ISRG - Earnings call transcript Q1 2022 | Intuitive Surgical, Inc.

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Intuitive Q1 2022 Earnings Release. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] And as a reminder your conference is being recorded. I would now like to turn the conference over to your host Brian King, Head of Investor Relations. ahead. go Please

Brian King

welcome With and CEO; first earnings quarter Jamie Good today to we call. me CFO. our have conference Samath afternoon Intuitive's Gary and Guthart,

comments like Before I statements. or Actual materially deemed to implied mentioned differ forward-looking on may those inform to we contain our Form today's would including you from begin, results as maybe call that expressed and uncertainties Xrd, are filed detail in result our February and described filings, Commission recent risks of Securities uncertainties. certain XXXX. Exchange These XX-K risks on most a and in

over quarter Jamie as review our highlights and present first session. a financial quarter's session. will release operational by a question-and-answer Events results Today's can found Gary. today, results website a such be audio to updated filings then our you consist place will supplementary our procedure SEC this statements. financial website Our With described And with question-and-answer Gary not press host our website. available at for on in under to the and reliance business announced will page. I that press will that posted be the been will forward-looking provide will format website. have or clinical on intuitive.com of it our and SEC’s to at release call the section undue cautioned turn provide Today's on Please earlier our XXXX. highlights we discuss will our data highlights. are financial and our Investors Relations note Investor providing outlook through replay finally I for followed of tables conference of

Gary Guthart

procedure stresses joining of first was non-urology included by delays. demand and outside for we and procedures performance today. of including hospitals, our of procedure and general US, availability the COVID where our of the quarter of pressure health you at challenged Regardless are products procedure receded. were in surgery logistic US the Drivers COVID, which staffing focus. environmental demand us the Thank component healthy regional recovering material for areas of In raw waves

above While the surgery hard the long da Vinci in In several compared States that of how china nicely UK, the utilization led Japan. In gynecology general of procedure total in diversifying in eight in Vinci to reimbursement will the States, also repair platform. quarter procedures continued saw cholecystectomy, procedures, by are bariatric slowdowns to urology with of International quarter procedures gastrectomy beyond surgery. in growth in MHLW use procedures countries Japan, Korea. later added another assisted reimbursement thoracic and for in surgery, and increased robotically In oncologic and particular reflecting is flexible grew number our April, covered XX strength approximately of da adoption program, in with coverage over QX, QX Vinci in the and robotics bringing compared types XXXX, XXX% United Ion rate, meet in United procedures da forecast quarter quarterly general to difficult of I our will but note these was grew to Germany persist, growth rectal our hernia the Outside challenge. working grew China, surgery. the XXXX. growth the the and da teams average first it's to Japan Italy Vinci The use the COVID beginnings grew Lobectomy and in XX%, countries healthy. headwinds some

Turning to capital.

quarters and been region varied XXXX trade-ins pull-forward strength systems in of standing historically placements available Vinci number an quarter. bringing due capital of Contributing to with for end, factors of into Vinci we're to budget QX team da base at several after the finances. quarter QX may customer the our the in Capital XXXX capital pipeline systems out Vinci of some with a placement with third-generation installed strong XXX total and utilization in Placements seeing near-term tightening in include a our overall by compared X,XXX US. systems. systems a UK the da demand year softening hospital Our placement reduction XXX installed da QX XXXX, have lumpy clinical of

the derived existing of from systems of through QX and for three-year same QX to customers XX% is quarter. the base the of of the With This our to XXXX first CAGR and XXXX installed in for period procedures and base climb and from utilization installed the the of increasing pandemic growth value installed XX% over us. continue

moderated will is demand will the Over detailed a regional segments a by in Jamie mid-term give trends robotic-assisted surgery of growth. later call. capital more Brian mature procedure function give capital procedure the utilization review in demand and

quarter, first global continued expansion, the and infrastructure. our innovation in invest initiatives exit we As we to business

our utility in the for accessories, with Sealer the XX-millimeter Xi spending quarter systems general roughly in received and NMPA target. clearance surgeries. for our particularly, Our our Endoscope products XX-millimeter These instruments Plus. of and Chinese several thoracic was line we procedures, support SureForm staplers, Vessel In Extend our our and and

medical of submitted device platform into for to Ion Ion. the regulation allow Europe. our EU application to Turning We the entry

teams unified share digital our in created review France, video been and India da also installed for capability the on launched and the and app Across we're the models. for community -- each capture creating for and Ireland workflow products, to from for edit and Building existing using Iris that clinical in and year-over-year the we is systems feedback annotation and procedures AI and have in quarter, Intuitive Intuitive our used storage video the solution the technology building room. resubmission with a US clips upgraded teams number Kingdom in a approximately for an production capture, In Spain require which for Hub, capacity customer allows in with events of conversations virtually base XXX(k) United Customer the and to are available of pardon software enables integrated collaborate Germany, encouraging. Israel reprocessing automated planning workflows integration procedures our grew cases. systems. interface Japan, Italy, to making procedure and with technology, has core operating this will models, launches and Hub improvements teams of key Vinci video set which Intuitive tripled QX. next some segmented Switzerland My US, software efficiency. me of Our and now Intuitive year-over-year. was for how organ its and Orpheus In Intuitive FDA characterize hardware our To XX% best of on anatomical the OR set to Hub goal convenient adding

base training SimNow a simulator in XX% reality the our quarter compared the of grew virtual with installed Finally, year ago.

which port began SP, technology includes XX% da single program next-generation our longer our life. we our Firefly and launch of Imaging Fluorescence For has SP Vinci endoscope the

also surgery We we during and In has our clearance both higher on our launched indications. PMDA next-generation seeking submitted for Japan more forces SP broad to durable. been SP Feedback da core that can are instruments apply encouraging. Vinci

working sites continue environment. approved delays our COVID additional in customers adoption, have Stepping and a with which the its hard We're top to indications slowed our is they challenging XXXX, SP an for our expand to support, in thoracic and important for IDE completion. as for surgery, navigate of pursue to US, and surgery. some back, train to an accelerate colorectal trial in IDE priority site-specific colorectal progress We is ongoing the trial. our for number participating supply broader

our over executing We United States on the detail. outside Samath, on beyond helping who the digital technologies through I'll focused and greater matters United our Jamie general are in to diversifying urology also time and will now tools. and new you financial the surgeons adopt take States our turn in business platforms

Jamie Samath

results results reflected expansion on da procedure forma non-GAAP our I as GAAP first the in on will of prepared base compared Good installed performance also approximately of XX%. of an our the between summarize placements Overall, in system our to afternoon. remarks. pro XX% systems, XXXX pro A and I the growth quarter of basis. forma Vinci or posted website. is will describe later highlights reconciliation my of resulting XXX performance a and of approximately GAAP our systems QX

As of the Key metrics a revenue follows. capital result increased business of by quarter as QX for procedure were and performance, our XXXX first XX% year-over-year.

XX% XX% OUS and procedures significant by in hospitalizations of number the to procedures Procedures variant. were increased procedure XX%. US the the impacted related growth, by Omicron the in the US grew Within January in

approximately of XX%. rates growth hospitalizations COVID-related and grew recovered da first compound three-year Vinci procedures As declined March, a in quickly. procedures quarter rate basis, February annual On

system system the measured field, compared year. per placements in three-year quarter by was placed in US. CAGR, systems decline with year. older from Utilization first increased the That increased the the systems of an XX% The a entirely of number approximately XXXX. placed declined to XXX trade-in clinical quarter X% by the of of last XXX grew systems by of utilization conjunction from quarter system, driven generation last X%. Using first X% First procedures

computer as freight continued recently, to to and our and lower including in meet challenging so During the ability system. QX, demand, for orders supply supply to shutdown Europe, da the the chain we chain delays constraints on-time than be experienced a and result, the far These due during continued remains of some performance have experience of have geographically pandemic. dynamic. unanticipated was we delays combination forwarder's to we delivery issues, instruments its some a to fulfilling quarter, were In customer in experienced In our our Vinci accessories. environment and global limited logistics customers

and have to to risks potential While supply remain material significant. our these operations customers QX financial constraints certain manufacturing with associated ability did not impact our to products results, disruption our our to a

inefficiencies reflected while risks the first COVID-mitigation of in logistics continued Italy in a impacted XXXX. of the and procedure procedure in our Omicron reflecting reimbursement strong procedures the adverse of that some procedure growth than the set granted reflecting procedures growth slightly significant with of significant cholecystectomy thoracic in Procedure variant the urologic Japan April COVID also future were in procedures. reflected was UK of colorectal higher growth The was and US Europe, and QX in performed. last hysterectomy quarter in the and the growth given of this variant Omicron adversely quarter, XXXX. key strong in XX% Brian impact to costs of early-stage the in Germany da Asia gross this that also later highlight Vinci experienced Vinci in COVID additional procedures number thoracic, Overall UK, quarter. of year the in in bariatrics, lower we Procedure China part was growth strength categories. of solid risk the over growth Delta and and growth of broad variant waves of will part commentary quarter. also expectations procedures of later maybe in QX impacted France hernia Korea recovery and impact in the that In growth strong in repair. Procedure across in the hysterectomy, the procedure QX by impact in margin. associate impact in measures of in past was continued we strong manufacturing growth strong QX and were our rectal growth experienced relative and the XXXX call. procedure During provide the da

result by government We first in place the quarter decline In China to impact systems budget by in the lower remainder levels systems As into XX XXXX, QX, with driven COVID first effect not compared reimbursements we additional in part timing of XXX base the with assistant our do of near driven of systems of in We primarily the placed XXXX. in in in into Gary with to in April and XX installed expect XXX the we were was into China placed and the increased into compared XX nine the XXXX. expect greenfield of quarter systems performance customers by pipeline, existing into placements Capital partially a taking a China XX Outside during in XX systems. term. Japan longer the included Current moderately placed placements to eight customers. of of US, Europe, softening quarter capacity The placements XXX than Japan US, experienced in of impacted Europe, cycle UK transactions, QX US XX increased XXX in times anticipation the systems quarter SI which logistics Japan in placements response and XXXX trade-in in in the accounts reflecting some XXX system adding greenfield eight similar on in X. procedure the into cycles. of systems cases. first US by a associated remaining approximately first is quarter the we indicated, in System UK. in of lockdowns we capital offset the the as to core

As local for regulatory year transactions XX for China, represented quota which of the the under compared current XX% the may end placements to competitors in systems of available QX have received full be XXXX, XXXX also there remaining and XX% clearance. of were XX% the of Globally to full trade-in in year that the XXXX. quarter

faced Given the significantly have our such a make compared significant partially government a continue of lower lower pressures on hospitals the interest pandemic supply $XXX to field, and of and in made billion by continue have in financial of the available the reductions may servicing impacted. impact trade-ins to XXXX, The government increases debt face of U.S. rate to shortages, that rates, the CARES to funding, older-generation result staffing debt hospitals. in pressures, to capital mitigated access pressures the Hospitals as hospitals environment rising COVID funding other the costs expect number Since approximately adversely interest in XXXX. financial customers inflation. environment the To spending and we to placed start be the higher and Act of as hospital chain as may been relief more burden has be and of experience in operational The systems XXXX the extent challenging. volume new financial resulting

we experience selling likely longer markets, various pressure. price in will progresses competition and cycles as addition, In

of quarter to last and -- mix prefer increase lease quarter XX% of XX% last of Additional mix follows. with revenue who was primarily Leasing $X.XX slightly quarter year. placements, revenue the XX% trends first statistics first are billion, The purchase reflected rather. Total as an year compared last from systems. represented QX customers lower

proportion we quarter-to-quarter, to expect from over fluctuate continue that will increase placements time. leasing operating While will under the of leases

of hospital orders Ion in We Ion the a The quarter, and reflects decline The lease in $X.XX unfavorable XX were system as of compared and systems and varied procedure accessory likely with of small mix the $XX the buyout dual which favorable U.S. The in procedure a $X,XXX average FX million stocking instruments revenue by quarter down $XX lower so. mix quarter XXXX decrease are the $X.XX of of buyout FX. X% now significantly unfavorable primarily selling Xi $X,XXX U.S. was by benefit stocking associated quarter-to-quarter an with Ion last First transactions with million and bulk in orders the placed systems last primarily driven sequential higher customers quarter, will arrangements. the dollar. revenue system a the extended year-over-year in has stronger approximately our recognized with of than $XX installed fourth compared particular quarter quarter. primarily to The million is of the last million year. and proportion lease of last $X,XXX in prices continue with impact Europe, XX compared of QX patterns per sequential last in associated ordering to million was QX, operating quarter. and systems year. procedure, large realized placements lower higher first XX do launch lower of under impact system product per Instrument XXX quarter the increase a year. Lease and per from base in from revenue first the in of reflects program the XXXX, placements use We from placements, and

the first Xx systems in compared at Seven placed to the over quarter just Ion placed SP XXXX. systems, X,XXX procedures quarter three were Korea. customers of in of the are quarter up First first over of including systems

now XXX. Our installed base of SP is systems

First by small beyond to will year-over-year Growth be with transoral quarter procedures of growth SP grew gated indications continue procedures clearances market high-value approximately the and in platform XX% and approximately clinical U.S. but in XX% SP the Korea. additional segment.

costs XX.X%, forma XX.X% first Pro with gross XXXX the margin XXXX last the and quarter was and lower XX.X% compared invest first last was relative infrastructure and forma costs result fixed primarily increased as logistics to to for to expenses. capacity long-term in on our a and quarter, Moving needs. than we revenue, margin of of gross serve as for gross quarter. higher manufacturing operating Pro margin quarter our

forma and that While a net expenses million first increased increase and customer components our programs. costs quarter still training, inventory count Pro marketing products a targeted grew are quarter-over-quarter, XX% The XXXX. head operating levels. higher approximately variable customer-facing $XX with compared first reflected and of there an, ago year number compensation increased are operating below in expenses from costs travel in quarter the increase

have the just of XX% a employees, increase the XXXX an basis. As over from the approximately $XX XXX manufacturing we of three-year and CAGR increase year infrastructure increase to XX,XXX first on of expenditures employees an of capacity had footprint, we comprised of end production million, are X,XXX quarter in Capital QX, facilities' Of employees. investments QX XX% or were the certain of primarily lines. automation our approximately added over last of manufacturing expand

was certain items. rate XX.X%, discrete forma expectations pro first due effective to tax tax slightly above the Our for primarily quarter our

in the forma primarily pro above for to previous due XXXX. became law was January tax Xst Our U.S. that XX.X% change effective XXXX, rate tax a on

include million $XXX forma GAAP XXXX. million first the results. are of our first $XXX $X.XX and $XXX pro the now quarter Our The employee and amortization and December per stock share investments. or cash of We of of gains for compared forma sequential on between intangibles employee net income capital share as interest-bearing our excess cash reduction from proceeds of repurchases, associated and compensation, and stock-based website net with partially or net XXst $X.XX with $X.X summarize net from on billion, and income outlined employee with investments million by sale, operating of ended for quarter for tax with benefits on and the GAAP XXXX. offset compared as quantified classified XXXX expenditures quarter strategic $XXX of XXXX. The per billion or share million in the first first adjustments GAAP cash and $X.XX or first for investments pro was income reflected awards, quarter $X.X GAAP $X quarter was losses with primarily compared losses the per XXXX, quarter income share, and unrealized will plans. I per investments available activities stock in share

During the over total and price a average XXXX. it that, of I And will XXX,XXX who per discuss at outlook quarter to we expenditure million. clinical highlights our updated provide for like $XXX repurchased of to $XXX Brian, shares, share turn an with would for

Brian King

Thank you, Jamie.

the Our XXXX. was three-year compared XXXX. growth rate quarter quarter first annual procedure XXXX first of overall and XX%, between was for to of first growth XXXX first of the XX% The XX% quarter compound quarter

in were procedure in basis was annual In U.S., for strong first basis growth X-year US the compared quarter. growth procedure XXX also quarter and quarter first quarter was procedures three-year by from grew the the in repair of and general COVID colorectal XX% in growth contributors and XX% the a by thoracic XXXX. first Outside quarter. Capital largest driven the quarter. and XXXX UK we in within in placement procedure growth first procedure volume strong gynecology the by the XXXX procedure placements additional procedures. while growth growth UK, In older-generation and hysterectomy were rectal experienced On were of XX disruption partially systems, growth Italy quarter, also approximately part growth of was in supported compared last growth growth thoracic last a XX%. procedure contributors. in XX%. points number growth and general, quarter In XXXX placed also in and procedures compound recession growth and again hernia highest strong driven of by Europe systems the driven robust was one growth thoracic UK, single specifically In Italy, by the driven for benefited, the gynecology of On categories US and of reflecting growth Germany, quarter trade-ins to continued strong by XX% the surgery, with in first procedure a strong annual lobectomy. First procedures. the with XX% UK urology and outside cholecystectomy basis first US and in of growth hysterectomy, in was hysterectomy, was the of In XXXX workday funding quarter XX% with to with colorectal Bariatrics by Germany caused surgery Procedure XX% early-stage and the in systems. to year-over-year, forge gastrectomy, compound quarter surgery. government in the the growth be benign Japan, growth general

growth expectations prostatectomy constrained partial below a which volumes. COVID first solid lockdowns prostatectomy we In March in procedure and and both resurgence in addition in In as regional in infections particular impacted nephrectomy. was hospitalizations In solid prior growth experienced and nephrectomy nephrectomy was with urologic of Korea, was negatively urology saw the growth China, recovery partial and procedure slightly when specifically but China year which procedures a double-digit quarter to by solid compared reflecting growth COVID.

We as continue gynecology and see well. thoracic to general broad-based growth in surgery

seeing quarter we result enter of we as continued procedure As lockdowns. year, on the regional negative second volume impact this the a are

invasive lung biopsy procedures. Now, platform turning alumina today to Ion, focused minimally on robotic-assisted our and

the placements XXXX installed year. year growing totaled over quarter prior Ion system in also QX over increase and ending QX with approximately XXX over strong X,XXX First XX% an approximately XXX% prior were prior the procedures Ion XXX% just systems over XXXX, XXXX the quarter.

our deem notable. to these we the of studies quarter certain Each Now, calls turning highlight on we published clinical be recently side business. to that

that thoroughly of gain However, of understanding body over to have we review years. evidence, a all scientific stakeholders the studies extensive of the been to the encourage complete more detail published

the the Robert readmission Medicine evidence in of I. laparoscopic, compared year significant nephrectomy, society low colleagues significantly using Overall, the of of across stay, XX specialties, for surgery and observed with for lobectomy hospital was relative a a for of large. use and to Dr. rate XX.X%, range of Intuitive approximately or conversion with partial rates, real-world times matching, within approach rate total of da New in or Peres for will successful procedures. corresponding patients forecast length open conversion for da significantly X.X-day data resection. of we between conversion MIS Vinci associated call, body greater anterior to encompassing a X% high-level X% turn associated reduction leads minimally of be to patients." in September quarter, York was XX%. patients for rates burden. a all were or that X.X researchers who During procedures with a including Converted-to-open significant longer our a XX%. risk conversion cumulative to surgery at Grossman the within robotic-assisted its across differences procedures a the assessing to colectomy, XX $X,XXX for researchers XXXX malignant laparoscopic conversion Shaw growth from a conversions Vinci compared hysterectomy, in-hospital conversion along And minimally Utilizing decrease to between The with collaboration perioperative adding value The standpoint in thoracoscopic in-hospital $X,XXX invasive and January procedures or published system, also total total to now to part score during surgery right rate open of significantly the care can propensity and with last multidisciplinary XX-day study University in and invasive performing School the were After database, with health these of result program, inguinal procedure is "From ventral for XX invasive hernia laparoscopic, over this across indicated conversion VATS full conversions days benign and a to a effect the robotic procedure cost, common underwent Starting cost volume-weighted all surgery approximately repair, da included the a operations a or XXX,XXX Vinci the cohorts. study sigmoidectomy, or the has adult procedures patient, XX-day or XXXX The the and conversion conditions. higher the improved of premier financial thoracoscopic, the procedure that X.X%, cost. than LAP could population da all all thoracoscopic to range outlook or studied concluded increased procedures. Vinci The reduction On major of and with benefits ability rates a lower to our hospital health XXXX. at an decrease robotic XXXX deliver XX% I several procedures. minimally

hospitals of further end and the decline are remainder high some the the assume significant The COVID-XX-related hospitalizations ongoing This year and of impacts around pressure increasing XXXX year. there We staffing of COVID continues now throughout of our XX%. from assume the to throughout COVID the with range At range the growth choppiness full at the we the with continued are end to resurgences. forecast and pandemic. procedure expect low assumes and XXXX XX% additional reflect uncertainty no associated world range, the of course

than quarters, rate have to as number disruptions. quarter, QX highlight a of growth lower chain procedure to China, be procedures COVID variant the likely and may noted quarter subsequent strong the recovery Omicron trend reflect the XXXX recent As we last our that In recovery in the quarter second XXXX, infections year-over-year began The of be seen reflected performed. in will results subside. the risk in significant increase volumes, not steep procedures quarter range and the supply as in procedure US exiting from does the in the the in

On profit. within gross XX.X%. year XXXX call, profit our margin to our full pro XX.X% to forma Turning gross and we forecast be last

and forma, some profit inflation expanding was are XX% dollar. to chain stronger within impact gross to end related on input lower We impact and XX.X% the from now margin of net of of the a The the revenue. slightly our pro supply range be reflect costs range to updated US

will call, and expenses, to quarter-to-quarter, and margin product, be mix respect product profit between on impact pro of depending the XX%. gross and our operating to introductions. Our last vary forecast XX% With new growth largely actual expense operating regional forma on trade-in we

refining are our to We XX% operating estimate and be full XX%. expect between growth now forma year our expense and pro

We continue compensation million to expense $XXX our between and stock expect XXXX. $XXX range in to million non-cash

other to of which quarter's mostly is in comprised $XX range expect we income, between forecast and billion. $XXX expenditures capital $XX XXXX. income, interest We within million call, million XXXX On a million of $X last to total

for activities. $XXX capital to to estimated timing forma between tax, concludes estimate of in current million we XX% primarily to to $XXX With our regard XXXX refining facility comments. million, be range the planned and rate to pre-tax our XX% expenditures income. That be pro based income of prepared the XXXX continue tax construction now are We on of

to open the now will We call questions. your

Operator

Thank the you. from [Operator Amit Hazan. sorry, is, line Instructions] And our Please, first of go question ahead.

Amit Hazan

over what and increase we just if five four of year-to-year. as to context choppy year pretty ask love that tend color you. you first Hey, the question to is XX% that. greenfield mentioned, just on years, we the afternoon. focused Thank more placements. or kind And I'll spending on is, same environment, Maybe, the have just my about look comments of past capital obviously, US on good which side the were just And, your on systems and the those back, is unit we a by numbers it would have

Just wondering you color this just delaying in as help here of, you're whether a And citing kind a seeing the year can proxy, on risk term for for target you're in non-trade-ins a on of that's of that kind actually the good then the immediate just using that US? And that purchases. what us give much sounded it's in risk factors. your It seeing if factors you I'm something lot its mentioned. you're or like near, that planned customers how

Gary Guthart

Yes.

take question little ask I'll the side. the and step second in trade-in on to me bit more then Let a on first Jamie

the for of of process some the less itself. around But US we're more lower may don't budget SI of as pull-forward for now, seeing COVID. it's pipeline hospitals little delay a So what little the parts, of may the know toward demand little United of ready where that States. we're end less bit the for bit some QX that, just we're parts what this bit We not volume. We a got in in the purchases, of entirely later signaling bit retirement QX we're of in clear. some government clear is, It early the at we're -- looks was trade-in demand be getting the flushing, of a support the know cycle just and planned a the of some contracting, terms yet. sure and It seeing a of strong. little

we're So not. that to hospitals there's and is, that answer capital. -- the fruition to or additional will on short soften forecasted then finances. pressures I'll those We'll US The going if have some point to final see of and come The see. to

turn me ratio what So little where bit look that like, let the kind regard of that's lays of With you a trade-in Jamie. it to does out. to

Jamie Samath

just trade-in there's just kind so of back I look has transactions cycle. globally. driven If year about at last a the the XXX-ish you in degree about the US, of sense can get that Of were XX% done the US trade-ins which XXXX to Yes.

I As the there's in XXX as my end remarks SIs in installed left the base. of said QX of about US in prepared the

those can that data to some points estimate play will you of of use kind so two how overtime. out And

a distribution. of of of get little for longer that to As to respect the you in start I'd kind trade-ins. last than of remaining they the say what when the towards But of with tail kind SIs, the that's you're middle end the average probably

I you US you you question estimates way about is, your have in our kind The it think think procedure the I would had of that can Amit greenfields. on a from take range.

You some sense of model the respect can installed apply you to usual expand. utilization. might how the base That with gives

is do and saw in the capital that so, that And we then what with risk from mix That to reflect can you we greenfields pipeline would And QX. just what US softening calculation. is kind highlighted the in a obviously potential respect that incrementals. of of model I

Gary Guthart

on feel a the is our demand. in core a target driver we like Just It's States, multiport healthy. a And demand United procedure healthy that. segment driver the in is, capping country market in remark core areas. thought procedure Final the is like mature

need way customer is Our quality major in supply with high they timely. focus can making a that's what sure we and that the

So, If demand. and it's closing procedure I those in is gaps, it itself markets well by think goes out. that the driven really successful managing those in core work because through supply chain. are we demand will capital will It ultimately play

Amit Hazan

hate in to this to to, feel on that it. investors want question at And get I second this but for me the ask just time I reflect color. always like question point Thanks you

So we that to the not obvious We background. stated always new know your you're you working if spend. one, see We believe that least you at in on everyone. R&D That's have two platforms. as

think to this I to where more go is we How FDA us just evolved? you is in can question maybe to whether point is always to for much timing. are? in where and technology process about seeing need the market wanted time you this situation new ask technology give big what the at and you And us the how incubate more is, related color through time something that's what getting for process on that that's we're a just

Gary Guthart

I'd have Gen what is good The of a made upgrading X base question. in there. and couple. to that technologies It's say Yes. platforms as lot installed is, capabilities bigger, here a out a invest the gotten matured One decision intentional -- the we've are has an the

to and was that's easier today more adds architecture we part that been that's incremental the than the utility that. Gen they for They out and absorb. procedures customer we're them it more easier are with do allow compound get X, to the more it. through They base they And capable when that In capital So mature -- done with has somebody get first is thing launched also pretty the had those utilization. to throughput that keep doing in that. higher SI first platform of not SI it have. kind purchases they And the in of they

to and software. too. or have it We do for we things have some endoscopy instruments and that whether our it's or up sleeves accessories continued And

changes are intentional. X. product moved early that bigger things into incremental that So structural some changes we on were kind will do more and more in We that make We structural sense. was intentionally on of have think there Gen that changes doing

interesting. We on them. are are working They

think about I'm they implications have we long-term participated for excited I the them. surgical market and segments

things technology Some of development. those are around

around them development of are pathways around are them manufacturing pathways. and supply and of and Some some regulatory clinical chain

said. out. those incremental We We on what that of play reinforce and remains things will work kind on structural work multiple I ahead of all true. we changes. you and So changes work generations

on about to bit We a continue perfectly to those FDA chain predict do that. based readiness, both thinks and how hard Timing-wise, supply sometimes little things.

time to them that And rather a want that us, customers that I have in it. we'll that done mind. it, to than sure For the value continue every step us make make and mind in we pursue with we philosophy with it's

Amit Hazan

the for Thanks color.

Operator

from Thank you. The Wise ahead. next Stifel. question Please Rick is from go

Rick Wise

on Good on Gary. comments Ion. expand your we talk could everybody. could you Hi, afternoon, Maybe, Hi. about --

on describe in about could this it also I'm about. a been impacts that a the how what's more story feedback using? speaking, you're you've timing the Submitted you could I'd little Ion. a of what talk the is be talk couple next. mean, But hear of like broadly -- at seems a maybe it more little And past maybe your bit the an opportunity early for the an about Maybe said Just I color what's sort us wondering recent kind and things to for whether execution to of approval, you as you XXXX. give kind enough getting curious EU point. device of bit little maybe more inflection from what's point

Gary Guthart

the -- of their has They On new we relatively it, submitted just the our world. regulation. Europe, dossier. changed over their It's EU -- MDR. framing device Europe submission for the for Thanks, medical Rick. call

That's us. quarters projecting As it's in of it's little mostly norms. it is new new those clearances historical what's the different finish, a we exact several regulators bit the a it's a game, to for for result, relative anticipate timing but XXXX. We little get and think don't odds -- completing it's to to because just

Ion of biopsy On ongoing, the is driven and of point right now bronchoscopy. being how the single it's indication on

I because think it's need. it meets driving well a

robotic PRECIsE I manual alternate that's see think word lot interest by of and peer-to-peer data are trial. capable. the is that driving mouth we backed and of And less a technologies like

capacity, do product improving helpful And the and focus efficacy. been continuously robustness lot quality, the a job that's A They maintain to improving terms been increasing for and of supply all are doing we has they're us. our just hard sure those So of in manufacturing our teams can are I'm make great here improve. developing robustness to. what usability, working things of and and quality capacity that simultaneously. both with up and extremely delighted

for real do some the on we think combination some are that's but whom Ion lot a with there excitement. of every not And population, So It's I for seen part we value day. sometimes patients combined has patients. been of room. wonderful, same and We're see the solution. that's patient a the And robotic good people of seeing surgery have that it thereafter bronchoscopic evaluation

is It's surgery and of treatment Ion time a is follow-through surgery tie-through to the indicated. then a definitive diagnostics the value. So with shortening answers creating if patient

and So that's assertively that can clinical multiple been platform great. indications a various future them places. as are We think that has provide in pursuing value it we bring Ion it can

have We part space. those are yet pathways what we regulatory are in to and in technology part publicly it's not in there's develop describing some a things because some competitive

working elements. so down And we're those

sure share. visibility a be bit better we'll ones closer when then As we little which to get into a have little

Rick Wise

– quarter. demand, Procedure it likely as stated to like was you. this it's seems feels it's it continue. you Got It like, healthy clearly

COVID So hopefully, headwinds little world. settle around a the as back bit hopefully

to about current average the Vinci with Gary, is for from specifics da that you this You correctly utilization base – but feel making XX% memory, used you the it say we discussions installed – forward? on system Vinci And XX% see, utilization? up about of start drive do new always I got that forgetting Is a are like you of going of about to should new of I'm if placements consideration it as Intuitive where the can question this used it would capacity, we or And to reflect think for of procedure systems. – talk systems. be da like when to let's the sort utilization percentage

Gary Guthart

There's absolutely inversely And procedure utilization capital, on and between increased demand, a relationship related. it's right? and growth

you you number utilization, to same the of more do capital If have lower sell procedures.

get have throughput. increases that it We derived higher by economic the pursued the utilization assertively our that and decreases customers sell, utility believed while to systems number higher the we have of value

utilization. too. but conditions And capital as utilization doing growth And customers. for put been. because the we higher increased about from intent so point even programs what that creates view that move help it's has services who'll years. near-term and to marginal as at pressures in view, bit it to out a marginal over consulting economics shortly, line for utilization, I'll an terms in for of happy number trend we it Intuitive, move that, pure in from the well workflow, work can quickly. a a sustained well But to It's hard economics been talk of get Jamie better of you see a way both are We've and them little our point design to And us ROI if turn

may it So placements, look in though at it's line a win-win pressure. even the like top

has and conditions more So a the also bit and about question less they lot how do with what the is operating Jamie. you it. asked a bit a question, had over I'll use a It's then turn it It to little technology utilization, that. do peak in hospital. how little think of kind to you mix

on a utilization. bit So Jamie, little perhaps

Jamie Samath

by times go recent XXXX. normalize look approach at over kind utilization CAGR XXXX on just X%. for at of by CAGR and a If a grew for quarter look X% utilization I you to past Again XXXX pre-COVID average this use system back basis the if three-year grew a by CAGR If X% year COVID basis. on in to second grew Rick, last back two-year XXXX to I

mix there. in see within think to there the you is combination respect the forward, procedure in institution. can on particularly relative the dependency different asset procedure the the lower it reflects with of some mix you possible that utilization. gives number to that institution commitment the a to With given consistency I drive than opportunity the drive So benign utilization some Xi some and looking trained the of surgeons the differently low-acuity times procedures. But General also surgery of are procedure

today at look you distribution utilization the it's relatively wide. of If

we CFOs think on continue are to number are of a and I supportive there see and drive that to hospitals opportunities basis utilization medium-term up of a that.

Rick Wise

Thank you so much.

Gary Guthart

Thanks, Rick.

Operator

Fargo. Thank you. next Larry question go the Biegelsen Wells from And ahead. Please is from

Larry Biegelsen

for taking Thanks the afternoon. Good questions.

Just on inflation and one constraint. supply for China me and one on

seen quota have have on You're you time line what next related the quota. the quota? the second what's Is one And I your follow-up. the grow from entirely? China? about so guys next are And China larger So finish what far expectations the possible And you quarter? or lockdowns? be you it for and in this Gary for to year-over-year to still eliminated Do could that process think can

Gary Guthart

I'll turn Jamie. both those to

Jamie Samath

it's the as locked in in so we pretty saw in locked cases and Yes. as With April -- respect to saw down early. saw authorities what procedures March. although rises places we And into procedures Shanghai. like obviously they far strictly, COVID with the down continued QX in That's you impacted

lockdowns. the without procedures. COVID impact overall expect global think in a that procedures. how small persists I relative What that is it's up really how last QX on QX. look of depends would second-biggest some in what things have right long our still US COVID now certainly still procedures is being ends to China. of proportion XX% in there's you about and China but long risk marketplace, But relatively those lockdowns way in you and the

think the And which period, been don't into We great be the more in third they into year might With of we of great don't quota and visibility the impact next logistics we that couple macro the would given separate to difficult has and visibility product when economy. the will a that how have we what just the I to supply situation a of be. broader of issued degree China think is honestly don't across quota year. would have generally I are predict. don't The great just respect quota exempt from we see kind exports where we are last have China or again from to a perspective port the play we risk number could the the impact in have But planning on out. quota. the times to and of a closures China expecting deliver be. as chains insights that

Gary Guthart

quota… the if general, In

Larry Biegelsen

Yes.

Gary Guthart

If the the do that responsive high demand the how demand responsive they to demand quota think is and question it. quota, is is central to we is government when

go Larry Sorry, ahead.

Larry Biegelsen

supply quantify you sorry are A Jamie on addressing Thank about expecting inflation? hand-to-hand on constraints, margin I'm of what you. you interrupt are to you. and buying this? the lot better? companies combat. for the No. able know your constraints, from how when And that to impact are you're inventory. gross supply talked inflation expectations forward And it on gets I are you've

almost that used You've calls. phrase the on last few

taking So thanks questions. for the

Jamie Samath

just ground would a impact ways. inflation maybe Yes. of I of couple the

and and to are gross infrastructure invested in, guided And XX.X%. back look range. capacity, say, in history, has the XX% we're costs manufacturing let's If the just that fixed gap XX%-ish One effectively for our investments our being been drivers what at range need. history two the making in we that's really margin in between versus long-term there's you

need it. lead of times that place that require So time. But in we the ahead ahead when is of some of we put that will

continuity chain I in would prices, you is logistics chain as the are customers. of to chain, side. more And number significant ensure cost whack-a-mole to supply The our fixed to constant this managing efforts the impact respond supply how the issue inflation is gap supply team there component perfect between on two. from of costs, to higher to slightly the roughly inflation is supply in The a kind described of cetera. by et operations and say It's that give impact impacts. delineation through described. is the second With our the battle of Gary the goal can't remainder that we're one respect impact form that just of I resolution. of you

that's So is. where and our efforts focus

operations point that rebalances back of But to that's getting As is be focus question teams in really future, to our be. chain to a our the on the in environment will whatever kind cost reductions, refocus we supply our when efficiencies manufacturing certainly, targets. of that will going

we inventory the almost prepared we my million increase can and sequentially. actually if saw that you On clearly We're side, not remarks I $XX us referenced The in inventories. of inventory is replenishing mix perfect. But where though to the to you long-term, inventory at look one we an mitigation. want we're hold, Certainly, lasts. have imbalance at going carefully to as levels as medium risk look what supply currently. of if

other thing on how we the less make we'll suppliers. sole dependent think is, look at I do ourselves

Larry Biegelsen

Thanks, Jamie.

Gary Guthart

is forecasting or the probably to bit because tiny what but of this number there's moment. move at the will bit Currently, a situation future, the a moving parts the it Just determining parts exactly how that of has that are a around current parts has intensity capping on decreased, sentence, difficult that color -- the it's stress little hard under predict of few enough stress increased.

buying the things to whether and of use the And the number are Jamie, those safety ahead, your of more use challenge ones redundancy point of stubborn. if that narrowing, it's we the of We'll stock, So, help can buying or and -- we chain. mitigate a issue tools remain supply that all various is any but risk. are

Larry Biegelsen

Gary. you, Thank

Operator

you. Thank

question ahead. from Morgan from Ranieri next is Drew Our Stanley. Please go

Drew Ranieri

thinking some taking maybe about about for kind Jamie. of, I Gary, talk I you out. than are still commentary hospitals question. I everywhere, Intuitive do to necessarily for to the off and push to or higher your US in just have get cycle for the ever how systems? the you've my think what that get guess dynamics given you about the and trade-in more like it That's are Thanks can Gary Hi, hospitals the But X,XXX of some the surgery takes into I has mean, mean, really centers of think the there utilization laid the customers. and what sidelines opportunities hospital you X,XXX high-volume US? maybe go Just you. really, using robotics? remaining

Gary Guthart

knowledge. to that little a -- I you hospitals of approach. a give qualitative perhaps have are The speak a perspective. Jamie won't quantitative view, But And the the not is may of bit system greenfields, there out you while to just of many collaboratively are programs they our in have and integrated work IDN today way products network delivery part have our with The one an with somewhere the that they we leadership. of that

to they programs they their of As will into within the value understand about. they move care are, what our start products start locations own the to system

so about over environments -- move time. seen of workspace we into different expansion some And especially ambulatory smaller surgery improving in and those spaces. procedures that Increasingly, as moving into more base general nice other care, we've our our are with a in and benign really that and we have prevalent often conversations become collaborative done customer benign procedures sites see

It for the capital our procedures practice. does can into higher Excellence. and is We think want Centers it's investment. get customer good we because of our go. think concentrating concentrate follow and where When utilization. they We think good get surgical we happens that's customers of There So for outcomes robotics patients those more regionally they it is to investment. that to effect capital

I if think to do look to today. you that. expand moment. is want of patient just to this combination anything two. a and I think consolidation is in the it it it's will every helps We know from but think we where add Jamie, works go we it where I and at So think don't to don't have

Jamie Samath

be say more thing greenfields -- always in case, this beds. would I be tend of smaller the tend setting, only The remaining the is not the rural number but to is to

the have experience as is function of largely benign in hospitals those the three, existing mix what seen general are accounts. success tend be IDNs placements actually which that's that hospitals. Gary said with And as are in in the and a to described number of higher we've IDNs. So surgery, I had four over greenfield rural quarters within these particularly of procedures Gary increases a last think These

customer. there was do in it And that sense more and see maybe with setting, IDN robotics for so before partners carefully the challenging. the us in economic be picture the one our financial or opportunity was and effective more makes for programs they skepticism for that whereas, We'll and has that conjunction to

small relatively installed growing have side, the we On a but base. ASC

US ASCs accounts. that the number affiliated have that's with Our ASCs in is because in Those probably way generally but ASCs systems procedure confidence us in at relatively growth gives hospitals greater IDNs. ASCs low. our accretive, That are at the is we of those or some

Gary Guthart

here Drew, follow-up you the a I'll give end. at fast

Drew Ranieri

All right. Thanks.

context Just in getting -- you're more procedures maybe for Can Thanks. you how of expect maybe eight procedures. that reimbursement on about procedures you just Japan? versus you look adding more that the of Japan, ramp talked in eight to like put reimbursed prior wave

Brian King

reimbursed say, bit to time, opportunity this as newly on resection, adoption procedures right? really at guess would highly lap those penetrated Drew an I by a like mean, example, you for it's take procedures, say, I'd I colon to it's difficult hi, the this eight were today. Brian. is if I estimate

capabilities think of training be develop and Vinci dependent and proctoring to opinion think it's key some to will take time. establish demonstrating So I to leaders. da actually and adoption And benefits, I which time take it's I say, on, clinical going economic our some think going really to

think take da It's I estimate to some locally. it's will just going hard to how quickly adopt Vinci time. So, really

Gary Guthart

that. little A on color

the over we're excited mid-term, really about think it. I

That Over it more. question. you, Thank was our takes the term, Drew. near last

Gary Guthart

acute and fundamentally to there's surgery opportunity durable we believe In substantial continue a to improve and closing, interventions.

for what Aim: care value to experiences teams care and a and understanding a and treat. creation of physicians pursuit profoundly lower better envision less future in in earlier diseases At experiences the cost termed more teams their from to care believe care is of invasive better Our identified and We Intuitive, with acute concludes patient back ultimately Quadruple this continue outcomes; forward We for foundationally human. total work needs environment. you look respect care It with patients and flows that predictable have teams our quickly, patients; call. journey. teams; for better and surgery hospitals, for support customers you Thank closely is their talking to of and and can get on to extraordinary we so patients their months. where your are what matters This most. again the three better in treated

Operator

today. Thank our ladies for that and Thank for Service. gentlemen, Teleconference AT&T conclude conference your and participation using for you. does And you

may You disconnect. now

Intuitive Surgical (ISRG) 21 Apr 222022 Q1 Earnings call transcript