The article is a transcript of the Intuitive Q1 2024 Earnings Release Call. The call is being recorded and will be available for audio replay on the company's website. The participants on the call include the CEO, CFO, and Head of Investor Relations. The call will consist of a presentation of the first quarter results, a question-and-answer session, and a discussion of procedure and clinical highlights. The CEO thanks everyone for joining the call.

The first quarter of 2024 was a successful one for Intuitive, with strong procedure growth and capital placements. The company also achieved important milestones in their ecosystem, including launching a new platform and improving supply constraints. While some regional challenges were faced, the company remains optimistic and will focus on what they can control. Procedure growth was led by general surgery and procedures outside the US, with strong performance in certain regions such as China, Germany, and the UK. Capital placements were solid overall, with a higher number of multi-port and SP systems placed compared to the previous year.

The company experienced some placement weakness in China and the UK due to delayed tenders and financial constraints. System utilization grew globally, but at a lower rate than previous quarters. Revenue grew by 11%, with a decline in average system selling prices. The company made progress with their new platforms, receiving FDA clearance for da Vinci 5 and placing eight systems. Customers have noted improvements in precision, imaging, efficiency, and ergonomics, as well as potential benefits from force feedback and digital analytical capabilities.

The company is working to improve customer support and optimize supply chains for DaVinci 5 components. Progress has been made in resolving supply challenges for Ion, with FDA clearing an increase in catheter lives and NMPA clearance in China. CE Mark was received for SP in Europe, with early customer interest. The company's priorities for 2024 include supporting the launch of new platforms, promoting focus procedures, improving product margins and quality, and increasing productivity. In Q1, da Vinci procedures grew by 16%.

In the first quarter, the installed basis systems grew by 14% to 8,887 systems, with an average system utilization increase of 2%. This was lower than previous trends due to strong growth and utilization in Q1 of last year. U.S. procedures grew by 14%, driven by general surgery, while bariatrics procedures remained flat. Outside the U.S., procedures grew by 20%, with strong growth in general surgery and thoracic procedures. Net new system placements grew by 16% to 284 systems, with 148 placed in the U.S. and 165 placed internationally. First quarter revenue was $1.89 billion, an 11% increase from last year.

In the first quarter, leasing accounted for 51% of placements, with an expected increase over time due to customer preference and the launch of da Vinci 5. Average selling prices were impacted by regional and platform mix and lower pricing in China. There was $29 million of leased buyout revenue. da Vinci instrument and accessory revenue per procedure was flat compared to last year. There were 19,500 Ion procedures, an increase of 90% from last year. More than 100,000 procedures have been performed since the launch of the Ion platform in 2019. 70 Ion systems were placed in the first quarter, including four in the U.K. The total installed base of Ion systems increased 61% year-over-year to 604 systems. 24 of the systems placed in the quarter were SP systems, including eight in Europe.

In the first quarter of 2024, the SP procedure growth was 60% with strong performance in Korea and the U.S. and early progress in Japan. The installed base of SP systems grew by 55% compared to the previous year. The pro forma gross margin was 67.6%, slightly lower than the previous quarter due to increased fixed costs and expenses related to the launch of da Vinci 5. Operating expenses increased by 7% and the pro forma effective tax rate was 22.5%. Pro forma net income for the quarter was $544 million or $1.50 per share. On a GAAP basis, net income was $547 million or $1.51 per share.

The first quarter of 2024 showed a 16% year-over-year procedure growth, with the U.S. at 14% and outside of the U.S. at 20%. General surgery and gynecology procedures were the main contributors to this growth, with strong performance in colon resection, hysterectomy, and foregut procedures. Europe, particularly Germany and the U.K., also showed strong growth in colon and rectal resection and hysterectomy procedures. China led the growth in Asia, with strong performance in urology and gynecology procedures.

In the first quarter of 2023, year-over-year procedure growth in Japan was healthy, with a moderate increase in urology and strong growth in general surgery and gynecology procedures. In June 2024, five additional procedures will have reimbursement in Japan, supporting the adoption of minimally invasive robotic surgery. A recent meta-analysis published in the Journal of Surgical Endoscopy compared outcomes of robotic assisted abdominal pelvic surgery with open and laparoscopic procedures, covering a variety of surgical procedures and including over 4,800 patients from randomized control studies.

The paragraph discusses a study comparing robotic assisted procedures to open and laparoscopic approaches. It found that robotic assisted procedures had lower rates of post-operative complications and estimated blood loss, as well as shorter length of stay and lower rates of conversion to open surgery. The study also analyzed the impact of surgeon experience and found that experienced robotic surgeons had better outcomes compared to inexperienced surgeons and laparoscopic surgeons. The authors concluded that robotic surgery may offer benefits in terms of shorter length of stay and lower conversion rates, with experience mitigating potential differences in operating time and improving rates of complications. A separate study also reported positive outcomes for the use of robotic technology in emergency general surgery cases.

This paragraph discusses a study published in JAMA Surgery that analyzed data from the PINC AI Healthcare Database to identify trends in the use of robotic assisted surgery for urgent or emergent procedures. The study found a significant increase in the use of robotic surgery for cholecystectomy, colectomy, and hernia repairs, with corresponding decreases in open and laparoscopic approaches. The study also found that robotic surgery had a lower risk of conversion to open surgery and a comparable or shorter length of hospital stay. However, open surgery remains an important component of emergency surgery.

The company is increasing its forecast for procedure growth in 2024 to be between 14% and 17%. This takes into account potential challenges in bariatrics procedures and competition in China. The company expects its gross profit margin to be between 67% and 68% of net revenue, and its operating expenses to grow between 11% and 15%. Non-cash stock compensation is expected to range between $680 million and $710 million, and other income is expected to total between $290 million and $320 million in 2024.

The company's estimated capital expenditures for the year remain unchanged at $1 billion to $1.2 billion, and their income tax rate is expected to be between 22% and 24% of pre-tax income in 2024. The call was then opened to questions, with the first one asking about the 16% increase in procedure volume. The company attributes this to strong performance in the US and UK, as well as growth in international markets for cancer and other procedures. The company is confident in the sustainability of this growth and reflects it in their guidance.

Robbie Marcus, speaking at the SAGES conference, asks about the early feedback on da Vinci 5. CEO Gary Guthart responds that they have heard positive feedback from doctors about the improvements in precision, imaging, workflow, human factors design, and ergonomics. He also mentions the potential of force feedback in surgery. However, it is difficult to predict the timing and depth of the replacement cycle. There are supply constraints as they work through the launch, and it is uncertain when they will be resolved. Larry Biegelsen from Wells Fargo asks about the supply constraints and when they can expect a full launch. Guthart mentions three factors that are currently affecting the launch.

The company is focused on optimizing the supply chain and incorporating feedback from customers to ensure high satisfaction. They also have planned feature content and hardware improvements for the da Vinci 5 system. The system will allow surgeons to go deeper into existing indications and could attract new surgeons. The core capabilities of da Vinci 5 include better imaging, precision, and high performance.

The company is exploring new clinical indications for their faster workflow technology, but they have not finalized anything yet and will need to have discussions with the FDA. The strong placements of the Xi system in the current capital environment are due to limited supply of the dV 5 system. The company does not provide guidance on system placements, but they acknowledge that it could be choppy due to constraints on the dV 5 system. In the first quarter, customers did not express a preference for waiting for the dV 5 system over getting an Xi system.

The launch of dV 5 in March has been well received by surgeons and executives at conferences and events. Intuitive is aware that some customers may choose to wait before adopting the new technology. The capabilities of dV 5, such as contact-sensitive help and real-time guidance, are expected to improve training and surgical outcomes. The Intuitive hub also offers integration technologies and analytical feedback to further support customers. Simulation training and online learning will also continue to evolve and aid in the adoption of dV 5.

The speaker discusses the current state of bariatric surgeries, stating that there has been a flat year-over-year trend and that there are varying opinions on the cause. They mention that there is ongoing research and data being collected and that the situation is dynamic and will require continued monitoring.

The speaker discusses the effectiveness and potential of bariatric surgery and pharmaceuticals for weight loss. They mention a range of opinions on the future of bariatric surgery and how it may affect growth rates. They also mention new features being developed for their products, but these are not expected to be available until 2025 or later.

The company is focused on ensuring that both themselves and their suppliers are satisfied with their new force feedback instruments, and they are open to adapting based on feedback. The instruments have sensitive sensors that report contact forces with tissue, and the company has received positive feedback from clinicians. They plan to expand the technology in the future and surgeons have the option to turn on or off the force reflection in their hands.

The company is exploring the clinical value of their technology, which decreases the amount of force applied during surgery. They believe it will be beneficial for certain procedures and patients, but they need to prove it. The technology is complex and they are working with their manufacturing partners to make it robust and high yield. They will initially focus on six instruments, but may expand to others in the future. They have recently expanded their indication in Europe.

The speaker, Gary Guthart, discusses the potential impact of the CRSA Conference in Rome on the adoption of their surgical technology in Europe. He mentions the early excitement and uptake of the technology in Korea and Japan, and the ongoing trials and experiments in the US. He remains optimistic about the potential for growth in the SP market. In terms of pricing in China, Jamie is asked to provide more context and explains that there has been a decrease in pricing, but it is unclear if this is temporary or permanent and the overall competitive situation in China.

In the paragraph, Jamie Samath discusses the impact of competition on pricing in China and the segmentation between domestically manufactured and imported products. Matt Miksic follows up with a question about the clinical benefits of force feedback and the timing of clinical studies on dV 5 research. Gary Guthart responds by saying that while there is no specific timeline, clinical studies on force feedback and efficiencies in surgery may be seen in the near future.

The speaker discusses the progress of force feedback studies, predicting that there will be a progression from narrow single institution studies to broader multiple center trials over the next year. They also mention anecdotal reports of increased efficiency due to autonomy features in the Da Vinci system, and anticipate that real-world evidence will further demonstrate these efficiencies in the coming months and quarters. They then shift focus to the Ion system and mention a rebound in sales after supply issues in the previous quarter, but do not provide any further details.

In the paragraph, the speakers discuss the growth of the company and its utilization in the market. They mention that there has been a partial recovery in the quarter, but there is still some backlog in terms of supply. They also mention that the growth is a blend of both existing and new accounts. The speakers then address a question about below-average utilization growth and its potential impact on system placements and procedure growth in the next few quarters. They mention that uncertainty surrounding inpatient volumes will play a role in determining utilization growth.

Jamie Samath discusses the utilization growth of Q1 and how it compares to previous years. He mentions that the utilization growth of 13% in the year-ago quarter was not sustainable and expects it to normalize to long-term averages. He also talks about the potential for Ion placements in China, which is expected to happen in the back half of 2024.

The speaker, Gary Guthart, is wrapping up the conference call by reiterating the company's belief in the potential to improve surgery and acute interventions. He mentions the quadruple aim of better patient outcomes, experiences, and lower costs. He emphasizes the importance of understanding and respecting patients and care teams and envisions a future of less invasive and better care. He thanks everyone for their support and looks forward to the next conference call.

This summary was generated with AI and may contain some inaccuracies.