Prepaid Expenses and Other Current Assets

The Company’s prepaid expenses and other current assets as of June 30, 2017 and December 31, 2016 were comprised of the following (in thousands):



	June 30, 2017		December 31, 2016
Prepaid tax	$	1,505	$	4,656
Prepaid expenses	4,729		4,573
Other current assets	8,165		9,498
Prepaid expenses and other current assets	$	14,399	$	18,727

Schedule of Marketable Investments

The Company’s marketable investments as of June 30, 2017 and December 31, 2016 were as follows (in thousands):



	June 30, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Commercial paper	$	24,198	$	1	$	(3	)	$	24,196
U.S. Treasury	9,003		—		(6		)	8,997
U.S. agency and government sponsored securities	6,850		—		(13		)	6,837
U.S. states and municipalities	8,263		—		(7		)	8,256
Corporate bonds	93,851		35		(104		)	93,782
Total	$	142,165	$	36	$	(133	)	$	142,068



	December 31, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Commercial paper	$	4,237	$	1	$	—		$	4,238
U.S. Treasury	4,996		—		—			4,996
U.S. agency and government sponsored securities	8,803		3		(12		)	8,794
U.S. states and municipalities	27,429		1		(75		)	27,355
Corporate bonds	69,009		36		(120		)	68,925
Non-U.S. government debt securities	1,209		—		—			1,209
Total	$	115,683	$	41	$	(207	)	$	115,517

Schedule of the Fair Value of Marketable Investments in an Unrealized Loss Position for Less than Twelve Months

The following tables present the gross unrealized losses and the fair value for those marketable investments that were in an unrealized loss position for less than twelve months as of June 30, 2017 and December 31, 2016 (in thousands):



	June 30, 2017
	Fair Value		Gross Unrealized Losses
Commercial paper	$	19,769	$	(3	)
U.S. Treasury	8,997		(6		)
U.S. agency and government sponsored securities	6,837		(13		)
U.S. states and municipalities	8,256		(7		)
Corporate bonds	51,843		(104		)
Total	$	95,702	$	(133	)



	December 31, 2016
	Fair Value		Gross Unrealized Losses
U.S. agency and government sponsored securities	$	3,291	$	(12	)
U.S. states and municipalities	22,286		(75		)
Corporate bonds	29,748		(120		)
Total	$	55,325	$	(207	)

Schedule of Contractual Maturities of Marketable Investments

The contractual maturities of the Company’s marketable investments as of June 30, 2017 and December 31, 2016 were as follows (in thousands):



	June 30, 2017		December 31, 2016
	Fair Value		Fair Value
Due in less than one year	$	121,290	$	71,051
Due in one to five years	20,778		44,466
Total	$	142,068	$	115,517

Schedule of Inventories

The components of inventories as of June 30, 2017 and December 31, 2016 consisted of the following (in thousands):



	June 30, 2017		December 31, 2016
Raw materials	$	11,068	$	11,367
Work in process	3,747		3,663
Finished goods	66,326		57,982
Inventories	$	81,141	$	73,012

Schedule of Accrued Liabilities

The following table shows the components of accrued liabilities as of June 30, 2017 and December 31, 2016 (in thousands):



	June 30, 2017		December 31, 2016
Payroll and employee-related cost	$	18,865	$	16,956
Sales return reserve	2,994		2,753
Preclinical and clinical trial cost	1,305		2,054
Royalty	1,165		802
Product warranty	1,037		1,254
Other accrued liabilities	7,811		7,871
Total accrued liabilities	$	33,177	$	31,690

Schedule of Estimated Product Warranty Accrual

The estimated product warranty accrual as of June 30, 2017 and December 31, 2016 was as follows (in thousands):



	June 30, 2017			December 31, 2016
Balance at the beginning of the period	$	1,254		$	713
Accruals of warranties issued	142			1,176
Settlements of warranty claims	(359		)	(635		)
Balance at the end of the period	$	1,037		$	1,254

Stockholder's Equity (Tables)

Summary of Stock Option Activity

Activity of stock options under the Penumbra, Inc. 2005 Stock Plan, the Penumbra, Inc. 2011 Equity Incentive Plan and the Amended and Restated Penumbra, Inc. 2014 Equity Incentive Plan (collectively the “Plans”) during the six months ended June 30, 2017 is set forth below:



	Number of Shares		Weighted- Average Exercise Price
Balance at December 31, 2016	2,876,955		$	14.63
Options exercised	(543,972	)	4.79
Options canceled	(2,276	)	15.95
Balance at June 30, 2017	2,330,707		16.93

Summary of Unvested Restricted Stock and Restricted Stock Unit Activity

The following table summarizes the activity of unvested restricted stock and restricted stock units under the Plans during the six months ended June 30, 2017 is set forth below:



	Number of Shares		Weighted Average Grant Date Fair Value
Unvested at December 31, 2016	1,002,944		$	29.44
Granted	77,399		78.16
Vested	(280,262	)	17.14
Canceled/Forfeited	(18,625	)	42.43
Unvested and expected to vest at June 30, 2017	781,456		38.37

Schedule of Stock-based Compensation Expense

The following table sets forth the stock-based compensation expense included in the Company’s condensed consolidated statements of operations and comprehensive (loss) income for the three and six months ended June 30, 2017 and 2016 (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Cost of revenue	$	191	$	651	$	501	$	660
Research and development	308		281		561		539
Sales, general and administrative	4,094		2,590		7,543		5,338
Total	$	4,593	$	3,522	$	8,605	$	6,537

Accumulated Other Comprehensive (Loss) Income (Tables)

Schedule of Accumulated Other Comprehensive Income (Loss)



	Six Months Ended June 30, 2017									Six Months Ended June 30, 2016
	Marketable Investments			Currency Translation Adjustments			Total			Marketable Investments			Currency Translation Adjustments			Total
Balance at beginning of the period	$	(105	)	$	(4,583	)	$	(4,688	)	$	(163	)	$	(1,952	)	$	(2,115	)
Other comprehensive income before reclassifications:
Unrealized gains —marketable investments	103			—			103			580			—			580
Foreign currency translation losses	—			(74		)	(74		)	—			(832		)	(832		)
Income tax effect—expense	—			—			—			(209		)	(1		)	(210		)
Net of tax	103			(74		)	29			371			(833		)	(462		)
Amounts reclassified from accumulated other comprehensive income to earnings:
Realized gains—marketable investments	(36		)	—			(36		)	(3		)	—			(3		)
Income tax effect—benefit	—			—			—			1			—			1
Net of tax	(36		)	—			(36		)	(2		)	—			(2		)
Net current-year other comprehensive income (loss)	67			(74		)	(7		)	369			(833		)	(464		)
Balance at end of the period	$	(38	)	$	(4,657	)	$	(4,695	)	$	206		$	(2,785	)	$	(2,579	)

The following table summarizes the changes in the accumulated balances during the three and six months ended June 30, 2017 and 2016, and includes information regarding the manner in which the reclassifications out of accumulated other comprehensive (loss) income into earnings affect the Company’s condensed consolidated statements of operations and comprehensive (loss) income (in thousands):



	Three Months Ended June 30, 2017									Three Months Ended June 30, 2016
	Marketable Investments			Currency Translation Adjustments			Total			Marketable Investments			Currency Translation Adjustments			Total
Balance at beginning of the period	$	(35	)	$	(3,891	)	$	(3,926	)	$	118		$	(904	)	$	(786	)
Other comprehensive income before reclassifications:
Unrealized gains —marketable investments	2			—			2			138			—			138
Foreign currency translation losses	—			(766		)	(766		)	—			(1,875		)	(1,875		)
Income tax effect—expense	—			—			—			(49		)	(6		)	(55		)
Net of tax	2			(766		)	(764		)	89			(1,881		)	(1,792		)
Amounts reclassified from accumulated other comprehensive income to earnings:
Realized gains—marketable investments	(5		)	—			(5		)	(2		)	—			(2		)
Income tax effect—benefit	—			—			—			1			—			1
Net of tax	(5		)	—			(5		)	(1		)	—			(1		)
Net current-year other comprehensive (loss) income	(3		)	(766		)	(769		)	88			(1,881		)	(1,793		)
Balance at end of the period	$	(38	)	$	(4,657	)	$	(4,695	)	$	206		$	(2,785	)	$	(2,579	)

Net (Loss) Income per Share (Tables)

Reconciliation of the Numerator and Denominator used in the Calculation of the Basic and Diluted Earnings per Share

A reconciliation of the numerator and denominator used in the calculation of the basic and diluted net (loss) income per share for the three and six months ended June 30, 2017 and 2016 is as follows (in thousands, except share and per share amounts):



	Three Months Ended June 30,					Six Months Ended June 30,
	2017			2016		2017			2016
Net (loss) income per share:
Numerator
Net (loss) income—basic and diluted	$	(1,558	)	$	3,013	$	(4,664	)	$	5,304
Denominator
Weighted average shares used to compute net (loss) income —Basic	33,219,487			30,210,322		32,420,105			30,100,162
Potential dilutive stock-based awards, as calculated using treasury stock method	—			3,097,871		—			3,037,202
Weighted average shares used to compute net income —Diluted	33,219,487			33,308,193		32,420,105			33,137,364
Net (loss) income per share from:
Basic	$	(0.05	)	$	0.10	$	(0.14	)	$	0.18
Diluted	$	(0.05	)	$	0.09	$	(0.14	)	$	0.16

Organization and Description of Business (Details)

6 Months Ended

Jun. 30, 2017

market

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Number of major markets

2

Summary of Significant Accounting Policies - Additional Disclosures (Details)

6 Months Ended

Jun. 30, 2017

activity

segment

Schedule of Equity Method Investments [Line Items]

Number of business activities

1

Number of operating segments

1

Minimum

Schedule of Equity Method Investments [Line Items]

Equity method ownership percentage

20.00%

Maximum

Schedule of Equity Method Investments [Line Items]

Equity method ownership percentage

50.00%

Summary of Significant Accounting Policies - New Accounting Pronouncements (Details) (USD $)

3 Months Ended

6 Months Ended

Jun. 30, 2017

Jun. 30, 2016

Jun. 30, 2017

Jun. 30, 2016

Dec. 31, 2016

New Accounting Pronouncements or Change in Accounting Principle [Line Items]

Excess tax deduction

$ 2,900,000

$ 4,400,000

Condensed Consolidated Balance Sheet Data:

Prepaid expenses and other current assets

14,399,000

18,727,000

Assets, Current

364,717,000

263,827,000

Assets

417,003,000

308,254,000

Additional paid-in capital

384,965,000

273,865,000

Accumulated deficit

(7,325,000)

(2,661,000)

Total stockholder’ equity

372,978,000

266,547,000

Liabilities and Equity

417,003,000

308,254,000

Condensed Consolidated Statements of Operations Data:

Provision for (Benefit from) income taxes

482,000

(3,396,000)

1,837,000

(3,566,000)

Net (loss) income

(1,558,000)

3,013,000

(4,664,000)

5,304,000

Net income per share

Basic (in dollars per share)

$ (0.05)

$ 0.10

$ (0.14)

$ 0.18

Diluted (in dollars per share)

$ (0.05)

$ 0.09

$ (0.14)

$ 0.16

Weighted average shares used to compute net income (loss) per share attributable to common shareholders

Basic (in shares)

33,219,487

30,210,322

32,420,105

30,100,162

Diluted (in shares)

33,219,487

33,308,193

32,420,105

33,137,364

Condensed Consolidated Statement of Cash Flow Data:

Net cash (used in) operating activities

2,844,000

(8,182,000)

Net cash (used in) financing activities

102,614,000

3,430,000

Accounting Standards Update 2016-09

Condensed Consolidated Balance Sheet Data:

Prepaid expenses and other current assets

17,371,000

Assets, Current

260,217,000

Assets

283,944,000

Additional paid-in capital

262,276,000

Accumulated deficit

(12,171,000)

Total stockholder’ equity

247,556,000

Liabilities and Equity

283,944,000

Condensed Consolidated Statements of Operations Data:

Provision for (Benefit from) income taxes

(3,396,000)

(3,566,000)

Net (loss) income

3,013,000

5,304,000

Net income per share

Basic (in dollars per share)

$ 0.10

$ 0.18

Diluted (in dollars per share)

$ 0.09

$ 0.16

Weighted average shares used to compute net income (loss) per share attributable to common shareholders

Basic (in shares)

30,210,322

30,100,162

Diluted (in shares)

33,308,193

33,137,364

Condensed Consolidated Statement of Cash Flow Data:

Net cash (used in) operating activities

(8,182,000)

Net cash (used in) financing activities

3,430,000

As Reported

Condensed Consolidated Balance Sheet Data:

Prepaid expenses and other current assets

17,406,000

Assets, Current

260,252,000

Assets

283,979,000

Additional paid-in capital

266,650,000

Accumulated deficit

(16,510,000)

Total stockholder’ equity

247,591,000

Liabilities and Equity

283,979,000

Condensed Consolidated Statements of Operations Data:

Provision for (Benefit from) income taxes

(568,000)

773,000

Net (loss) income

185,000

965,000

Net income per share

Basic (in dollars per share)

$ 0.01

$ 0.03

Diluted (in dollars per share)

$ 0.01

$ 0.03

Weighted average shares used to compute net income (loss) per share attributable to common shareholders

Basic (in shares)

30,210,322

30,100,162

Diluted (in shares)

32,693,684

32,542,253

Condensed Consolidated Statement of Cash Flow Data:

Net cash (used in) operating activities

(12,555,000)

Net cash (used in) financing activities

$ 7,803,000

Fair Value of Financial Instruments (Details) (Recurring, USD $)

In Thousands, unless otherwise specified

Jun. 30, 2017

Dec. 31, 2016

Financial Assets

Total

$ 177,299

$ 116,390

Commercial paper

Financial Assets

Marketable investments

24,196

4,238

U.S. Treasury

Financial Assets

Marketable investments

8,997

4,996

U.S. agency and government sponsored securities

Financial Assets

Marketable investments

6,837

8,794

U.S. states and municipalities

Financial Assets

Marketable investments

8,256

27,355

Corporate bonds

Financial Assets

Marketable investments

93,782

68,925

Non-U.S. government debt securities

Financial Assets

Marketable investments

1,209

Commercial paper

Financial Assets

Cash equivalents

19,188

Money market funds

Financial Assets

Cash equivalents

4,546

873

U.S. Treasury

Financial Assets

Cash equivalents

4,997

U.S. states and municipalities

Financial Assets

Cash equivalents

6,500

Level 1

Financial Assets

Total

18,540

5,869

Level 1 |
Commercial paper

Financial Assets

Marketable investments

0

Level 1 |
U.S. Treasury

Financial Assets

Marketable investments

8,997

4,996

Level 1 |
U.S. agency and government sponsored securities

Financial Assets

Marketable investments

0

Level 1 |
U.S. states and municipalities

Financial Assets

Marketable investments

0

Level 1 |
Corporate bonds

Financial Assets

Marketable investments

0

Level 1 |
Non-U.S. government debt securities

Financial Assets

Marketable investments

0

Level 1 |
Commercial paper

Financial Assets

Cash equivalents

0

Level 1 |
Money market funds

Financial Assets

Cash equivalents

4,546

873

Level 1 |
U.S. Treasury

Financial Assets

Cash equivalents

4,997

Level 1 |
U.S. states and municipalities

Financial Assets

Cash equivalents

0

Level 2

Financial Assets

Total

158,759

110,521

Level 2 |
Commercial paper

Financial Assets

Marketable investments

24,196

4,238

Level 2 |
U.S. Treasury

Financial Assets

Marketable investments

0

Level 2 |
U.S. agency and government sponsored securities

Financial Assets

Marketable investments

6,837

8,794

Level 2 |
U.S. states and municipalities

Financial Assets

Marketable investments

8,256

27,355

Level 2 |
Corporate bonds

Financial Assets

Marketable investments

93,782

68,925

Level 2 |
Non-U.S. government debt securities

Financial Assets

Marketable investments

1,209

Level 2 |
Commercial paper

Financial Assets

Cash equivalents

19,188

Level 2 |
Money market funds

Financial Assets

Cash equivalents

0

Level 2 |
U.S. Treasury

Financial Assets

Cash equivalents

0

Level 2 |
U.S. states and municipalities

Financial Assets

Cash equivalents

$ 6,500

Balance Sheet Components - Prepaid Expenses and Other Current Assets (Details) (USD $)

In Thousands, unless otherwise specified

Jun. 30, 2017

Dec. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Prepaid tax

$ 1,505

$ 4,656

Prepaid expenses

4,729

4,573

Other current assets

8,165

9,498

Prepaid expenses and other current assets

$ 14,399

$ 18,727

Balance Sheet Components - Gains and Losses of Marketable Investments (Details) (USD $)

In Thousands, unless otherwise specified

Jun. 30, 2017

Dec. 31, 2016

Schedule of Available-for-sale Securities [Line Items]

Amortized Cost

$ 142,165

$ 115,683

Gross Unrealized Gains

36

41

Gross Unrealized Losses

(133)

(207)

Fair Value

142,068

115,517

Commercial paper

Schedule of Available-for-sale Securities [Line Items]

Amortized Cost

24,198

4,237

Gross Unrealized Gains

1

Gross Unrealized Losses

(3)

0

Fair Value

24,196

4,238

U.S. Treasury

Schedule of Available-for-sale Securities [Line Items]

Amortized Cost

9,003

4,996

Gross Unrealized Gains

0

Gross Unrealized Losses

(6)

0

Fair Value

8,997

4,996

U.S. agency and government sponsored securities

Schedule of Available-for-sale Securities [Line Items]

Amortized Cost

6,850

8,803

Gross Unrealized Gains

0

3

Gross Unrealized Losses

(13)

(12)

Fair Value

6,837

8,794

U.S. states and municipalities

Schedule of Available-for-sale Securities [Line Items]

Amortized Cost

8,263

27,429

Gross Unrealized Gains

0

1

Gross Unrealized Losses

(7)

(75)

Fair Value

8,256

27,355

Corporate bonds

Schedule of Available-for-sale Securities [Line Items]

Amortized Cost

93,851

69,009

Gross Unrealized Gains

35

36

Gross Unrealized Losses

(104)

(120)

Fair Value

93,782

68,925

Non-U.S. government debt securities

Schedule of Available-for-sale Securities [Line Items]

Amortized Cost

1,209

Gross Unrealized Gains

0

Gross Unrealized Losses

0

Fair Value

$ 1,209

Balance Sheet Components - Marketable Securities in an Unrealized Loss Position (Details) (USD $)

Jun. 30, 2017

Dec. 31, 2016

Schedule of Available-for-sale Securities [Line Items]

Fair Value

$ 95,702,000

$ 55,325,000

Gross Unrealized Losses, less than 12 months

(133,000)

(207,000)

Gross Unrealized Losses, greater than 12 months

0

Commercial paper

Schedule of Available-for-sale Securities [Line Items]

Fair Value

19,769,000

Gross Unrealized Losses, less than 12 months

(3,000)

U.S. Treasury

Schedule of Available-for-sale Securities [Line Items]

Fair Value

8,997,000

Gross Unrealized Losses, less than 12 months

(6,000)

U.S. agency and government sponsored securities

Schedule of Available-for-sale Securities [Line Items]

Fair Value

6,837,000

3,291,000

Gross Unrealized Losses, less than 12 months

(13,000)

(12,000)

U.S. states and municipalities

Schedule of Available-for-sale Securities [Line Items]

Fair Value

8,256,000

22,286,000

Gross Unrealized Losses, less than 12 months

(7,000)

(75,000)

Corporate bonds

Schedule of Available-for-sale Securities [Line Items]

Fair Value

51,843,000

29,748,000

Gross Unrealized Losses, less than 12 months

$ (104,000)

$ (120,000)

Balance Sheet Components - Contractual Maturities of Marketable Investments (Details) (USD $)

In Thousands, unless otherwise specified

Jun. 30, 2017

Dec. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Due in less than one year

$ 121,290

$ 71,051

Due in one to five years

20,778

44,466

Total

$ 142,068

$ 115,517

Balance Sheet Components - Non-Marketable Equity Investments (Details) (USD $)

Dec. 31, 2016

Jun. 30, 2017

MVI

May 31, 2017

MVI

Schedule of Equity Method Investments [Line Items]

Equity method ownership percentage

50.00%

Carrying value of investment

$ 0

$ 4,900,000

Balance Sheet Components - Inventories (Details) (USD $)

In Thousands, unless otherwise specified

Jun. 30, 2017

Dec. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Raw materials

$ 11,068

$ 11,367

Work in process

3,747

3,663

Finished goods

66,326

57,982

Inventories

$ 81,141

$ 73,012

Balance Sheet Components - Accrued Liabilities (Details) (USD $)

In Thousands, unless otherwise specified

Jun. 30, 2017

Dec. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Payroll and employee-related cost

$ 18,865

$ 16,956

Sales return reserve

2,994

2,753

Preclinical and clinical trial cost

1,305

2,054

Accrued Royalties

1,165

802

Product warranty

1,037

1,254

Other accrued liabilities

7,811

7,871

Total accrued liabilities

$ 33,177

$ 31,690

Balance Sheet Components - Product Warranty (Details) (USD $)

In Thousands, unless otherwise specified

6 Months Ended

12 Months Ended

Jun. 30, 2017

Dec. 31, 2016

Product Warranty, Increase (Decrease) [Roll Forward]

Balance at the beginning of the period

$ 1,254

$ 713

Accruals of warranties issued

142

1,176

Settlements of warranty claims

(359)

(635)

Balance at the end of the period

$ 1,037

$ 1,254

Commitments and Contingencies - Lease and Purchase Commitments (Details) (USD $)

In Millions, unless otherwise specified

3 Months Ended

6 Months Ended

Jun. 30, 2017

Jun. 30, 2016

Jun. 30, 2017

Jun. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

Rent expense

$ 1.5

$ 1.3

$ 2.9

$ 2.4

Commitments and Contingencies - Royalty Obligations (Details) (USD $)

3 Months Ended

6 Months Ended

Jun. 30, 2017

Cost of Sales

Jun. 30, 2016

Cost of Sales

Jun. 30, 2017

Cost of Sales

Jun. 30, 2016

Cost of Sales

Jun. 30, 2017

Royalty Agreement, March 2005

Dec. 31, 2016

Royalty Agreement, March 2005

Jun. 30, 2017

Royalty Agreement, April 2012

Jun. 30, 2017

Royalty Agreement, November 2013, Less than $5 Million in Sales

Jun. 30, 2017

Royalty Agreement, November 2013, Greater than $5 Million in Sales

Jun. 30, 2017

Royalty Agreement, April 2015

Other Commitments [Line Items]

Minimum annual royalty payments

$ 100,000

Royalty as a percent of sales

5.00%

3.00%

1.00%

2.00%

Royalty threshold

5,000,000

Royalty expense

$ 1,200,000

$ 700,000

$ 2,000,000

$ 1,400,000

Commitments and Contingencies - Litigation (Details) (Damages from Product, USD $)

In Millions, unless otherwise specified

6 Months Ended

Jun. 30, 2017

Non-Economic Damages

Loss Contingencies [Line Items]

Damages sought, value

$ 20

Minimum |
Economic Damages

Loss Contingencies [Line Items]

Damages sought, value

4

Maximum |
Economic Damages

Loss Contingencies [Line Items]

Damages sought, value

$ 6

Stockholder's Equity - Common Stock (Details) (Underwritten Public Offering, USD $)

In Millions, except Share data, unless otherwise specified

1 Months Ended

Mar. 31, 2017

Underwritten Public Offering

Subsidiary, Sale of Stock [Line Items]

Number of shares issued and sold (in shares)

1,495,000

Public offering price (in USD per share)

$ 76.00

Net cash proceeds from shares issued and sold

$ 106.3

Underwriting discounts and commissions

6.8

Other offering expenses

$ 0.5

Stockholder's Equity - Stock Option Activity (Details) (USD $)

6 Months Ended

Jun. 30, 2017

Number of Shares

Beginning balance (in shares)

2,876,955

Options exercised (in shares)

(543,972)

Options cancelled (in shares)

(2,276)

Ending balance (in shares)

2,330,707

Weighted- Average Exercise Price

Beginning balance (in dollars per share)

$ 14.63

Options exercised (in dollars per share)

$ 4.79

Options cancelled (in dollars per share)

$ 15.95

Ending balance (in dollars per share)

$ 16.93

Stockholder's Equity - Restricted Stock and Restricted Stock Units Activity (Details) (Restricted stock and restricted stock units, USD $)

6 Months Ended

Jun. 30, 2017

Restricted stock and restricted stock units

Number of Shares

Unvested beginning balance (in shares)

1,002,944

Granted (in shares)

77,399

Vested (in shares)

(280,262)

Canceled/Forfeited (in shares)

(18,625)

Unvested and expected to vest ending balance (in shares)

781,456

Weighted Average Grant Date Fair Value

Unvested beginning balance (in dollars per share)

$ 29.44

Granted (in dollars per share)

$ 78.16

Vested (in dollars per share)

$ 17.14

Canceled/Forfeited (in dollars per share)

$ 42.43

Unvested and expected to vest ending balance (in dollars per share)

$ 38.37

Stockholder's Equity - Stock-based Compensation Expense (Details) (USD $)

3 Months Ended

6 Months Ended

12 Months Ended

Jun. 30, 2017

Jun. 30, 2016

Jun. 30, 2017

Jun. 30, 2016

Dec. 31, 2016

Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]

Stock-based compensation expense

$ 4,593,000

$ 3,522,000

$ 8,605,000

$ 6,537,000

Unrecognized compensation cost related to unvested share-based compensation arrangements

32,900,000

Unrecognized compensation cost, expected recognition period

2 years 6 months

Share-based compensation expense, capitalized in inventory

300,000

400,000

Cost of revenue

Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]

Stock-based compensation expense

191,000

651,000

501,000

660,000

Research and development

Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]

Stock-based compensation expense

308,000

281,000

561,000

539,000

Sales, general and administrative

Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]

Stock-based compensation expense

$ 4,094,000

$ 2,590,000

$ 7,543,000

$ 5,338,000

Accumulated Other Comprehensive (Loss) Income (Details) (USD $)

In Thousands, unless otherwise specified

3 Months Ended

6 Months Ended

3 Months Ended

6 Months Ended

3 Months Ended

6 Months Ended

Jun. 30, 2017

Jun. 30, 2016

Jun. 30, 2017

Jun. 30, 2016

Jun. 30, 2017

Marketable Investments

Jun. 30, 2016

Marketable Investments

Jun. 30, 2017

Marketable Investments

Jun. 30, 2016

Marketable Investments

Jun. 30, 2017

Currency Translation Adjustments

Jun. 30, 2016

Currency Translation Adjustments

Jun. 30, 2017

Currency Translation Adjustments

Jun. 30, 2016

Currency Translation Adjustments

Jun. 30, 2017

Total

Mar. 31, 2017

Total

Dec. 31, 2016

Total

Jun. 30, 2016

Total

Mar. 31, 2016

Total

Dec. 31, 2015

Total

AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]

Beginning balance

$ 266,547

$ (35)

$ 118

$ (105)

$ (163)

$ (3,891)

$ (904)

$ (4,583)

$ (1,952)

$ (4,695)

$ (3,926)

$ (4,688)

$ (2,579)

$ (786)

$ (2,115)

Other comprehensive income before reclassifications:

Other comprehensive income before reclassifications

2

138

103

580

(766)

(1,875)

(74)

(832)

Income tax effect—expense

0

(55)

0

(210)

0

(49)

0

(209)

0

(6)

0

(1)

Net of tax

(764)

(1,792)

29

(462)

2

89

103

371

(766)

(1,881)

(74)

(833)

Amounts reclassified from accumulated other comprehensive income to earnings:

Realized gains—marketable investments

(5)

(2)

(36)

(3)

(5)

(2)

(36)

(3)

0

Income tax effect—benefit

0

1

0

1

0

1

0

1

0

Net of tax

(5)

(1)

(36)

(2)

(5)

(1)

(36)

(2)

0

Net current-year other comprehensive (loss) income

(769)

(1,793)

(7)

(464)

(3)

88

67

369

(766)

(1,881)

(74)

(833)

Ending balance

$ 372,978

$ (38)

$ 206

$ (38)

$ 206

$ (4,657)

$ (2,785)

$ (4,657)

$ (2,785)

$ (4,695)

$ (3,926)

$ (4,688)

$ (2,579)

$ (786)

$ (2,115)

Income Taxes (Details) (USD $)

In Millions, unless otherwise specified

3 Months Ended

6 Months Ended

Jun. 30, 2017

Jun. 30, 2016

Jun. 30, 2017

Jun. 30, 2016

Income Tax Disclosure [Abstract]

Effective tax rate

(44.80%)

886.70%

(65.00%)

(205.20%)

Excess tax deduction

$ 2.9

$ 4.4

Deferred tax assets, valuation allowance

$ 16.8

Net (Loss) Income per Share - Basic and Diluted Earnings per Share (Details) (USD $)

In Thousands, except Share data, unless otherwise specified

3 Months Ended

6 Months Ended

Jun. 30, 2017

Jun. 30, 2016

Jun. 30, 2017

Jun. 30, 2016

Numerator

Net (loss) income

$ (1,558)

$ 3,013

$ (4,664)

$ 5,304

Less: Undistributed income attributable to preferred stockholders-diluted

0

Net (loss) income attributable to common stockholders-basic

(1,558)

3,013

(4,664)

5,304

Net (loss) income attributable to common stockholders-diluted

$ (1,558)

$ 3,013

Denominator

Weighted average shares used to compute net (loss) income per share attributable to common stockholders — Basic (in shares)

33,219,487

30,210,322

32,420,105

30,100,162

Potential dilutive shares(in shares)

0

3,097,871

0

3,037,202

Weighted average shares used to compute net income attributable to common stockholders —Diluted (in shares)

33,219,487

33,308,193

32,420,105

33,137,364

Net (loss) income per share attributable to common stockholders — Basic (in dollars per share)

$ (0.05)

$ 0.10

$ (0.14)

$ 0.18

Net (loss) income per share attributable to common stockholders — Diluted (in dollars per share)

$ (0.05)

$ 0.09

$ (0.14)

$ 0.16

Net (Loss) Income per Share - Antidilutive Securities (Details)

3 Months Ended

6 Months Ended

Jun. 30, 2017

Jun. 30, 2016

Jun. 30, 2017

Jun. 30, 2016

Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]

Antidilutive securities excluded from the computation of earnings per share (in shares)

3,200,000

15,210

3,200,000

37,634

Subsequent Event (Details) (Crossmed, Subsequent Event)

In Millions, unless otherwise specified

0 Months Ended

Jul. 3, 2017

USD ($)

Jul. 3, 2017

EUR (€)

Subsequent Event [Line Items]

Purchase price

$ 9.3

€ 8.2