PENUMBRA INC, 10-Q filed on 11/3/2016
Quarterly Report
Document and Entity Information Document
9 Months Ended
Sep. 30, 2016
Oct. 15, 2016
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
Non-accelerated Filer 
 
Document Type
10-Q 
 
Document Period End Date
Sep. 30, 2016 
 
Document Fiscal Year Focus
2016 
 
Document Fiscal Period Focus
Q3 
 
Amendment Flag
false 
 
Entity Common Stock, Shares Outstanding
 
31,643,863 
Condensed Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2016
Dec. 31, 2015
Current assets:
 
 
Cash and cash equivalents
$ 15,856 
$ 19,547 
Marketable investments
125,975 
129,257 
Accounts receivable, net of doubtful accounts of $631 and $589 at September 30, 2016 and December 31, 2015, respectively
36,635 
29,444 
Inventories
70,092 
56,761 
Prepaid expenses and other current assets
18,665 
9,352 
Total current assets
267,223 
244,361 
Property and equipment, net
16,224 
8,951 
Deferred taxes
13,394 
10,143 
Other non-current assets
438 
393 
Total assets
297,279 
263,848 
Current Liabilities:
 
 
Accounts payable
3,584 
2,567 
Accrued liabilities
33,760 
25,581 
Total current liabilities
37,344 
28,148 
Other non-current liabilities
6,081 
3,178 
Total liabilities
43,425 
31,326 
Commitments and contingencies
   
   
Stockholders’ Equity:
 
 
Common stock
31 
30 
Additional paid-in capital
275,031 
252,087 
Notes receivable from stockholder(s)
(5)
Accumulated other comprehensive loss
(3,592)
(2,115)
Accumulated deficit
(17,616)
(17,475)
Total stockholders’ equity
253,854 
232,522 
Total liabilities and stockholders’ equity
$ 297,279 
$ 263,848 
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2016
Dec. 31, 2015
Dec. 31, 2014
Statement of Financial Position [Abstract]
 
 
 
Allowance for doubtful accounts
$ 631 
$ 589 
$ 602 
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Income Statement [Abstract]
 
 
 
 
Revenue
$ 67,187 
$ 50,416 
$ 190,212 
$ 131,679 
Cost of revenue
24,313 
16,919 
65,963 
44,079 
Gross profit
42,874 
33,497 
124,249 
87,600 
Operating expenses:
 
 
 
 
Research and development
6,497 
4,560 
17,762 
12,543 
Sales, general and administrative
37,740 
26,755 
106,685 
72,698 
Total operating expenses
44,237 
31,315 
124,447 
85,241 
(Loss) Income from operations
(1,363)
2,182 
(198)
2,359 
Interest income, net
631 
17 
1,700 
402 
Other expense, net
(360)
(115)
(856)
(613)
(Loss) Income before provision for income taxes
(1,092)
2,084 
646 
2,148 
Provision for income taxes
14 
1,183 
787 
1,416 
Net (loss) income
(1,106)
901 
(141)
732 
Foreign currency translation adjustments, net of tax
(898)
(303)
(1,731)
(892)
Unrealized (losses) gains on available-for-sale securities, net of tax
(115)
254 
220 
Comprehensive (loss) income
(2,119)
598 
(1,618)
60 
Net (loss) income attributable to common stockholders
$ (1,106)
$ 276 
$ (141)
$ 175 
Net (loss) income per share attributable to common stockholders — Basic (in dollars per share)
$ (0.04)
$ 0.04 
$ 0.00 
$ 0.03 
Net (loss) income per share attributable to common stockholders — Diluted (in dollars per share)
$ (0.04)
$ 0.03 
$ 0.00 
$ 0.02 
Weighted average shares used to compute net (loss) income per share attributable to common stockholders — Basic (in shares)
30,604,384 
7,853,730 
30,269,463 
5,962,031 
Weighted average shares used to compute net (loss) income per share attributable to common stockholders — Diluted (in shares)
30,604,384 
10,189,248 
30,269,463 
8,494,651 
Condensed Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
Net income (loss)
$ (141)
$ 732 
Adjustments to reconcile net (loss) income to net cash used in operating activities:
 
 
Depreciation and amortization
1,809 
1,200 
Amortization of premium on marketable investments
733 
Stock-based compensation
10,800 
5,126 
Excess tax benefit from stock-based compensation
(7,601)
(1,257)
Provision for (release of) doubtful accounts
152 
(108)
Inventory write downs
1,190 
704 
Write off of note receivable
91 
Loss on disposal of property and equipment
59 
12 
Realized (gain) loss on marketable investments
(3)
541 
Deferred taxes
(143)
Changes in operating assets and liabilities:
 
 
Accounts receivable
(7,088)
(7,383)
Inventories
(14,018)
(18,012)
Prepaid expenses and other current and non-current assets
(5,543)
(1,706)
Accounts payable
947 
1,501 
Accrued expenses and other non-current liabilities
8,796 
5,901 
Net cash used in operating activities
(10,051)
(12,631)
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
Purchase of marketable investments
(45,027)
(4,069)
Proceeds from sales of marketable investments
2,504 
52,160 
Proceeds from maturities of marketable investments
46,081 
Purchases of property and equipment
(7,078)
(4,507)
Net cash (used in) provided by investing activities
(3,520)
43,584 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
Proceeds from issuance of common stock issued in initial public offering, net of issuance costs
125,916 
Proceeds from exercises of stock options
2,893 
546 
Proceeds from issuance of stock under employee stock purchase plan
3,783 
Excess tax benefit from stock-based compensation
7,601 
1,257 
Payment of employee taxes related to vested restricted stock
(2,024)
(2,525)
Net cash provided by financing activities
12,253 
125,194 
Effect of foreign exchange rate changes on cash and cash equivalents
(2,373)
(339)
Net Increase (Decrease) In Cash And Cash Equivalents
(3,691)
155,808 
CASH AND CASH EQUIVALENTS—Beginning of period
19,547 
3,290 
CASH AND CASH EQUIVALENTS—End of period
15,856 
159,098 
NONCASH INVESTING AND FINANCING ACTIVITIES:
 
 
Purchase of property and equipment funded through accounts payable and accrued liabilities
2,197 
200 
Deferred issuance costs not yet paid
1,149 
Conversion of convertible preferred stock into common stock
$ 0 
$ 111,467 
Organization and Description of Business
Organization and Description of Business
Organization and Description of Business
Penumbra, Inc. (the “Company”) is a global interventional therapies company that designs, develops, manufactures and markets innovative medical devices. The Company 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
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying condensed consolidated balance sheet as of September 30, 2016, the condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2016 and 2015, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2016 and 2015 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, 2015 was derived from the audited financial statements as of that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.
 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 September 30, 2016, the results of its operations for the three and nine months ended September 30, 2016 and 2015, and the cash flows for the nine months ended September 30, 2016 and 2015. The results for the three and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016 or for any other future annual or interim period. Certain changes in presentation were made in the condensed consolidated financial statements for the nine months ended September 30, 2015, to conform to the presentation for the nine month periods ended September 30, 2016.
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, 2015 included in the Companys Annual Report on Form 10-K. There have been no changes to the Company’s significant accounting policies during the nine months ended September 30, 2016, 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, 2015.
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 reserves, 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 Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“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 CustomersPrincipal 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 CustomersIdentifying 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 CustomersNarrow-Scope improvements and Practical Expedients, which further clarifies the implementation on narrow scope improvements and practical expedients. 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 is currently evaluating the impact of adopting these standards.
In July 2015, the 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. The accounting standard is effective prospectively for annual periods beginning after December 15, 2016, and interim periods therein. Early adoption is permitted as of the beginning of an interim or annual reporting period. The Company is currently evaluating the impact of adopting this standard.
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The new standard is effective for annual periods and interim periods beginning after December 15, 2017 and, upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company is currently evaluating the impact of adopting this standard.
In February 2016, the FASB issued ASU 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. The Company is currently evaluating the impact of adopting this standard.
In March 2016, the FASB issued ASU No. 2016-09, Stock CompensationImprovements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The accounting standard is effective for annual periods beginning after December 15, 2016, including interim periods within those annual periods. Early adoption is permitted in any interim or annual period. The Company is currently evaluating the impact of adopting this standard.
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 August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows. The standard clarifies the way certain cash receipts and cash payments are classified with the objective of reducing the existing diversity in practice. The standard is effective for fiscal years and interim periods beginning after December 15, 2017. Early adoption is permitted for all periods beginning after December 15, 2016. The Company is currently evaluating the impact of adopting this standard.
Fair Value of Financial Instruments
Fair Value of Financial Instruments
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.
Marketable investments 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 and internal assumptions of the independent pricing services. 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 September 30, 2016 or December 31, 2015.
During the three and nine months ended September 30, 2016 and 2015, 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 September 30, 2016 or December 31, 2015.
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 September 30, 2016
 
 
Level 1
 
Level 2
 
Level 3
 
Fair Value
Financial Assets
 
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
 
Money market funds
 
$
334

 
$

 
$

 
$
334

Marketable investments:
 
 
 
 
 
 
 
 
Commercial paper
 

 
8,620

 

 
8,620

U.S. Treasury
 
15,506

 


 

 
15,506

U.S. agency securities
 

 
11,804

 

 
11,804

U.S. states and municipalities
 

 
13,118

 

 
13,118

Corporate bonds
 

 
71,234

 

 
71,234

Non-U.S. government debt securities
 

 
5,693

 

 
5,693

Total
 
$
15,840

 
$
110,469


$


$
126,309

 
 
As of December 31, 2015
 
 
Level 1
 
Level 2
 
Level 3
 
Fair Value
Financial Assets
 
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
 
Commercial paper
 
$

 
$
9,850

 
$

 
$
9,850

Money market funds
 
252

 

 

 
252

Marketable investments:
 
 
 
 
 
 
 
 
Commercial paper
 

 
22,332

 

 
22,332

U.S. Treasury
 
15,436

 

 

 
15,436

U.S. agency securities
 

 
21,464

 

 
21,464

U.S. states and municipalities
 

 
2,084

 

 
2,084

Corporate bonds
 

 
61,002

 

 
61,002

Non-U.S. government debt securities
 

 
6,939

 

 
6,939

Total
 
$
15,688

 
$
123,671

 
$

 
$
139,359

Balance Sheet Components
Balance Sheet Components
Balance Sheet Components
Cash and Cash Equivalents
The majority of the Company’s cash is held by one financial institution in the United States in an amount that exceeds federally insured limits. The Company maintained investments in money market funds that were not federally insured during the periods presented and held cash in foreign banks of approximately $2.7 million and $1.9 million at September 30, 2016 and December 31, 2015, respectively, that were not federally insured. The Company has not experienced any losses on its deposits of cash and cash equivalents.
Accounts Receivable, Net
The Company’s allowance for doubtful accounts comprised of the following (in thousands):
Allowance for Doubtful Accounts
 
September 30,
2016
 
December 31,
2015
Balance at the beginning of the period
 
$
589

 
$
602

Charged to costs and expenses
 
152

 
(13
)
Deductions
 
(110
)
 

Balance at the end of the period
 
$
631

 
$
589

One customer (a distributor) accounted for 13% and 11%, respectively, of the Company’s revenue during the three months ended September 30, 2016 and 2015. The same customer accounted for 11% during the nine months ended September 30, 2016 and 2015. No customer accounted for greater than 10% of the Company’s accounts receivable balance as of September 30, 2016 or December 31, 2015.
Prepaid Expenses and Other Current Assets
The Company’s prepaid expenses and other current assets as of September 30, 2016 and December 31, 2015 were comprised of the following (in thousands):
 
 
September 30,
2016
 
December 31,
2015
Prepaid Tax
 
$
3,321

 
$
2,736

Prepaid expenses
 
5,236

 
4,706

Income tax receivable
 
5,104

 
606

Other current assets
 
5,004

 
1,304

Prepaid expenses and other current assets
 
$
18,665

 
$
9,352



 Marketable Investments
The Company’s marketable investments as of September 30, 2016 and December 31, 2015 were as follows (in thousands):
 
 
September 30, 2016
 
 
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
Commercial paper
 
$
8,621

 
$
2

 
$
(3
)
 
$
8,620

U.S. Treasury
 
15,488

 
18

 

 
15,506

U.S. agency securities
 
11,787

 
19

 
(2
)
 
11,804

U.S. states and municipalities
 
13,129

 

 
(11
)
 
13,118

Corporate bonds
 
71,113

 
133

 
(12
)
 
71,234

Non-U.S. government debt securities
 
5,693

 
3

 
(3
)
 
5,693

Total
 
$
125,831

 
$
175

 
$
(31
)
 
$
125,975

 
 
December 31, 2015
 
 
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
Commercial paper
 
$
22,328

 
$
5

 
$
(1
)
 
$
22,332

U.S. Treasury
 
15,459

 
4

 
(27
)
 
15,436

U.S. agency securities
 
21,497

 
1

 
(34
)
 
21,464

U.S. states and municipalities
 
2,086

 

 
(2
)
 
2,084

Corporate bonds
 
61,188

 
3

 
(189
)
 
61,002

Non-U.S. government debt securities
 
6,954

 
1

 
(16
)
 
6,939

Total
 
$
129,512

 
$
14

 
$
(269
)
 
$
129,257


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 September 30, 2016 and December 31, 2015 (in thousands):
 
 
September 30, 2016
 
 
Fair Value
 
Gross Unrealized Losses
Commercial paper
 
$
4,223

 
$
(3
)
US Agency securities
 
1,999

 
(2
)
U.S. States and Municipalities
 
11,778

 
(11
)
Corporate bonds
 
15,740

 
(12
)
Non-U.S. government debt securities
 
4,474

 
(3
)
Total
 
$
38,214

 
$
(31
)
 
 
December 31, 2015
 
 
Fair Value
 
Gross Unrealized Losses
Commercial paper
 
$
4,746

 
$
(1
)
U.S. Treasury
 
12,453

 
(27
)
U.S. agency securities
 
13,475

 
(34
)
U.S. states and municipalities
 
2,084

 
(2
)
Corporate bonds
 
59,163

 
(189
)
Non-U.S. government debt securities
 
5,881

 
(16
)
Total
 
$
97,802

 
$
(269
)

As of September 30, 2016 and December 31, 2015, 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 September 30, 2016 and December 31, 2015 were as follows (in thousands):
 
September 30,
2016
 
December 31, 2015
 
Fair Value
Due in one year
$
94,388

 
$
62,983

Due in one to five years
31,587

 
66,274

Total
$
125,975

 
$
129,257


 
Inventories
Inventories are stated at the lower of cost (determined under the first-in first-out method) or market. Inventory quantities are reviewed in consideration of actual loss experience, projected future demand and remaining shelf life to record a provision for excess and obsolete inventory when appropriate.
The components of inventories as of September 30, 2016 and December 31, 2015 consisted of the following (in thousands):
 
 
September 30,
2016
 
December 31,
2015
Raw materials
 
$
10,900

 
$
9,176

Work in process
 
2,991

 
2,746

Finished goods
 
56,201

 
44,839

Inventories
 
$
70,092

 
$
56,761


Property and Equipment, Net
Property and equipment, net as of September 30, 2016 and December 31, 2015 consisted of the following (in thousands):
 
 
September 30,
2016
 
December 31,
2015
Machinery and equipment
 
$
9,708

 
$
8,559

Furniture and fixtures
 
3,112

 
2,091

Leasehold improvements
 
2,384

 
1,564

Software
 
1,020

 
666

Computers
 
671

 
565

Construction in progress
 
6,194

 
577

Total property and equipment
 
23,089

 
14,022

Less: Accumulated depreciation and amortization
 
(6,865
)
 
(5,071
)
Property and equipment, net
 
$
16,224

 
$
8,951


Depreciation and amortization expense was $0.7 million and $0.5 million for the three months ended September 30, 2016 and 2015, respectively, and was $1.8 million and $1.2 million for the nine months ended September 30, 2016 and 2015, respectively.
Accrued Liabilities
The following table shows the components of accrued liabilities as of September 30, 2016 and December 31, 2015 (in thousands):
 
 
September 30,
2016
 
December 31,
2015
Payroll and employee-related expenses
 
$
17,519

 
$
13,653

Sales return reserve
 
2,995

 
3,247

Preclinical and clinical trial cost
 
2,195

 
1,330

Deferred revenue
 
345

 
526

Product warranty
 
1,138

 
713

Sales tax payable
 
578

 
531

Income tax payable
 
400

 
308

Leasehold improvement expenditures
 
2,093

 

Other accrued liabilities
 
6,497

 
5,273

Total accrued liabilities
 
$
33,760

 
$
25,581


The estimated product warranty accrual as of September 30, 2016 and December 31, 2015 was as follows (in thousands):
 
 
September 30,
2016
 
December 31,
2015
Balance at the beginning of the period
 
$
713

 
$
314

Provision for product warranty
 
894

 
752

Settlements of product warranty claims
 
(469
)
 
(353
)
Balance at the end of the period
 
$
1,138

 
$
713

Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies
Lease Commitments
The Company leases its offices and other equipment 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 September 30, 2016 and 2015 was $1.4 million and $0.9 million, respectively and for the nine months ended September 30, 2016 and 2015 was $3.8 million and $2.3 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.
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 September 30, 2016 and December 31, 2015, 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 sales for the three months ended September 30, 2016 and 2015 was $0.7 million and $0.6 million, respectively and for the nine months ended September 30, 2016 and 2015 was $2.1 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 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 the Company 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 and seeks both compensatory and punitive damages without a specific damages claim. Counsel for the claimant previously indicated that he expects that a jury could award $35 million in damages were this matter to go to trial. This amount is substantially in excess of the Company’s insurance coverage. The hospital defendant had requested indemnification from the Company but was dismissed from the case in July 2016. The case is in the discovery phase, and the Company is unable to assess the merits of the plaintiff’s case. The Company intends to vigorously defend the litigation, as the Company believes there will be substantial questions regarding causation, liability and damages.
From time to time, the Company is subject to claims and assessments in the ordinary course of business. The Company is not currently a party to any 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.
Stock-based Compensation
Stock-based Compensation
Stock-Based Compensation
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 nine months ended September 30, 2016 is set forth below:
 
 
Number
of Shares
 
Weighted-
Average
Exercise
Price
Balance at December 31, 2015
 
3,755,345

 
$
12.13

Options exercised
 
(832,681
)
 
3.45

Options canceled
 
(15,925
)
 
17.90

Balance at September 30, 2016
 
2,906,739

 
14.58

 
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 nine months ended September 30, 2016 is set forth below: 
 
 
Number
of Shares
 
Weighted Average
Grant Date
Fair Value
Unvested at December 31, 2015
 
849,571

 
$
15.12

Granted
 
293,250

 
61.78

Vested
 
(139,325
)
 
17.68

Canceled/Forfeited
 
(7,500
)
 
19.77

Unvested and expected to vest at September 30, 2016
 
995,996

 
28.47


Employee Stock Purchase Plan
Under the Penumbra, Inc. Employee Stock Purchase Plan (“ESPP”), employees purchased 148,354 shares for $3.8 million during the nine months ended September 30, 2016.
Stock-based Compensation
The following table sets forth the stock-based compensation expense included in the condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2016 and 2015 (in thousands):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2016
 
2015
 
2016
 
2015
Cost of sales
 
$
83

 
$
141

 
$
742

 
$
271

Research and development
 
251

 
100

 
790

 
282

Sales, general and administrative
 
3,930

 
1,269

 
9,268

 
4,573

Total
 
$
4,264

 
$
1,510

 
$
10,800

 
$
5,126


As of September 30, 2016, total unrecognized compensation cost was $35.1 million related to unvested share-based compensation arrangements which is expected to be recognized over a weighted average period of 2.9 years.
The total stock-based compensation cost capitalized in inventory was $0.4 million and $0.3 million as of September 30, 2016 and December 31, 2015, respectively.
Accumulated Other Comprehensive (Loss) Income
Accumulated Other Comprehensive (Loss) Income
Accumulated Other Comprehensive (Loss) Income
Other comprehensive (loss) 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 nine months ended September 30, 2016 and 2015, 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 September 30, 2016
 
Three Months Ended September 30, 2015
 
 
 Marketable
Investments
 
 Currency Translation
Adjustments
 
 Total
 
 Marketable
Investments
 
 Currency Translation
Adjustments
 
 Total
Balance at beginning of the period
 
$
206

 
$
(2,785
)
 
$
(2,579
)
 
$

 
$
(1,233
)
 
$
(1,233
)
Other comprehensive income before reclassifications:
 
 
 
 
 
 
 
 
 
 
 
 
Unrealized (losses) gains—marketable investments
 
(178
)
 

 
(178
)
 

 

 

Foreign currency translation (losses) gains
 

 
(901
)
 
(901
)
 

 
(327
)
 
(327
)
Income tax effect—benefit (expense)
 
63

 
3

 
66

 

 
24

 
24

Net of tax
 
(115
)
 
(898
)
 
(1,013
)
 

 
(303
)
 
(303
)
Amounts reclassified from accumulated other comprehensive income to earnings:
 
 
 
 
 
 
 
 
 
 
 
 
Realized losses (gains)—marketable investments
 
1

 

 
1

 

 

 

Income tax effect—(expense) benefit
 
(1
)
 

 
(1
)
 

 

 

Net of tax
 

 

 

 

 

 

Net current-year other comprehensive (loss) income
 
(115
)
 
(898
)
 
(1,013
)
 

 
(303
)
 
(303
)
Balance at end of the period
 
$
91

 
$
(3,683
)
 
$
(3,592
)
 
$

 
$
(1,536
)
 
$
(1,536
)

 
 
Nine Months Ended September 30, 2016
 
Nine Months Ended September 30, 2015
 
 
 Marketable
Investments
 
 Currency Translation
Adjustments
 
 Total
 
 Marketable
Investments
 
 Currency Translation
Adjustments
 
 Total
Balance at beginning of the period
 
$
(163
)
 
$
(1,952
)
 
$
(2,115
)
 
$
(220
)
 
$
(644
)
 
$
(864
)
Other comprehensive income before reclassifications:
 
 
 
 
 
 
 
 
 
 
 
 
Unrealized gains (losses)—marketable investments
 
401

 

 
401

 
(162
)
 

 
(162
)
Foreign currency translation (losses) gains
 

 
(1,732
)
 
(1,732
)
 

 
(1,008
)
 
(1,008
)
Income tax effect—(expense) benefit
 
(145
)
 
1

 
(144
)
 
36

 
116

 
152

Net of tax
 
256

 
(1,731
)
 
(1,475
)
 
(126
)
 
(892
)
 
(1,018
)
Amounts reclassified from accumulated other comprehensive income to earnings:
 
 
 
 
 
 
 
 
 
 
 
 
Realized (gains) losses—marketable investments
 
(3
)
 

 
(3
)
 
541

 

 
541

Income tax effect—benefit (expense)
 
1

 

 
1

 
(195
)
 

 
(195
)
Net of tax
 
(2
)
 

 
(2
)
 
346

 

 
346

Net current-year other comprehensive income (loss)
 
254

 
(1,731
)
 
(1,477
)
 
220

 
(892
)
 
(672
)
Balance at end of the period
 
$
91

 
$
(3,683
)
 
$
(3,592
)
 
$

 
$
(1,536
)
 
$
(1,536
)
Income Taxes
Income Taxes
Income Taxes
The Company’s income tax expense, deferred tax assets 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. Although management believes the use of the annual effective tax rate method to be appropriate for prior interim reporting periods, for the fiscal three and nine month periods ended September 30, 2016 and September 30, 2015, respectively, the Company used a discrete effective tax rate method to calculate taxes. The discrete method of calculating the estimated effective tax rate involves the use of actual year-to-date information. The Company determined that since small changes in estimated “ordinary” income would result in significant changes in the estimated annual effective tax rate, the discrete effective tax rate method would provide a more reliable estimate in income tax expense for both periods.
The Company’s effective tax rate decreased to (1.3)% for the three months ended September 30, 2016, compared to 56.8% for the three months ended September 30, 2015. The decrease in rate was primarily attributable to an income tax benefit as a result of a domestic operating loss offset by an income tax expense from discrete items recorded for the three month period.
The effective tax rate increased to 121.8% for the nine months ended September 30, 2016, compared to 65.9% for the nine months ended September 30, 2015. The increase in rate was primarily attributable to a shift in the ratio of operating income between jurisdictions for the nine month period.
Net (Loss) Income per Share of Common Stock attributable to Common Stockholders
Net (loss) Income per Share of Common Stock attributable to Common Stockholders
Net (Loss) Income per Share of Common Stock attributable to Common Stockholders
The Company calculated its basic and diluted net income per share attributable to common stockholders for the three and nine months ended September 30, 2015 in conformity with the two-class method required for companies with participating securities. Under the two-class method, the Company determined whether it had net income attributable to common stockholders, which included the results of operations less current period preferred stock non-cumulative dividends. If it was determined that the Company did have net income attributable to common stockholders during a period, the related undistributed earnings were then allocated between common stock and the preferred stock based on the weighted average number of shares outstanding during the period to determine the numerator for the basic net income per share attributable to common stockholders. In computing diluted net income attributable to common stockholders, undistributed earnings were re-allocated to reflect the potential impact of dilutive securities to determine the numerator for the diluted net income per share attributable to common stockholders.
The Company’s basic net income per share attributable to common stockholders 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 attributable to common stockholders 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 and common stock warrants 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 attributable to common stockholders for the three and nine months ended September 30, 2016 and 2015 is as follows (in thousands, except share and per share amounts):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2016
 
2015
 
2016
 
2015
Net (loss) income per share:
 
 
 
 
 
 
 
 
Numerator
 
 
 
 
 
 
 
 
Net (loss) income
 
$
(1,106
)
 
$
901

 
$
(141
)
 
$
732

Less: Undistributed income attributable to preferred stockholders
 

 
(625
)
 

 
(557
)
Net (loss) income attributable to common stockholders—basic and diluted
 
$
(1,106
)
 
$
276

 
$
(141
)
 
$
175

Denominator
 
 
 
 
 
 
 
 
Weighted average shares used to compute net (loss) income attributable to common stockholders
—Basic
 
30,604,384

 
7,853,730

 
30,269,463

 
5,962,031

Potential dilutive options, as calculated using treasury stock method
 

 
1,979,194

 

 
2,362,685

Potential dilutive restricted stock and restricted stock units, as calculated using treasury stock method
 

 
356,324

 

 
169,935

Weighted average shares used to compute net income attributable to common stockholders
—Diluted
 
30,604,384

 
10,189,248

 
30,269,463

 
8,494,651

Net (loss) income per share attributable to common stockholders
—Basic
 
$
(0.04
)
 
$
0.04

 
$
0.00

 
$
0.03

—Diluted
 
$
(0.04
)
 
$
0.03

 
$
0.00

 
$
0.02


 
The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net income per share of common stock for the periods presented, because the effect of including them would have been anti-dilutive: 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2016
 
2015
 
2016
 
2015
Options to purchase common stock
 
2,974,642

 
1,321,250

 
2,974,642

 
1,321,250

Restricted stock and restricted stock units
 
995,996

 
6,500

 
995,996

 
6,500

Total
 
3,970,638

 
1,327,750

 
3,970,638

 
1,327,750

Geographic Areas and Product Sales
Geographic Areas and Product Sales
Geographic Areas and Product Sales
The Company’s revenue by geographic area, based on the destination to which the Company ships its products, for the three and nine months ended September 30, 2016 and 2015 was as follows (in thousands):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2016
 
2015
 
2016
 
2015
United States
 
$
44,380

 
$
35,394

 
$
127,484

 
$
89,364

Japan
 
8,859

 
5,420

 
21,589

 
14,030

Other International
 
13,948

 
9,602

 
41,139

 
28,285

Total
 
$
67,187

 
$
50,416

 
$
190,212

 
$
131,679


The following table sets forth revenue by product category (in thousands):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2016
 
2015
 
2016
 
2015
Neuro
 
$
47,534

 
$
36,309

 
$
134,180

 
$
102,363

Peripheral Vascular
 
19,653

 
14,107

 
56,032

 
29,316

Total
 
$
67,187

 
$
50,416

 
$
190,212

 
$
131,679


The Company does not have significant long-lived assets outside the U.S.
Summary of Significant Accounting Policies (Policies)
Basis of Presentation and Consolidation
The accompanying condensed consolidated balance sheet as of September 30, 2016, the condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2016 and 2015, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2016 and 2015 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, 2015 was derived from the audited financial statements as of that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.
 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 September 30, 2016, the results of its operations for the three and nine months ended September 30, 2016 and 2015, and the cash flows for the nine months ended September 30, 2016 and 2015. The results for the three and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016 or for any other future annual or interim period. Certain changes in presentation were made in the condensed consolidated financial statements for the nine months ended September 30, 2015, to conform to the presentation for the nine month periods ended September 30, 2016.
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, 2015 included in the Companys Annual Report on Form 10-K. There have been no changes to the Company’s significant accounting policies during the nine months ended September 30, 2016, 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, 2015.
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 reserves, 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 Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“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 CustomersPrincipal 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 CustomersIdentifying 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 CustomersNarrow-Scope improvements and Practical Expedients, which further clarifies the implementation on narrow scope improvements and practical expedients. 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 is currently evaluating the impact of adopting these standards.
In July 2015, the 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. The accounting standard is effective prospectively for annual periods beginning after December 15, 2016, and interim periods therein. Early adoption is permitted as of the beginning of an interim or annual reporting period. The Company is currently evaluating the impact of adopting this standard.
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The new standard is effective for annual periods and interim periods beginning after December 15, 2017 and, upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company is currently evaluating the impact of adopting this standard.
In February 2016, the FASB issued ASU 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. The Company is currently evaluating the impact of adopting this standard.
In March 2016, the FASB issued ASU No. 2016-09, Stock CompensationImprovements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The accounting standard is effective for annual periods beginning after December 15, 2016, including interim periods within those annual periods. Early adoption is permitted in any interim or annual period. The Company is currently evaluating the impact of adopting this standard.
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 August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows. The standard clarifies the way certain cash receipts and cash payments are classified with the objective of reducing the existing diversity in practice. The standard is effective for fiscal years and interim periods beginning after December 15, 2017. Early adoption is permitted for all periods beginning after December 15, 2016. The Company is currently evaluating the impact of adopting this standard.
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 September 30, 2016
 
 
Level 1
 
Level 2
 
Level 3
 
Fair Value
Financial Assets
 
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
 
Money market funds
 
$
334

 
$

 
$

 
$
334

Marketable investments:
 
 
 
 
 
 
 
 
Commercial paper
 

 
8,620

 

 
8,620

U.S. Treasury
 
15,506

 


 

 
15,506

U.S. agency securities
 

 
11,804

 

 
11,804

U.S. states and municipalities
 

 
13,118

 

 
13,118

Corporate bonds
 

 
71,234

 

 
71,234

Non-U.S. government debt securities
 

 
5,693

 

 
5,693

Total
 
$
15,840

 
$
110,469


$


$
126,309

 
 
As of December 31, 2015
 
 
Level 1
 
Level 2
 
Level 3
 
Fair Value
Financial Assets
 
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
 
Commercial paper
 
$

 
$
9,850

 
$

 
$
9,850

Money market funds
 
252

 

 

 
252

Marketable investments:
 
 
 
 
 
 
 
 
Commercial paper
 

 
22,332

 

 
22,332

U.S. Treasury
 
15,436

 

 

 
15,436

U.S. agency securities
 

 
21,464

 

 
21,464

U.S. states and municipalities
 

 
2,084

 

 
2,084

Corporate bonds
 

 
61,002

 

 
61,002

Non-U.S. government debt securities
 

 
6,939

 

 
6,939

Total
 
$
15,688

 
$
123,671

 
$

 
$
139,359

Balance Sheet Components (Tables)
The Company’s allowance for doubtful accounts comprised of the following (in thousands):
Allowance for Doubtful Accounts
 
September 30,
2016
 
December 31,
2015
Balance at the beginning of the period
 
$
589

 
$
602

Charged to costs and expenses
 
152

 
(13
)
Deductions
 
(110
)
 

Balance at the end of the period
 
$
631

 
$
589

The Company’s prepaid expenses and other current assets as of September 30, 2016 and December 31, 2015 were comprised of the following (in thousands):
 
 
September 30,
2016
 
December 31,
2015
Prepaid Tax
 
$
3,321

 
$
2,736

Prepaid expenses
 
5,236

 
4,706

Income tax receivable
 
5,104

 
606

Other current assets
 
5,004

 
1,304

Prepaid expenses and other current assets
 
$
18,665

 
$
9,352

The Company’s marketable investments as of September 30, 2016 and December 31, 2015 were as follows (in thousands):
 
 
September 30, 2016
 
 
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
Commercial paper
 
$
8,621

 
$
2

 
$
(3
)
 
$
8,620

U.S. Treasury
 
15,488

 
18

 

 
15,506

U.S. agency securities
 
11,787

 
19

 
(2
)
 
11,804

U.S. states and municipalities
 
13,129

 

 
(11
)
 
13,118

Corporate bonds
 
71,113

 
133

 
(12
)
 
71,234

Non-U.S. government debt securities
 
5,693

 
3

 
(3
)
 
5,693

Total
 
$
125,831

 
$
175

 
$
(31
)
 
$
125,975

 
 
December 31, 2015
 
 
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
Commercial paper
 
$
22,328

 
$
5

 
$
(1
)
 
$
22,332

U.S. Treasury
 
15,459

 
4

 
(27
)
 
15,436

U.S. agency securities
 
21,497

 
1

 
(34
)
 
21,464

U.S. states and municipalities
 
2,086

 

 
(2
)
 
2,084

Corporate bonds
 
61,188

 
3

 
(189
)
 
61,002

Non-U.S. government debt securities
 
6,954

 
1

 
(16
)
 
6,939

Total
 
$
129,512

 
$
14

 
$
(269
)
 
$
129,257

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 September 30, 2016 and December 31, 2015 (in thousands):
 
 
September 30, 2016
 
 
Fair Value
 
Gross Unrealized Losses
Commercial paper
 
$
4,223

 
$
(3
)
US Agency securities
 
1,999

 
(2
)
U.S. States and Municipalities
 
11,778

 
(11
)
Corporate bonds
 
15,740

 
(12
)
Non-U.S. government debt securities
 
4,474

 
(3
)
Total
 
$
38,214

 
$
(31
)
 
 
December 31, 2015
 
 
Fair Value
 
Gross Unrealized Losses
Commercial paper
 
$
4,746

 
$
(1
)
U.S. Treasury
 
12,453

 
(27
)
U.S. agency securities
 
13,475

 
(34
)
U.S. states and municipalities
 
2,084

 
(2
)
Corporate bonds
 
59,163

 
(189
)
Non-U.S. government debt securities
 
5,881

 
(16
)
Total
 
$
97,802

 
$
(269
)
The contractual maturities of the Company’s marketable investments as of September 30, 2016 and December 31, 2015 were as follows (in thousands):
 
September 30,
2016
 
December 31, 2015
 
Fair Value
Due in one year
$
94,388

 
$
62,983

Due in one to five years
31,587

 
66,274

Total
$
125,975

 
$
129,257

The components of inventories as of September 30, 2016 and December 31, 2015 consisted of the following (in thousands):
 
 
September 30,
2016
 
December 31,
2015
Raw materials
 
$
10,900

 
$
9,176

Work in process
 
2,991

 
2,746

Finished goods
 
56,201

 
44,839

Inventories
 
$
70,092

 
$
56,761

Property and equipment, net as of September 30, 2016 and December 31, 2015 consisted of the following (in thousands):
 
 
September 30,
2016
 
December 31,
2015
Machinery and equipment
 
$
9,708

 
$
8,559

Furniture and fixtures
 
3,112

 
2,091

Leasehold improvements
 
2,384

 
1,564

Software
 
1,020

 
666

Computers
 
671

 
565

Construction in progress
 
6,194

 
577

Total property and equipment
 
23,089

 
14,022

Less: Accumulated depreciation and amortization
 
(6,865
)
 
(5,071
)
Property and equipment, net
 
$
16,224

 
$
8,951

The following table shows the components of accrued liabilities as of September 30, 2016 and December 31, 2015 (in thousands):
 
 
September 30,
2016
 
December 31,
2015
Payroll and employee-related expenses
 
$
17,519

 
$
13,653

Sales return reserve
 
2,995

 
3,247

Preclinical and clinical trial cost
 
2,195

 
1,330

Deferred revenue
 
345

 
526

Product warranty
 
1,138

 
713

Sales tax payable
 
578

 
531

Income tax payable
 
400

 
308

Leasehold improvement expenditures
 
2,093

 

Other accrued liabilities
 
6,497

 
5,273

Total accrued liabilities
 
$
33,760

 
$
25,581

The estimated product warranty accrual as of September 30, 2016 and December 31, 2015 was as follows (in thousands):
 
 
September 30,
2016
 
December 31,
2015
Balance at the beginning of the period
 
$
713

 
$
314

Provision for product warranty
 
894

 
752

Settlements of product warranty claims
 
(469
)
 
(353
)
Balance at the end of the period
 
$
1,138

 
$
713

Stock-based Compensation (Tables)
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 nine months ended September 30, 2016 is set forth below:
 
 
Number
of Shares
 
Weighted-
Average
Exercise
Price
Balance at December 31, 2015
 
3,755,345

 
$
12.13

Options exercised
 
(832,681
)
 
3.45

Options canceled
 
(15,925
)
 
17.90

Balance at September 30, 2016
 
2,906,739

 
14.58

The following table summarizes the activity of unvested restricted stock and restricted stock units under the Plans during the nine months ended September 30, 2016 is set forth below: 
 
 
Number
of Shares
 
Weighted Average
Grant Date
Fair Value
Unvested at December 31, 2015
 
849,571

 
$
15.12

Granted
 
293,250

 
61.78

Vested
 
(139,325
)
 
17.68

Canceled/Forfeited
 
(7,500
)
 
19.77

Unvested and expected to vest at September 30, 2016
 
995,996

 
28.47

The following table sets forth the stock-based compensation expense included in the condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2016 and 2015 (in thousands):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2016
 
2015
 
2016
 
2015
Cost of sales
 
$
83

 
$
141

 
$
742

 
$
271

Research and development
 
251

 
100

 
790

 
282

Sales, general and administrative
 
3,930

 
1,269

 
9,268

 
4,573

Total
 
$
4,264

 
$
1,510

 
$
10,800

 
$
5,126

Accumulated Other Comprehensive (Loss) Income (Tables)
Schedule of Accumulated Other Comprehensive Income (Loss)
The following table summarizes the changes in the accumulated balances during the three and nine months ended September 30, 2016 and 2015, 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 September 30, 2016
 
Three Months Ended September 30, 2015
 
 
 Marketable
Investments
 
 Currency Translation
Adjustments
 
 Total
 
 Marketable
Investments
 
 Currency Translation
Adjustments
 
 Total
Balance at beginning of the period
 
$
206

 
$
(2,785
)
 
$
(2,579
)
 
$

 
$
(1,233
)
 
$
(1,233
)
Other comprehensive income before reclassifications:
 
 
 
 
 
 
 
 
 
 
 
 
Unrealized (losses) gains—marketable investments
 
(178
)
 

 
(178
)
 

 

 

Foreign currency translation (losses) gains
 

 
(901
)
 
(901
)
 

 
(327
)
 
(327
)
Income tax effect—benefit (expense)
 
63

 
3

 
66

 

 
24

 
24

Net of tax
 
(115
)
 
(898
)
 
(1,013
)
 

 
(303
)
 
(303
)
Amounts reclassified from accumulated other comprehensive income to earnings:
 
 
 
 
 
 
 
 
 
 
 
 
Realized losses (gains)—marketable investments
 
1

 

 
1

 

 

 

Income tax effect—(expense) benefit
 
(1
)
 

 
(1
)
 

 

 

Net of tax
 

 

 

 

 

 

Net current-year other comprehensive (loss) income
 
(115
)
 
(898
)
 
(1,013
)
 

 
(303
)
 
(303
)
Balance at end of the period
 
$
91

 
$
(3,683
)
 
$
(3,592
)
 
$

 
$
(1,536
)
 
$
(1,536
)

 
 
Nine Months Ended September 30, 2016
 
Nine Months Ended September 30, 2015
 
 
 Marketable
Investments
 
 Currency Translation
Adjustments
 
 Total
 
 Marketable
Investments
 
 Currency Translation
Adjustments
 
 Total
Balance at beginning of the period
 
$
(163
)
 
$
(1,952
)
 
$
(2,115
)
 
$
(220
)
 
$
(644
)
 
$
(864
)
Other comprehensive income before reclassifications:
 
 
 
 
 
 
 
 
 
 
 
 
Unrealized gains (losses)—marketable investments
 
401

 

 
401

 
(162
)
 

 
(162
)
Foreign currency translation (losses) gains
 

 
(1,732
)
 
(1,732
)
 

 
(1,008
)
 
(1,008
)
Income tax effect—(expense) benefit
 
(145
)
 
1

 
(144
)
 
36

 
116

 
152

Net of tax
 
256

 
(1,731
)
 
(1,475
)
 
(126
)
 
(892
)
 
(1,018
)
Amounts reclassified from accumulated other comprehensive income to earnings:
 
 
 
 
 
 
 
 
 
 
 
 
Realized (gains) losses—marketable investments
 
(3
)
 

 
(3
)
 
541

 

 
541

Income tax effect—benefit (expense)
 
1

 

 
1

 
(195
)
 

 
(195
)
Net of tax
 
(2
)
 

 
(2
)
 
346

 

 
346

Net current-year other comprehensive income (loss)
 
254

 
(1,731
)
 
(1,477
)
 
220

 
(892
)
 
(672
)
Balance at end of the period
 
$
91

 
$
(3,683
)
 
$
(3,592
)
 
$

 
$
(1,536
)
 
$
(1,536
)
Net (Loss) Income per Share of Common Stock attributable to Common Stockholders (Tables)
A reconciliation of the numerator and denominator used in the calculation of the basic and diluted net (loss) income per share attributable to common stockholders for the three and nine months ended September 30, 2016 and 2015 is as follows (in thousands, except share and per share amounts):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2016
 
2015
 
2016
 
2015
Net (loss) income per share:
 
 
 
 
 
 
 
 
Numerator
 
 
 
 
 
 
 
 
Net (loss) income
 
$
(1,106
)
 
$
901

 
$
(141
)
 
$
732

Less: Undistributed income attributable to preferred stockholders
 

 
(625
)
 

 
(557
)
Net (loss) income attributable to common stockholders—basic and diluted
 
$
(1,106
)
 
$
276

 
$
(141
)
 
$
175

Denominator
 
 
 
 
 
 
 
 
Weighted average shares used to compute net (loss) income attributable to common stockholders
—Basic
 
30,604,384

 
7,853,730

 
30,269,463

 
5,962,031

Potential dilutive options, as calculated using treasury stock method
 

 
1,979,194

 

 
2,362,685

Potential dilutive restricted stock and restricted stock units, as calculated using treasury stock method
 

 
356,324

 

 
169,935

Weighted average shares used to compute net income attributable to common stockholders
—Diluted
 
30,604,384

 
10,189,248

 
30,269,463

 
8,494,651

Net (loss) income per share attributable to common stockholders
—Basic
 
$
(0.04
)
 
$
0.04

 
$
0.00

 
$
0.03

—Diluted
 
$
(0.04
)
 
$
0.03

 
$
0.00

 
$
0.02

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net income per share of common stock for the periods presented, because the effect of including them would have been anti-dilutive: 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2016
 
2015
 
2016
 
2015
Options to purchase common stock
 
2,974,642

 
1,321,250

 
2,974,642

 
1,321,250

Restricted stock and restricted stock units
 
995,996

 
6,500

 
995,996

 
6,500

Total
 
3,970,638

 
1,327,750

 
3,970,638

 
1,327,750

Geographic Areas and Product Sales (Tables)
The Company’s revenue by geographic area, based on the destination to which the Company ships its products, for the three and nine months ended September 30, 2016 and 2015 was as follows (in thousands):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2016
 
2015
 
2016
 
2015
United States
 
$
44,380

 
$
35,394

 
$
127,484

 
$
89,364

Japan
 
8,859

 
5,420

 
21,589

 
14,030

Other International
 
13,948

 
9,602

 
41,139

 
28,285

Total
 
$
67,187

 
$
50,416

 
$
190,212

 
$
131,679

The following table sets forth revenue by product category (in thousands):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2016
 
2015
 
2016
 
2015
Neuro
 
$
47,534

 
$
36,309

 
$
134,180

 
$
102,363

Peripheral Vascular
 
19,653

 
14,107

 
56,032

 
29,316

Total
 
$
67,187

 
$
50,416

 
$
190,212

 
$
131,679

Organization and Description of Business (Details)
9 Months Ended
Sep. 30, 2016
market
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
Number of major markets
Summary of Significant Accounting Policies - Additional Disclosures (Details)
9 Months Ended
Sep. 30, 2016
segment
activity
Accounting Policies [Abstract]
 
Number of business activities
Number of operating segments
Fair Value of Financial Instruments (Details) (Recurring, USD $)
In Thousands, unless otherwise specified
Sep. 30, 2016
Dec. 31, 2015
Financial Assets
 
 
Total
$ 126,309 
$ 139,359 
Commercial paper
 
 
Financial Assets
 
 
Marketable investments
8,620 
22,332 
U.S. Treasury
 
 
Financial Assets
 
 
Marketable investments
15,506 
15,436 
U.S. agency securities
 
 
Financial Assets
 
 
Marketable investments
11,804 
21,464 
U.S. states and municipalities
 
 
Financial Assets
 
 
Marketable investments
13,118 
2,084 
Corporate bonds
 
 
Financial Assets
 
 
Marketable investments
71,234 
61,002 
Non-U.S. government debt securities
 
 
Financial Assets
 
 
Marketable investments
5,693 
6,939 
Commercial paper
 
 
Financial Assets
 
 
Cash equivalents
 
9,850 
Money market funds
 
 
Financial Assets
 
 
Cash equivalents
334 
252 
Level 1
 
 
Financial Assets
 
 
Total
15,840 
15,688 
Level 1 |
Commercial paper
 
 
Financial Assets
 
 
Marketable investments
Level 1 |
U.S. Treasury
 
 
Financial Assets
 
 
Marketable investments
15,506 
15,436 
Level 1 |
U.S. agency securities
 
 
Financial Assets
 
 
Marketable investments
Level 1 |
U.S. states and municipalities
 
 
Financial Assets
 
 
Marketable investments
Level 1 |
Corporate bonds
 
 
Financial Assets
 
 
Marketable investments
Level 1 |
Non-U.S. government debt securities
 
 
Financial Assets
 
 
Marketable investments
Level 1 |
Commercial paper
 
 
Financial Assets
 
 
Cash equivalents
 
Level 1 |
Money market funds
 
 
Financial Assets
 
 
Cash equivalents
334 
252 
Level 2
 
 
Financial Assets
 
 
Total
110,469 
123,671 
Level 2 |
Commercial paper
 
 
Financial Assets
 
 
Marketable investments
8,620 
22,332 
Level 2 |
U.S. Treasury
 
 
Financial Assets
 
 
Marketable investments
   
Level 2 |
U.S. agency securities
 
 
Financial Assets
 
 
Marketable investments
11,804 
21,464 
Level 2 |
U.S. states and municipalities
 
 
Financial Assets
 
 
Marketable investments
13,118 
2,084 
Level 2 |
Corporate bonds
 
 
Financial Assets
 
 
Marketable investments
71,234 
61,002 
Level 2 |
Non-U.S. government debt securities
 
 
Financial Assets
 
 
Marketable investments
5,693 
6,939 
Level 2 |
Commercial paper
 
 
Financial Assets
 
 
Cash equivalents
 
9,850 
Level 2 |
Money market funds
 
 
Financial Assets
 
 
Cash equivalents
Level 3
 
 
Financial Assets
 
 
Total
Level 3 |
Commercial paper
 
 
Financial Assets
 
 
Marketable investments
Level 3 |
U.S. Treasury
 
 
Financial Assets
 
 
Marketable investments
Level 3 |
U.S. agency securities
 
 
Financial Assets
 
 
Marketable investments
Level 3 |
U.S. states and municipalities
 
 
Financial Assets
 
 
Marketable investments
Level 3 |
Corporate bonds
 
 
Financial Assets
 
 
Marketable investments
Level 3 |
Non-U.S. government debt securities
 
 
Financial Assets
 
 
Marketable investments
Level 3 |
Commercial paper
 
 
Financial Assets
 
 
Cash equivalents
 
Level 3 |
Money market funds
 
 
Financial Assets
 
 
Cash equivalents
$ 0 
$ 0 
Balance Sheet Components - Cash and Cash Equivalents Narrative (Details) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2016
Dec. 31, 2015
Sep. 30, 2016
United States
financial_instituion
Concentration Risk [Line Items]
 
 
 
Number of financial institutions holding cash in excess of federally insured limits
 
 
Cash, uninsured amount
$ 2.7 
$ 1.9 
 
Balance Sheet Components - Accounts Receivable, Net (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended 12 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Dec. 31, 2015
Allowance for Doubtful Accounts Receivable [Roll Forward]
 
 
 
Balance at Beginning of Period
$ 589 
$ 602 
$ 602 
Charged to Costs and Expenses
152 
(108)
(13)
Deductions
(110)
 
Balance at End of Period
$ 631 
 
$ 589 
Balance Sheet Components - Accounts Receivable Narrative (Details) (Customer Concentration Risk)
9 Months Ended 12 Months Ended 3 Months Ended 9 Months Ended
Sep. 30, 2016
Accounts Receivable
customer
Dec. 31, 2015
Accounts Receivable
customer
Sep. 30, 2016
One Major Customer
Revenue
customer
Sep. 30, 2015
One Major Customer
Revenue
customer
Sep. 30, 2016
One Major Customer
Revenue
customer
Sep. 30, 2015
One Major Customer
Revenue
customer
Concentration Risk [Line Items]
 
 
 
 
 
 
Concentration risk, number of customers that accounted for greater than a specified benchmark
Concentration risk, percentage
10.00% 
10.00% 
13.00% 
11.00% 
11.00% 
11.00% 
Balance Sheet Components - Prepaid Expenses and Other Current Assets (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2016
Dec. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
 
Prepaid Tax
$ 3,321 
$ 2,736 
Prepaid expenses
5,236 
4,706 
Income tax receivable
5,104 
606 
Other current assets
5,004 
1,304 
Prepaid expenses and other current assets
$ 18,665 
$ 9,352 
Balance Sheet Components - Gains and Losses of Marketable Investments (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2016
Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
 
 
Cost
$ 125,831 
$ 129,512 
Gross Unrealized Gains
175 
14 
Gross Unrealized Losses
(31)
(269)
Fair Value
125,975 
129,257 
Commercial paper
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Cost
8,621 
22,328 
Gross Unrealized Gains
Gross Unrealized Losses
(3)
(1)
Fair Value
8,620 
22,332 
U.S. Treasury
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Cost
15,488 
15,459 
Gross Unrealized Gains
18 
Gross Unrealized Losses
(27)
Fair Value
15,506 
15,436 
U.S. agency securities
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Cost
11,787 
21,497 
Gross Unrealized Gains
19 
Gross Unrealized Losses
(2)
(34)
Fair Value
11,804 
21,464 
U.S. states and municipalities
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Cost
13,129 
2,086 
Gross Unrealized Gains
Gross Unrealized Losses
(11)
(2)
Fair Value
13,118 
2,084 
Corporate bonds
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Cost
71,113 
61,188 
Gross Unrealized Gains
133 
Gross Unrealized Losses
(12)
(189)
Fair Value
71,234 
61,002 
Non-U.S. government debt securities
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Cost
5,693 
6,954 
Gross Unrealized Gains
Gross Unrealized Losses
(3)
(16)
Fair Value
$ 5,693 
$ 6,939 
Balance Sheet Components - Marketable Securities in an Unrealized Loss Position (Details) (USD $)
Sep. 30, 2016
Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
 
 
Fair Value
$ 38,214,000 
$ 97,802,000 
Gross Unrealized Losses, less than 12 months
(31,000)
(269,000)
Gross Unrealized Losses, greater than 12 months
Commercial paper
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Fair Value
4,223,000 
4,746,000 
Gross Unrealized Losses, less than 12 months
(3,000)
(1,000)
U.S. Treasury
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Fair Value
 
12,453,000 
Gross Unrealized Losses, less than 12 months
 
(27,000)
U.S. agency securities
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Fair Value
1,999,000 
13,475,000 
Gross Unrealized Losses, less than 12 months
(2,000)
(34,000)
U.S. states and municipalities
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Fair Value
11,778,000 
2,084,000 
Gross Unrealized Losses, less than 12 months
(11,000)
(2,000)
Corporate bonds
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Fair Value
15,740,000 
59,163,000 
Gross Unrealized Losses, less than 12 months
(12,000)
(189,000)
Non-U.S. government debt securities
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Fair Value
4,474,000 
5,881,000 
Gross Unrealized Losses, less than 12 months
$ (3,000)
$ (16,000)
Balance Sheet Components - Contractual Maturities of Marketable Investments (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2016
Dec. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
 
Due in one year
$ 94,388 
$ 62,983 
Due in one to five years
31,587 
66,274 
Total
$ 125,975 
$ 129,257 
Balance Sheet Components - Inventories (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2016
Dec. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
 
Raw materials
$ 10,900 
$ 9,176 
Work in process
2,991 
2,746 
Finished goods
56,201 
44,839 
Inventories
$ 70,092 
$ 56,761 
Balance Sheet Components - Property and Equipment, Net (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Dec. 31, 2015
Property, Plant and Equipment [Line Items]
 
 
 
 
 
Total property and equipment
$ 23,089 
 
$ 23,089 
 
$ 14,022 
Less: Accumulated depreciation and amortization
(6,865)
 
(6,865)
 
(5,071)
Property and equipment, net
16,224 
 
16,224 
 
8,951 
Depreciation and amortization expense
700 
500 
1,809 
1,200 
 
Machinery and equipment
 
 
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
 
 
Total property and equipment
9,708 
 
9,708 
 
8,559 
Furniture and fixtures
 
 
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
 
 
Total property and equipment
3,112 
 
3,112 
 
2,091 
Leasehold improvements
 
 
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
 
 
Total property and equipment
2,384 
 
2,384 
 
1,564 
Software
 
 
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
 
 
Total property and equipment
1,020 
 
1,020 
 
666 
Computers
 
 
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
 
 
Total property and equipment
671 
 
671 
 
565 
Construction in progress
 
 
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
 
 
Total property and equipment
$ 6,194 
 
$ 6,194 
 
$ 577 
Balance Sheet Components - Accrued Liabilities (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2016
Dec. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
 
Payroll and employee-related expenses
$ 17,519 
$ 13,653 
Sales return reserve
2,995 
3,247 
Preclinical and clinical trial cost
2,195 
1,330 
Deferred revenue
345 
526 
Product warranty
1,138 
713 
Sales tax payable
578 
531 
Income tax payable
400 
308 
Leasehold improvement expenditures
2,093 
Other accrued liabilities
6,497 
5,273 
Total accrued liabilities
$ 33,760 
$ 25,581 
Balance Sheet Components - Product Warranty (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended 12 Months Ended
Sep. 30, 2016
Dec. 31, 2015
Product Warranty, Increase (Decrease) [Roll Forward]
 
 
Balance at the beginning of the period
$ 713 
$ 314 
Provision for product warranty
894 
752 
Settlements of product warranty claims
(469)
(353)
Balance at the end of the period
$ 1,138 
$ 713 
Commitments and Contingencies - Lease and Purchase Commitments (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Commitments and Contingencies Disclosure [Abstract]
 
 
 
 
Rent expense
$ 1.4 
$ 0.9 
$ 3.8 
$ 2.3 
Commitments and Contingencies - Royalty Obligations (Details) (USD $)
3 Months Ended 9 Months Ended 9 Months Ended
Sep. 30, 2016
Cost of Sales
Sep. 30, 2015
Cost of Sales
Sep. 30, 2016
Cost of Sales
Sep. 30, 2015
Cost of Sales
Sep. 30, 2016
Royalty Agreement, March 2005
Dec. 31, 2015
Royalty Agreement, March 2005
Sep. 30, 2016
Royalty Agreement, April 2012
Sep. 30, 2016
Royalty Agreement, November 2013, Less than $5 Million in Sales
Sep. 30, 2016
Royalty Agreement, November 2013, Greater than $5 Million in Sales
Sep. 30, 2016
Royalty Agreement, April 2015
Other Commitments [Line Items]
 
 
 
 
 
 
 
 
 
 
Minimum annual royalty payments
 
 
 
 
$ 100,000 
$ 100,000 
 
 
 
 
Royalty as a percent of sales
 
 
 
 
 
 
5.00% 
3.00% 
1.00% 
2.00% 
Royalty threshold
 
 
 
 
 
 
 
 
5,000,000 
 
Royalty expense
$ 700,000 
$ 600,000 
$ 2,100,000 
$ 1,400,000 
 
 
 
 
 
 
Commitments and Contingencies - Litigation (Details) (Damages from Product, USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2016
Damages from Product
 
Loss Contingencies [Line Items]
 
Damages sought, value
$ 35 
Stock-based Compensation - Stock Option Activity (Details) (USD $)
9 Months Ended
Sep. 30, 2016
Number of Shares
 
Beginning balance (in shares)
3,755,345 
Options exercised (in shares)
(832,681)
Options cancelled (in shares)
(15,925)
Ending balance (in shares)
2,906,739 
Weighted- Average Exercise Price
 
Beginning balance (in dollars per share)
$ 12.13 
Options exercised (in dollars per share)
$ 3.45 
Options cancelled (in dollars per share)
$ 17.90 
Ending balance (in dollars per share)
$ 14.58 
Stock-based Compensation - Restricted Stock and Restricted Stock Units Activity (Details) (Restricted stock and restricted stock units, USD $)
9 Months Ended
Sep. 30, 2016
Restricted stock and restricted stock units
 
Number of Shares
 
Unvested beginning balance (in shares)
849,571 
Granted (in shares)
293,250 
Vested (in shares)
(139,325)
Canceled/Forfeited (in shares)
(7,500)
Unvested and expected to vest ending balance (in shares)
995,996 
Weighted Average Grant Date Fair Value
 
Unvested beginning balance (in dollars per share)
$ 15.12 
Granted (in dollars per share)
$ 61.78 
Vested (in dollars per share)
$ 17.68 
Canceled/Forfeited (in dollars per share)
$ 19.77 
Unvested and expected to vest ending balance (in dollars per share)
$ 28.47 
Stock-based Compensation - Employee Stock Purchase Plan (Details) (USD $)
In Millions, except Share data, unless otherwise specified
9 Months Ended
Sep. 30, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
 
Shares purchased under employee stock purchase plan (in shares)
148,354 
Shares purchased under employee stock purchase plan
$ 3.8 
Stock-based Compensation - Stock-based Compensation Expense (Details) (USD $)
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
 
 
 
 
 
Stock-based compensation expense
$ 4,264,000 
$ 1,510,000 
$ 10,800,000 
$ 5,126,000 
 
Unrecognized compensation cost related to unvested share-based compensation arrangements
35,100,000 
 
35,100,000 
 
 
Unrecognized compensation cost, expected recognition period
 
 
2 years 11 months 
 
 
Share-based compensation expense, capitalized in inventory
 
 
400,000 
 
300,000 
Cost of sales
 
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
 
 
 
 
 
Stock-based compensation expense
83,000 
141,000 
742,000 
271,000 
 
Research and development
 
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
 
 
 
 
 
Stock-based compensation expense
251,000 
100,000 
790,000 
282,000 
 
Sales, general and administrative
 
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
 
 
 
 
 
Stock-based compensation expense
$ 3,930,000 
$ 1,269,000 
$ 9,268,000 
$ 4,573,000 
 
Accumulated Other Comprehensive (Loss) Income (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Marketable Investments
Sep. 30, 2015
Marketable Investments
Sep. 30, 2016
Marketable Investments
Sep. 30, 2015
Marketable Investments
Sep. 30, 2016
Currency Translation Adjustments
Sep. 30, 2015
Currency Translation Adjustments
Sep. 30, 2016
Currency Translation Adjustments
Sep. 30, 2015
Currency Translation Adjustments
Sep. 30, 2016
Total
Jun. 30, 2016
Total
Dec. 31, 2015
Total
Sep. 30, 2015
Total
Jun. 30, 2015
Total
Dec. 31, 2014
Total
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
 
 
$ 232,522 
 
$ 206 
$ 0 
$ (163)
$ (220)
$ (2,785)
$ (1,233)
$ (1,952)
$ (644)
$ (3,592)
$ (2,579)
$ (2,115)
$ (1,536)
$ (1,233)
$ (864)
Other comprehensive income before reclassifications:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income before reclassifications
 
 
 
 
(178)
401 
(162)
(901)
(327)
(1,732)
(1,008)
 
 
 
 
 
 
Income tax effect—benefit (expense)
66 
24 
(144)
152 
63 
(145)
36 
24 
116 
 
 
 
 
 
 
Net of tax
(1,013)
(303)
(1,475)
(1,018)
(115)
256 
(126)
(898)
(303)
(1,731)
(892)
 
 
 
 
 
 
Amounts reclassified from accumulated other comprehensive income to earnings:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Realized losses (gains)—marketable investments
(3)
541 
(3)
541 
 
 
 
 
 
 
Income tax effect—(expense) benefit
(1)
(195)
(1)
(195)
 
 
 
 
 
 
Net of tax
(2)
346 
(2)
346 
 
 
 
 
 
 
Net current-year other comprehensive (loss) income
(1,013)
(303)
(1,477)
(672)
(115)
254 
220 
(898)
(303)
(1,731)
(892)
 
 
 
 
 
 
Ending balance
$ 253,854 
 
$ 253,854 
 
$ 91 
$ 0 
$ 91 
$ 0 
$ (3,683)
$ (1,536)
$ (3,683)
$ (1,536)
$ (3,592)
$ (2,579)
$ (2,115)
$ (1,536)
$ (1,233)
$ (864)
Income Taxes (Details)
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Income Tax Disclosure [Abstract]
 
 
 
 
Effective tax rate
(1.30%)
56.80% 
121.80% 
65.90% 
Net (Loss) Income per Share of Common Stock attributable to Common Stockholders - Basic and Diluted Earnings per Share (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Numerator
 
 
 
 
Net (loss) income
$ (1,106)
$ 901 
$ (141)
$ 732 
Less: Undistributed income attributable to preferred stockholders-basic
(625)
(557)
Less: Undistributed income attributable to preferred stockholders-diluted
(625)
(557)
Net (loss) income attributable to common stockholders-basic
(1,106)
276 
(141)
175 
Net (loss) income attributable to common stockholders-diluted
$ (1,106)
$ 276 
$ (141)
$ 175 
Denominator
 
 
 
 
Weighted average shares used to compute net income (loss) per share attributable to common stockholders — Basic (in shares)
30,604,384 
7,853,730 
30,269,463 
5,962,031 
Weighted average shares used to compute net income attributable to common stockholders —Diluted (in shares)
30,604,384 
10,189,248 
30,269,463 
8,494,651 
Net (loss) income per share attributable to common stockholders — Basic (in dollars per share)
$ (0.04)
$ 0.04 
$ 0.00 
$ 0.03 
Net income (loss) per share attributable to common stockholders — Diluted (in dollars per share)
$ (0.04)
$ 0.03 
$ 0.00 
$ 0.02 
Options and ESPP Shares
 
 
 
 
Denominator
 
 
 
 
Potential dilutive shares(in shares)
1,979,194 
2,362,685 
Restricted stock and restricted stock units
 
 
 
 
Denominator
 
 
 
 
Potential dilutive shares(in shares)
356,324 
169,935 
Net (Loss) Income per Share of Common Stock attributable to Common Stockholders - Antidilutive Securities (Details)
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Antidilutive securities excluded from the computation of earnings per share (in shares)
3,970,638 
1,327,750 
3,970,638 
1,327,750 
Options to purchase common stock
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Antidilutive securities excluded from the computation of earnings per share (in shares)
2,974,642 
1,321,250 
2,974,642 
1,321,250 
Restricted stock and restricted stock units
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Antidilutive securities excluded from the computation of earnings per share (in shares)
995,996 
6,500 
995,996 
6,500 
Geographic Areas and Product Sales - Revenue by Geographic Area (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
Revenue
$ 67,187 
$ 50,416 
$ 190,212 
$ 131,679 
United States
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
Revenue
44,380 
35,394 
127,484 
89,364 
Japan
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
Revenue
8,859 
5,420 
21,589 
14,030 
Other International
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
Revenue
$ 13,948 
$ 9,602 
$ 41,139 
$ 28,285 
Geographic Areas and Product Sales - Revenue by Product Category (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Revenue from External Customer [Line Items]
 
 
 
 
Revenue
$ 67,187 
$ 50,416 
$ 190,212 
$ 131,679 
Neuro
 
 
 
 
Revenue from External Customer [Line Items]
 
 
 
 
Revenue
47,534 
36,309 
134,180 
102,363 
Peripheral Vascular
 
 
 
 
Revenue from External Customer [Line Items]
 
 
 
 
Revenue
$ 19,653 
$ 14,107 
$ 56,032 
$ 29,316