The paragraph is an introduction to Intuitive's third quarter 2024 earnings conference call. The operator announces the call and introduces Brandon Lamb from Investor Relations, who mentions the departure of Brian King. The call features Gary Guthart, Dave Rosa, and Jamie Samath. Lamb warns that the call may include forward-looking statements with associated risks detailed in SEC filings, and advises caution in relying on them. The call's recording will be available on Intuitive's website. The format includes highlights of the third quarter results followed by a Q&A session.

In the second paragraph of the article, it describes the structure of a call where Gary, Dave, and Jamie will discuss different aspects of the business, followed by a Q&A session. Gary Guthart then provides an overview of the company's strong performance in Q3 of 2024, highlighting growth in procedures and system installations worldwide. He emphasizes the success and stability of their multi-port system, noting the launch of their fifth generation, DaVinci 5, which has already seen significant use. Furthermore, he mentions ongoing efforts to secure global regulatory approvals. He also touches on the endoluminal system, Ion, which primarily has installations in the U.S.

The paragraph highlights the achievements and future plans for the Ion and DaVinci SP technologies. It notes that over 150,000 lung biopsies have been performed using Ion, which uses machine learning for personalized intervention and has achieved a 205% growth rate over five years. There have been numerous upgrades and improvements to Ion, and plans include expanding its presence internationally and increasing usage in the U.S. The DaVinci SP, launched in 2018, has installed 243 systems and completed 67,000 procedures, experiencing strong growth especially outside the U.S. due to broader clinical indications. The SP has over 500 supporting peer-reviewed articles and efforts focus on instrument extension and global regulatory activities. There are also significant digital efforts, with 3,000 simulation systems installed and extensive ongoing training for surgeons.

The paragraph highlights the expansion and impact of Intuitive's digital tools and global operations. The My Intuitive app has over 14,000 active surgeon users, and the Intuitive Hub is operational in around 2,000 operating rooms. The company has conducted custom hospital analytics over 4,000 times, focusing on improving OR outcomes, care team efficiency, and cost reduction, while ensuring cybersecurity and data privacy. Regionally, Intuitive has invested in balanced country and regional teams to enhance customer interactions and satisfaction, achieving significant procedure growth rates over five years: 21% in Europe, 25% in Asia, and 18% in other non-U.S. markets. The company has also expanded reimbursement coverage for robot-assisted surgeries in numerous countries and continues to localize and strengthen its global capabilities, digital ecosystem, and range of interventions to better serve patients worldwide.

The paragraph discusses the growth and developments of DaVinci procedures and systems in the most recent quarter. There was an 18% growth in procedures, driven by general surgery in the U.S. and contributions from countries like Japan, Germany, France, and the U.K., amidst mixed conditions in Asia. The company placed 379 DaVinci systems, including the new DaVinci 5 series, and 58 Ion systems. System utilization increased globally. Financially, revenue grew by 17% with spending aligning with expectations, focusing on R&D, manufacturing expansion, and digital tools. The DaVinci 5 launch is progressing well, with positive customer feedback across various specialties.

Last month, approximately 1,200 healthcare professionals attended the annual Intuitive 360 user conference to discuss advancements in robotic programs, particularly with the DaVinci 5 system. Attendees highlighted improvements in efficiency and force feedback, with early data showing console time savings and a 20% reduction in surgical force when using force feedback, as reported by Dr. Laila Rashidi. Intuitive has been developing force feedback technology for over two decades, believing it can enhance patient experiences and accelerate learning for care teams. Ongoing studies and publications are expected to further explore these benefits. Additionally, Intuitive is focusing on digital innovations to extract clinical and operational insights from their DaVinci and Ion platforms, which, when integrated with electronic medical record data, aim to improve outcomes and efficiencies. They currently have data from millions of procedures to support these efforts.

The paragraph discusses advancements and regulatory progress related to the DaVinci system, highlighting the introduction of Case Insights, a new analytical tool in My Intuitive for enhancing post-operative analyses. The company submitted a CE technical file in Europe and gained clearance for DaVinci 5 in Korea, while working on regulatory approval in Japan. They began shipping DaVinci 5 hardware and plan a broad launch by mid-2025 with enhanced software features. Additionally, they received 510(k) clearance for the 8mm SureForm 30 stapler, designed for better access in tight surgical spaces. In China, they are initiating their commercial presence with the Ion system, collaborating with medical centers to gather data for further expansion.

The paragraph discusses recent developments and achievements in the commercialization and clinical evaluation of a medical platform in Europe and the U.S. The platform has expanded to Germany and Italy, received clearance in Taiwan, and submitted for a colorectal indication in the U.S. Noteworthy data from the CONFIRM study, presented by Dr. Bryan Husta at a major conference, highlights the efficacy of the Ion Endoluminal System combined with Mobile Cone Beam CT for diagnosing small pulmonary nodules. Results show high diagnostic yield and safety, suggesting the platform's potential to compete with traditional biopsy methods.

The paragraph discusses a study conducted by Maegawa from Emory University, published in the journal "Surgery," comparing robotic and laparoscopic cholecystectomy procedures for benign conditions in 2022. Using data from the American College of Surgeons National Surgical Quality Improvement Program Database, which included over 59,000 patients, the study found that robotic-assisted cholecystectomies were associated with significantly lower risks of serious complications, conversions to open surgery, and hospitalization over 24 hours compared to laparoscopic procedures. The authors suggest that adopting new technologies could enhance the safety of minimally invasive surgeries. The paragraph ends with a statement on the organization's priorities for 2024, focusing on launching new technologies and improving productivity, before transitioning to Jamie Samath discussing financial and procedural details.

In the third quarter, the company reported strong non-GAAP and GAAP performance metrics, with DaVinci procedures growing by 18% and the installed base increasing by 15%. Despite a day-adjusted growth rate of 17% for procedures, U.S. bariatric procedures slightly declined. Internationally, procedures rose by 24%, notably in the U.K., India, Japan, Germany, France, and Italy, although China's growth lagged due to market dynamics and competition. The company placed a total of 379 systems this quarter, with significant increases both in the U.S. and outside the U.S., where net new system placements rose by 28% year-over-year. The launch of DaVinci 5 systems is expected to further influence U.S. placements in the coming year.

In Q3, the company experienced significant growth with system placements increasing across regions compared to last year, including Europe, Japan, and China. They reported a 17% increase in overall revenue to $2 billion, driven by growth in DaVinci and Ion platforms. Leasing accounted for 58% of placements, indicating strong capital strength in the U.S. System average selling prices rose due to a higher mix of DaVinci 5 systems. Lease buyout revenue was down from the previous quarter but up from last year. Revenue per procedure from DaVinci instruments and accessories declined slightly year-over-year. Ion procedures grew substantially by 73%, with system placements steady compared to last year but down from last quarter. The Ion install base increased by 50%, with many systems under operating leases.

In the third quarter, SP procedure growth reached 70%, with notable multi-specialty growth in Korea, strong growth in the U.S., and early-stage growth in Japan and Europe. 21 SP systems were placed, mostly in OUS markets, raising the total installed base by 54% to 243 systems year-over-year. The pro forma gross margin increased slightly to 69.1% from 68.8% last year, mainly due to improved overhead leverage and lower costs, despite higher inventory reserves. New manufacturing and capability centers were opened in Georgia and Bangalore, respectively, while anticipating increased depreciation in 2025 due to ongoing capital investments. Operating expenses rose by 13% due to higher headcount and other costs, while R&D expenses remained steady at 11% of revenue. The company hired 617 employees, primarily in Mexico, to support procedure growth, reflecting leveraging prior investments in SG&A for efficient scaling with growth.

The article paragraph discusses the financial performance of a company for the third quarter (Q3) of 2024, highlighting a pro forma operating margin of 36% and a 25% increase in pro forma EPS compared to the previous year. Pro forma other income rose to $94.6 million, driven by higher interest income, although a decline in interest yield is anticipated for 2025 due to the current interest rate environment. The pro forma effective tax rate was 20.5%, benefiting from certain tax reserves and deferred tax adjustments. Pro forma net income for Q3 was $669 million, or $1.84 per share, while GAAP net income was $565 million, or $1.56 per share. Differences between pro forma and GAAP results are detailed on the company's website. The company ended Q3 with $8.3 billion in cash and investments, an increase from the previous quarter due to operating cash flow, despite $248 million in capital expenditures. Brandon Lamb will now discuss the updated outlook.

The company has updated its financial outlook for 2024, increasing its expected full-year procedure growth range to 16% to 17%, citing potential challenges in Asia related to physician strikes in Korea and delays in China. The gross profit margin is anticipated to be between 68.5% and 69%, while operating expense growth is now expected to be within 10% to 12%. Non-cash stock compensation is projected to be $670 million to $690 million, and other income, mainly interest income, is estimated to be $325 million to $345 million. Capital expenditures are projected to range from $1 billion to $1.2 billion, and the pro forma income tax rate is expected to be between 22% and 23%.

The paragraph is from an earnings call where Travis Steed from Bank of America asks about the progress and customer reactions to the DV5 system's ramp-up before its broad launch in mid-2025. Dave Rosa confirms that there will be ongoing software updates, with planned releases adding new hardware and software features by the broad launch. Supply is expected to increase gradually each quarter. Jamie Samath adds that an executive publication highlighted potential contribution margin improvements due to enhanced efficiency, as reported by key opinion leader (KOL) surgeons, which could increase procedure throughput. This efficiency is an important aspect being discussed with hospital administration.

The paragraph discusses the company's international progress and new surgical procedures. The company has supply ready for a Korean product launch and is in ongoing discussions for Japan. The European CE mark approval is expected by the end of 2025. There is a focus on new procedures like appendectomy, foregut, hepatobiliary, and emergent surgeries. In the U.S., foregut and hepatobiliary procedures have been growing well, despite being smaller categories. Appendectomy is still in the early stages and is considered a small but growing procedure.

The paragraph discusses the use and expansion of the Xi system in surgical settings, specifically for appendectomies, which have been incorporated into both emerging and acute care settings. There is mention of clinical work done on appendectomies and an FDA indication in the U.S. The conversation then shifts to a question from Robbie Marcus of JPMorgan regarding the company's impressive gross and operating margins. Jamie Samath responds, explaining that the company aims to maintain top-tier margins comparable to its med tech peers, but does not expect to exceed operating margins above 40%, a level seen prior to COVID. The focus is on balancing investment rate with targeted profitability, with the current margin at 37% for the quarter and 36% year-to-date.

In 2025, gross margins are expected to decrease due to increased depreciation expenses from new facilities as production ramps up, though the long-term goal is to reach 70% gross margin. Currently, margins are at 36%, with no immediate objective to exceed 40%. Future margin improvements will depend on R&D investments based on available opportunities. Regarding asset trade-ins, particularly with the DaVinci 5 rollout, there is a plan to refurbish returned Xis for resale, with potential for market segmentation both domestically in the U.S. and internationally. The refurbishment strategy is not fully detailed but will follow similar past practices.

The paragraph is part of a conversation between David Roman from Goldman Sachs and Gary Guthart about the progress of the Ion platform's launch and adoption in various markets. Gary Guthart explains that in the U.S., Ion has successfully moved past the initial phase and is now focusing on increasing utilization, customer satisfaction, and expanding indications within lung biopsies. In contrast, the adoption in international markets like Europe, China, and Germany is still in its early stages. David Roman also notes a trend in the increased number of systems placed under usage agreements.

The paragraph discusses the growth and implications of usage-based operating lease arrangements, which have increased from 12% to 15% over the year. These arrangements allow customers to pay for systems and services based on usage, reducing their need for capital expenditure and lowering the risk of underutilizing new systems. While these arrangements are generally financially advantageous due to embedded interest rates, there is variability in customer usage. The model is popular with U.S. customers and is expected to continue growing, although at a slower rate due to high market penetration. In contrast, international markets are still in the early stages of adopting this model, making future growth uncertain.

The paragraph discusses the varying interest in the DaVinci 5 surgical system among different types of hospitals. Larger academic hospitals are waiting for dual console availability before making decisions, while smaller, non-academic hospitals are making decisions more quickly without this requirement. The conversation focuses on whether the availability of dual consoles, expected by mid-next year, will accelerate decision-making in larger hospitals. Gary Guthart and Dave Rosa provide insights on the prioritization of single versus dual console systems, indicating that as supply capacity increases, more dual consoles will be produced to meet broader customer needs. They do not anticipate significant changes in forecast models with the upcoming broad launch.

The paragraph is a discussion between Rick Wise, Gary Guthart, and Adam Maeder about the current state and potential future of a device called Hub, which is being implemented in over 2,000 operating rooms (ORs). Hub is a data recorder and media management tool that is currently set up mostly on-premise but may transition to cloud implementations. Guthart expresses satisfaction with its early performance, emphasizes the importance of refining integration with DaVinci 5, and suggests that Hub's journey in market penetration and development is just beginning. Adam Maeder shifts the conversation to concerns about the capital environment, particularly how hospitals are budgeting and their willingness to invest in larger capital expenditures as the year ends and moving into 2025.

The paragraph discusses the current state of the healthcare capital market in the U.S., Europe, and China. In the U.S., the market is described as relatively stable with growing interest in robotics like the DaVinci 5. In Europe, specifically the U.K. and Germany, there is pressure on healthcare capital spending due to government budget constraints, with uncertainty about future changes. In China, there is significant stress in the healthcare market due to value-based pricing and price caps, along with competition from domestic vendors favored by local governments. The pressures in China are expected to persist for some quarters.

The paragraph discusses the DaVinci 5 systems and their deployment compared to the Xi systems. The speaker notes that the DaVinci 5 is being used for a broad range of procedures and sees full utilization despite the limited supply. However, it is too early to compare its utilization directly with the Xi systems due to a lack of sufficient data. On the topic of innovation, the focus is on software development, which has the potential for faster innovation cycles compared to hardware, particularly for non-medical device software. In contrast, software that requires regulatory approval, like the 510(k) process, has longer innovation cycles.

In the given paragraph, Gary Guthart discusses growth opportunities in the U.S. market regarding procedure growth and the balance between deepening existing procedures and exploring new segments. He acknowledges the mature stages of some procedures, emphasizing the need to support those not fully engaged yet, while still recognizing opportunities for further expansion.

The paragraph discusses the ongoing efforts and future plans of Intuitive to explore new opportunities in the medical field, particularly in surgery and acute intervention. It highlights the company's aim to expand into niche markets with new indications for their products, Ion and SP, and the potential of multiport systems. Intuitive emphasizes their commitment to improving surgery outcomes, patient experiences, and reducing care costs by collaborating with hospitals and care teams. The ultimate goal is to create a future of care that is less invasive, with earlier disease identification and quicker treatment, allowing patients to return to their normal lives. The paragraph concludes with a note of appreciation for the support received and anticipates future discussions.

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