The paragraph introduces the Intuitive Surgical Q4 2024 earnings conference call, with participants initially in a listen-only mode. The call is hosted by Brandon Lamm, Investor Relations, and includes CEO Gary Guthart, CFO Jamie Samath, and Dr. Daniel Oh, Senior Medical Officer, who will discuss clinical highlights. Dave Rosa, the President, is absent due to a prior commitment. The company announces the appointment of Dan Connolly as the new VP and Head of Investor Relations, starting in early February. The paragraph also includes a disclaimer about forward-looking statements, warning that actual results may differ due to risks and uncertainties detailed in Intuitive's SEC filings.

The paragraph discusses a conference call where Intuitive provides highlights of their full year and fourth quarter results, followed by a Q&A session. Gary Guthart begins by sharing the company's strong performance in 2024, noting the robust early adoption of the fifth-generation da Vinci 5 platform, and growth in procedure volume across various indications and regions. The company saw increased utilization of the Ion and da Vinci SP platforms, continued global clearances, and made improvements across its platforms. In 2024, Intuitive focused on expanding indications, increasing adoption through training and market efforts, and enhancing quality and gross margins in global operations.

The article highlights the company's productivity improvements and successful procedures growth of 17% for the full year, particularly in the US general surgery, and regional strengths in the UK, Ireland, Japan, and Germany. The acquisition of the da Vinci business in several European countries was announced, enhancing their market presence. In the US, there was notable growth in cholecystectomy, foregut, appendectomy, and thoracic procedures, while bariatric procedures saw a slight decline due to increased GLP-1 medication use. Globally, procedure growth diversified beyond urology, with benign indications rising faster than cancer ones. Ion and SP flexible robotics procedures experienced significant growth. On the capital side, more multi-port, ion, and SP systems were placed compared to the previous year, supported by the da Vinci 5 launch in the US.

The paragraph discusses the company's diverse systems portfolio, including da Vinci 5, Xi, X, SP, and Ion, along with flexible financing options tailored to meet customer needs. It highlights the growth in system utilization across different platforms, with specific percentages for multi-port, SP, and Ion. The importance of analyzing system utilization by customer segment is emphasized, noting that different hospital programs can have varying utilization rates. The company's performance in 2024 resulted in $8.4 billion in revenue, with 84% being recurring and a 17% growth over 2023. Operating expenses were low, focusing on R&D, expanding manufacturing and commercial presence, and leveraging enabling functions. Improved product margins and increased shipment volume contributed to a 29% growth in net income over 2023. Finally, there is mention of the successful launch of the da Vinci 5 system.

In 2024, the company placed 362 da Vinci 5 systems and over 2,500 surgeons performed more than 32,000 procedures using the system, which supports over 40 procedure types. The company plans to provide hardware and software upgrades for da Vinci 5, emphasizing enhanced digital features enabled by a significant increase in computing power. For 2025, the company’s priorities include the full launch of da Vinci 5, increasing procedure adoption, enhancing product quality, optimizing manufacturing, and improving digital tools. Jamie Samath discusses strong financial performance for 2024, with a 17% growth in both procedures and total revenue, an improved pro forma gross margin, and reduced SG&A expenses compared to 2023.

In 2024, pro forma operating margin improved by 310 basis points to 37%, with a 28% increase in pro forma EPS following a 22% rise in 2023. 362 da Vinci 5 systems were placed in the first year of limited launch, 174 in Q4, including the first replacements in Korea. Q4 financial performance surpassed expectations, with 25% revenue growth and a pro forma operating margin of 38%. Revenue was boosted by a higher purchase mix, dual console placements, and a stronger system ASP. Key metrics showed 18% da Vinci procedure growth, a 15% increase in da Vinci systems' installed base, and 3% growth in average system utilization. US procedures grew 15%, led by general surgery, while bariatric procedures declined slightly. International procedures rose 25%, particularly in India, the UK, Italy, and Japan, although Korean growth was affected by physician strikes. Chinese procedure growth was slightly below the company average.

The paragraph reports on strong growth in procedure performance for colorectal, benign general surgery, and thoracic categories, alongside capital performance improvements. In the fourth quarter, 493 systems were placed, a 19% increase from the previous year, with notable growth in the US due to multisystem placements and increased da Vinci 5 supply. Internationally, placements were stable, with increases in Europe and China but declines in Japan. Revenue rose to $2.41 billion, a 25% increase, with systems revenue up 36% due to increased da Vinci system placements and higher system ASP. Leasing represented 45% of placements, down from 58%, due to purchase preferences in the US and distributor activity. Average selling prices rose to $1.59 million, influenced by product mix and market pricing dynamics.

In the fourth quarter, the company recognized $28 million in lease buyout revenue, up from $21 million last year, and saw an increase in Da Vinci instrument and accessory revenue per procedure. There was a 70% increase in Ion procedures, with 69 Ion systems placed compared to 44 last year, despite earlier supply constraints. The installed base of Ion systems rose by 51%, and system utilization increased by 13%. SP procedure growth accelerated by 81%, aided by placements in Korea, Europe, and Japan. The SP platform utilization grew by 18%, and new US clearances were received for thoracic and colorectal indications, with broader SP commercial efforts pending FDA clearance for an SP stapler. The fourth quarter pro forma gross margin improved to 69.5% from 68% in the previous year.

The paragraph discusses the financial outlook and strategic plans for the company's manufacturing and expenses. In 2024, there was an improvement in gross margins due to revenue growth and cost efficiencies, particularly for the Ion and SP platforms, although further improvements are needed. In 2025, the company plans to open new manufacturing facilities in California, Germany, and Bulgaria, resulting in higher depreciation and inventory levels. Mature products will be transferred to facilities in Georgia and Mexicali. Operating expenses rose in the fourth quarter due to increased headcount, variable compensation, legal expenses, and a contribution to the Intuitive Foundation. The company achieved better leverage in SG&A, though future depreciation and legal costs are expected to rise.

The paragraph discusses the company's focus on innovation and investment in R&D to support customer goals. It compares pro forma and GAAP financial results for Q4 2024 and Q4 2023, highlighting a decrease in other income due to FX remeasurement and a slightly lower pro forma tax rate due to discrete benefits. Q4 2024 pro forma net income increased significantly compared to the previous year. GAAP net income also rose, although the previous year's figures included one-time tax benefits from changes in Swiss tax laws. The company ended the year with increased cash and investments, driven by operating activities despite capital expenditures. Additionally, it announced plans to expand direct operations in Italy, Spain, Portugal, and associated territories with a purchase agreement valued at EUR290 million plus a potential earn-out based on 2025 performance.

The paragraph discusses the company's outlook and expectations for its financial performance in 2025. While the company anticipates a slightly positive impact on pro forma EPS from a transaction closing in 2026, it projects a decrease in pro forma operating margins for 2025 compared to Q4 performance due to higher leasing rates, increased depreciation expenses, and a revenue mix with lower product margins. Other factors affecting the financial outlook include currency exchange rate impacts, higher trading credits affecting system ASPs with the launch of da Vinci 5, and potential lengthening of capital selling cycles due to increased competition. Further details on the 2025 outlook will be provided by another speaker, Brandon, later in the call.

The paragraph discusses a recent study called the COMPARE Study, led by Dr. Rocco Ricciardi and colleagues, which was published in the Annals of Surgery. This meta-analysis compared the perioperative outcomes of da Vinci robotic-assisted surgery with laparoscopic/thoracoscopic surgery and open procedures across seven oncologic specialties. Data were drawn from past 12 years, including over 1 million patients in each group from 22 countries. The study found that da Vinci procedures resulted in better outcomes, with reduced conversion to open surgery, fewer blood transfusions, lower complication rates within 30 days, shorter hospital stays, and reduced 30-day readmission and mortality rates.

The paragraph discusses two studies related to da Vinci robotic surgery. The first is a meta-analysis highlighting the benefits of da Vinci procedures compared to traditional open surgery, emphasizing the advantages for decision-makers in multi-specialty settings. The second study, led by Dr. Michael Awad, examined Intuitive's new force feedback technology in the da Vinci 5 system. Conducted on 28 surgeons with varying experience levels, the study showed that the technology significantly reduced the forces exerted on tissues during surgical tasks, such as retraction, dissection, and suturing. This benefit was observed across all experience levels, indicating the technology's potential to enhance surgical safety and outcomes.

In the article paragraph, Brandon Lamm discusses the financial outlook for 2025, focusing on da Vinci procedure growth, gross profit margin, and operating expenses. For 2025, procedure growth is expected to be between 13% and 16%, influenced by factors such as China's market conditions, European hospital budgets, and bariatric procedure trends. The gross profit margin is anticipated to range from 67% to 68%, affected by new facility depreciation, newer product growth, and the US dollar's strength. Operating expenses are projected to rise between 10% and 15% due to increased depreciation, innovation investments, and legal costs. Potential impacts from new tariffs are not included in these estimates.

The company anticipates its noncash stock compensation expense to be between $760 million and $790 million in 2025, while other income, mostly from interest, is expected to be between $370 million and $400 million. Capital expenditures are projected to range from $650 million to $800 million for facility construction. The 2025 pro forma income tax rate is estimated at 22% to 23%, up from 21.4% in 2024. During a Q&A session, Gary Guthart addresses Larry Biegelsen's question about the correlation between system placements and utilization rates. Guthart suggests that not all accounts will have high utilization and that new capital opportunities might impact utilization rates, leading to fluctuations.

The paragraph discusses expected changes in gross margins for 2025 compared to 2024, highlighting three primary factors: depreciation expense leading to deleverage, product mix changes with DV5, Ion, and SP contributing more to revenue but carrying lower margins, and the impact of foreign exchange (FX). Despite these pressures, cost reductions are being implemented. Over the midterm, the goal is to surpass a 70% gross margin through growth, improving product margins for Ion and SP, and consistent cost reductions.

In the paragraph, Robbie Marcus from JPMorgan raises questions about the mix and upgrade cycle of the da Vinci 5 versus Xi systems, as well as their placement outside the US. Gary Guthart responds by highlighting two main factors driving the launch: scaling up supply chains and obtaining global clearances. He also mentions upcoming software updates that integrate new digital technologies, offering surgeons enhanced data access and performance analysis tools. The upgrade pace will depend on the perceived value of the new features, considering that both X and Xi models are reliable.

The paragraph discusses the positive reception and increasing value of the da Vinci 5 system's features, such as analytics and imaging, contributing to a trade-in cycle for medical equipment. While it's challenging to predict the exact pace and specifics of this transition, Jamie Samath notes that the move to a broad launch and obtaining additional geographical clearances will likely increase the proportion of DV5 placements. Despite this, the existing Xi systems remain capable, and there may be opportunities for refurbished versions in more price-sensitive markets. Gary Guthart adds that depreciated systems like X and Xi could still find use in other markets, while acknowledging the dynamic capital equipment environment.

The paragraph discusses the business environment and challenges faced by a company, particularly in the context of their operations in China and other global markets. Jamie Samath addresses the dynamics in China, mentioning that although they placed 20 systems there in Q4, the market remains challenging due to domestic competition and government actions. In the U.S., the company has seen strong interest, partly due to the new da Vinci 5 product, and less sensitivity to capital budgets. There are challenges noted in the UK, Germany, and Japan due to profitability issues. In terms of future expectations for 2025, there is uncertainty regarding market dynamics. Additionally, Travis Steed from Bank of America Securities asks Gary about the company's R&D investments after reaching $1 billion annually, questioning whether these will focus more on new areas like the endoluminal platform, robotics in other categories such as cardio, or geographic expansion.

The paragraph features Gary Guthart discussing the diverse opportunities in the field of robotics, emphasizing the importance of innovation and technology development. He highlights the need to invest in both existing and future platforms, which involves regulatory and clinical efforts for expanding indications, as well as developing additional instruments and accessories. Guthart stresses the importance of supporting latecomers to robotics who may have varying needs such as learning or economic support. The discussion also touches on the da Vinci 5 system, illustrating how the company balances opportunities across multiple timeframes, specialties, and geographies. Travis Steed then inquires about short-term operational expenditure growth, seeking clarification on the proportion allocated to R&D versus SG&A and the factors influencing the variation in growth rates.

In the paragraph, Jamie Samath addresses queries about potential tariffs and their impact on business operations. He mentions that R&D and SG&A will grow at a similar rate of 10% to 15%, with an emphasis on supporting procedure growth and managing legal expenses. Samath notes that a significant portion of the company's instruments are manufactured in Mexico, meaning tariffs might materially affect them. He discusses the potential need to adjust pricing in response to tariffs and highlights the company's efforts to balance customer needs with their business strategies. Travis Steed then prompts the next question from Rick Wise of Stifel.

Gary Guthart discusses the potential of new digital features in the da Vinci 5 surgical system, focusing on three main areas. First, these features aim to improve outcomes for care teams by providing real-time tools in the operating room, thereby increasing confidence and enabling access to more patients. While they may not introduce entirely new procedures, they make existing procedures more accessible. Second, the features are designed to rapidly build confidence within care teams, benefiting hospitals and accelerating learning for surgeons and other team members. Finally, the tools offer customers the ability to conduct value analysis using their own data.

The paragraph discusses the impact of developing new capabilities in the DV5 space, particularly in imaging and augmented reality, and how these advancements inspire surgeons to explore new opportunities. Rick Wise then asks Jamie Samath about the growth prospects for Ion and SP, noting their strong performance the previous year. Jamie explains that Ion has conducted 28,000 procedures in Q4, translating to a run rate of over 100,000 annually, primarily in the US. This indicates that Ion is progressing along the adoption curve for biopsy procedures, with a focus on improving utilization. As the technology matures, procedure growth rates are expected to slow, which has been observed over recent quarters.

The paragraph discusses the international expansion and product development efforts of the Ion and SP businesses. The Ion business is focused on launching in international markets like Europe, Korea, and China, with potential long-term applications in different body areas. The manufacturing and engineering efforts aim to meet product cost and gross margin goals in the midterm. The SP business is also launching internationally, with strong utilization in Korea and broad indications in Europe and Japan. The US market is expected to expand with additional indications in thoracic and colorectal areas, and the SP growth rate is accelerating nicely. Margin improvements in the SP business are somewhat easier to achieve compared to Ion, due to leveraging common technology. David Roman from Goldman Sachs asks about the impact of competition and selling cycles, whether current or theoretical.

The paragraph discusses the impact of increasing competition on selling cycles in international markets outside China, particularly highlighting the US market. Jamie Samath notes that while the selling cycles have remained stable elsewhere, growing competition could extend these cycles. David Roman inquires about the opportunities in the surgical instruments and accessories market, both presently and in the future. He specifically mentions the launch of an upgraded instrument, DV5, and its potential impact. Gary Guthart explains their strategy to add value to existing procedures by identifying elements within the operating room that customers already purchase from others and possibly integrating those into their offerings.

The paragraph discusses a strategy focused on enhancing value creation, either clinically or economically, through design and integration capabilities. The company prioritizes innovations that offer better outcomes for customers over simply mimicking existing solutions to boost revenue. Examples include initiatives like cannula seals and stapling improvements, and enhancements in the da Vinci 5 system via integration. Their approach emphasizes long-term value over immediate revenue growth. The paragraph also highlights force feedback instruments and insufflation as areas for potential market share expansion, though widespread availability of force feedback instruments is not expected until the end of 2025.

The paragraph discusses the impact of procedure mix on I&A (instruments and accessories) revenue per procedure, noting a potential decline as benign procedures become more common. Gary Guthart emphasizes procedure mix as a larger driver than inflation impacts. Patrick Wood from Morgan Stanley questions the efficiency benefits of expanding the install base, asking about margin implications of servicing densely concentrated systems versus less dense areas. Jamie Samath responds, highlighting that I&A revenue generally has higher margins than capital and that increased system utilization can shift revenue towards higher profit streams. Wood clarifies his focus on service efficiencies within existing accounts.

Gary Guthart discusses the advantages of geographic density for Intuitive, such as reduced costs in account support through services like sales and training. He emphasizes the company's commitment to improving surgery and acute intervention by aligning with the quintuple aim: better patient outcomes, experiences for patients and care teams, access to care, and reduced total costs. Intuitive focuses on a human-centered approach to value creation in healthcare, aiming for less invasive and more effective treatments. The call concludes with gratitude to participants and an announcement of the next meeting in three months.

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