The paragraph is an introduction to Intuitive Surgical, Inc.'s First Quarter 2025 Earnings Release conference call. It includes a welcome message by the operator and Dan Connally, the Head of Investor Relations. Key personnel attending the call are Gary Guthart (CEO), Dave Rosa (President), and Jamie Samath (CFO). The opening remarks mention the possibility of forward-looking statements, advising investors about associated risks and uncertainties detailed in SEC filings. The call's audio replay, press release, and financial data are available on their website. The format of the call includes business and financial overviews, operational and clinical highlights, an updated financial outlook for 2025, and a Q&A session. Gary will provide a business overview, Dave will cover business highlights, and Jamie will discuss financial results before Dan talks about the financial outlook.

In the second paragraph of the article, Gary Guthart discusses the positive performance of the company's business in the first quarter, highlighting strong procedure growth in general surgery, both in the United States and internationally, as well as the introduction of new systems. He emphasizes the ongoing adoption of their platforms, such as dV5, multiport, Ion, and single port systems. Guthart outlines their approach to navigating dynamic trade policy changes, focusing on ensuring the supply of products, optimizing production costs, and adjusting supply chain strategies when trade conditions stabilize. The company aims for long-term growth, maintaining high-quality minimally invasive care, and avoiding immediate changes to pricing despite potential cost fluctuations. David Rosa is then invited to discuss product, services, and operating highlights.

In the first quarter of 2025, the company's global da Vinci installed base surpassed 10,000 systems, with over 50,000 surgeons performing procedures across 70 countries. Procedure growth was strong at 17%, driven by U.S. general surgery and regional markets like India and Korea. U.S. after-hours procedures saw a 36% increase year-over-year. The company placed 367 da Vinci systems—including 147 da Vinci 5 systems—and 49 Ion systems, with strong U.S. performance but mixed results internationally due to challenges in Germany, the UK, and Japan. System utilization grew, leading to a 19% revenue increase. Despite the mixed international performance, product margins and operating expenses met expectations. The rollout of the da Vinci 5 system progressed well, with 147 systems placed and over 32,000 procedures conducted, including the installation of the first fully integrated system featuring new software enhancements.

The paragraph discusses upcoming features for the da Vinci 5 surgical system, including real-time video and 3D model reviews, and visual force feedback gauges, pending regulatory clearance. The company plans a broad launch of the system midyear and is working on regulatory processes in Japan and Europe. A study led by Dr. Michael Stifelman explored the effects of Force Feedback technology in robotic-assisted kidney surgeries, revealing significantly faster bowel function recovery in patients compared to those using standard instruments. This suggests that integrating force feedback into surgery could improve precision and recovery. Another study addresses the time to proficiency with this technology.

The paragraph discusses a study led by Andrew Hung at Cedars-Sinai Medical Center, which examined the benefits of force feedback technology on novice surgeons' suturing performance. The technology showed promise in reducing errors and tissue damage, as well as improving efficiency. Broader availability of these instruments is anticipated by the end of 2025. The use of case insight data with the da Vinci 5 system is increasing, providing valuable operational and clinical insights that aid in measuring surgical performance. The paragraph also mentions significant growth in Ion procedures, recent regulatory clearances in Australia and China, and the focus on expanding utilization and reducing costs internationally for the Ion platform.

The paragraph discusses the significant growth in procedures, with a 94% increase driven by strong performance in the U.S., Korea, Japan, and early adoption in Europe. It mentions the U.S. 510(k) clearance for the da Vinci SP SureForm 45 stapler, aimed at enhancing thoracic and colorectal procedures. The focus for 2025 includes launching the da Vinci 5, increasing adoption of key procedures, enhancing manufacturing and product quality, and improving digital tools. Despite potential inefficiencies from rapid changes, they are well-positioned to meet these priorities. Jamie Samath then takes over to discuss financial performance in detail, noting a reconciliation of pro forma and GAAP results on the company's website and touching on the global trade and tariffs context.

In 2024, Intuitive primarily manufactured its robotic systems in the U.S., endoscopes in Europe, and instruments in Mexico, with raw materials sourced globally. Intuitive's manufacturing and export activities make it a significant U.S. exporter. The company faces different tariffs: a 125% Chinese tariff on imports for Chinese production and U.S. tariffs of 145% on components from China; 10% baseline U.S. tariffs on imports from non-U.S. suppliers and European endoscopes, with potential increases post-pause period; and a 25% tariff on certain imports from Mexico not meeting USMCA requirements, though most Mexican-made products are exempt from tariffs under USMCA.

The paragraph outlines the expected financial impact of tariffs on the company's income statement for 2025, predicting an approximate additional cost of sales of 1.7% of revenue, with variations based on several factors including China sales and USMCA-certified products. Tariff costs are included in inventory costs, which affects cost of sales progressively throughout the year. The company anticipates a pro forma gross margin between 65% and 66.5% of revenue, excluding unforeseen tariffs or inflationary effects on labor or components. While operational mitigations may be considered, they are not expected to significantly benefit 2025 results. In Q1, core metrics showed strong performance with 17% growth in da Vinci procedures, a 15% increase in the installed base of da Vinci Systems, and 2% growth in average system utilization. Adjusting for fewer business days, Q1 procedures grew by 18.5%, with U.S. procedures up by 13%, particularly in general surgery, despite a decline in bariatric procedures.

The paragraph discusses the growth and distribution of OUS (Outside the U.S.) procedures and da Vinci system placements. Procedure growth increased by 24%, notably in India, Korea, distributor markets, and the U.K., with a potential catch-up effect from previous periods. China's growth, driven by urologic procedures, was slightly above the global average. Colorectal, hysterectomy, benign general surgery, and thoracic procedures showed robust growth. The first quarter saw a 17% rise in system placements, with 367 systems installed compared to last year, including 147 da Vinci 5 systems, reflecting positive reception in the U.S. However, OUS system placements slightly decreased due to financial pressures and healthcare spending constraints, particularly in Japan, Germany, and the U.K. China's market remains affected by domestic competition and price pressures.

The paragraph discusses the impact of a 125% tariff on excise systems imported into China, which may affect the costs and competitiveness in the Chinese market. Despite this challenge and broader economic pressures, the company's first-quarter revenue increased by 19% to $2.25 billion, with a 20% growth on a constant currency basis. The da Vinci system placements rose by 17%, contributing to a 25% increase in systems revenue, partially due to higher average selling prices of $1.62 million, compared to $1.39 million last year. Recurring revenue accounted for 85% of total revenue, and lease arrangements represented a growing share of placements. The company expects leasing rates to rise in the future and anticipates higher trading credits with the da Vinci 5 launch. Furthermore, lease buyout revenue increased to $39 million. However, the revenue per procedure for instruments and accessories remained flat at $1,780 due to differing trends in procedure type mix.

The paragraph discusses the performance and expansion efforts related to various medical platforms and systems, particularly the Ion and SP platforms. There was a 58% increase in Ion procedures in the first quarter, alongside the placement of 49 Ion systems, with four of those being placed in international markets. The focus is on increasing the use of Ion for lung biopsies and expanding its adoption across U.S. healthcare systems. SP procedures saw a 94% growth, particularly in Korea, Europe, and Japan, with 19 SP systems placed in the first quarter, leading to a 26% rise in utilization. The gross margin for Q1 of 2025 declined slightly due to increased facilities costs and a higher revenue mix from Ion and da Vinci 5, which have lower margins.

In the first quarter, the company experienced no significant tariff impact and expanded its U.S. manufacturing and R&D capabilities by opening two facilities in Sunnyvale, California, and a factory in Georgia. Plans to open more facilities in Germany, Bulgaria, and expand in Mexico are underway, seeking advantages in supply availability, quality, and costs. Operating expenses rose by 12% due to increased staffing, facilities costs, and legal fees, with about 250 new hires in manufacturing to support growth. The company remains committed to investing in R&D to drive long-term revenue. Pro forma net income for the quarter was $662 million, or $1.81 per share, up from $541 million, or $1.50 per share, last year, with gains fueled by higher interest income and meeting tax expectations of a 22.3% effective rate.

In the first quarter of 2025, GAAP net income was $698 million or $1.92 per share, up from $545 million or $1.51 per share in the first quarter of 2024. The company ended the quarter with $9.1 billion in cash and investments, an increase from $8.8 billion at the end of the previous year. This rise was mainly due to cash generated from operations, offset by taxes related to share settlements and $117 million in capital expenditures. For 2025, the company has updated its financial outlook, predicting procedure growth of 15% to 17%, increased from the earlier forecast of 13% to 16%. Factors affecting this include growth dynamics in China, CapEx constraints in key markets, and trends in bariatric procedures. The gross profit margin is projected to be 67% to 68% of revenue, influenced by new facilities, product growth, and a stronger U.S. dollar.

The paragraph provides an update on the financial impacts of recent tariffs and other fiscal expectations for the company. Tariffs are projected to increase the cost of sales by about 1.7% of revenue, affecting the pro forma gross margin, which is now expected to be between 65% and 66.5%. Operating expenses are anticipated to grow by 10% to 14%, attributed to new facility depreciation and growth investments. Non-cash stock compensation is estimated to be $770 million to $790 million in 2025, while other income, mainly from interest, is projected at $370 million to $400 million. Capital expenditures, mainly for facilities, are estimated between $650 million and $750 million. The pro forma income tax rate for 2025 is expected to remain between 22% and 23%. During the Q&A, Travis Steed from Bank of America Securities inquires about the tariff impact, with Jamie Samath noting that approximately half the tariff impact comes from U.S.-China trade, and about 40% from imports into the U.S.

The paragraph discusses the impact of tariffs on revenue, indicating that the exit rate in Q4 will be higher than the current 1.7% due to increasing tariffs throughout the year. The variability is noted based on Chinese capital sales, and the company plans to assess the tariff situation beyond 2025. In terms of the capital environment, strong customer response to da Vinci 5 is noted in the U.S., where leasing and user-based arrangements offer flexibility. However, outside the U.S., some markets face constraints due to government budget reallocations, such as shifting funds to military spending in Europe and the reduction of post-COVID funding.

The paragraph discusses a company's strategy to help customers increase utilization of existing capacities to enhance throughput with the assistance of Genesis resources and other teams. The company is also expanding its economic tools to assist customers in evaluating program returns, particularly internationally. They are exploring leasing and usage-based arrangements in the U.S., which are at early adoption stages. Customers have raised concerns about tariffs, but this hasn't yet impacted core capital demand. However, there is concern that increased pricing due to tariffs could pressure hospitals. Jamie Samath mentions that the company's 1.7% estimate for 2025 includes European retaliatory tariffs assuming they take effect after a 90-day pause, though how this will actually play out remains to be seen.

The paragraph discusses the company's strategic approach to their supply chain and manufacturing operations, highlighting a cautious and measured approach to pursuing improvements that are not disruptive to partners and employees. Jamie Samath clarifies potential discrepancies in da Vinci 5 placements in the U.S., explaining that supply met expectations and any changes in placements reflect normal seasonality. Larry Biegelsen and Robbie Marcus from JPMorgan ask about procedure volume and early confidence in raising outlook. Jamie indicates the positive performance in the first quarter is driving this optimism, aligning with prior prepared remarks.

In the paragraph, Jamie Samath discusses the company's forecasting process, which includes customer input and plans, and mentions that Q1 procedure performance was 18.5%. The company is monitoring macroeconomic conditions closely, aiming for a 15% growth target for the rest of the year. Gary Guthart adds that the company is seen positively by customers, who recognize economic and patient benefits. Robbie Marcus raises concerns about the impact of tariffs on the company's guidance. Jamie Samath responds, explaining that the company is taking a cautious approach by considering current tariffs without speculating on future changes, aiming to provide a responsible guide.

The paragraph discusses potential operational strategies to mitigate supply chain challenges. David Rosa outlines a two-pronged approach: optimizing parts coming into the factory and parts leaving it. For incoming parts, the focus is on industrial scaling and risk management, including dual sourcing and strategic reserves. For outgoing products, efforts include qualifying products under USMCA and optimizing global inventory to circumvent tariffs. Mid-term strategies involve utilizing existing global manufacturing facilities to enhance product supply, while long-term plans focus on expanding the manufacturing footprint in response to the trade environment.

In the paragraph, Rick Wise from Stifel asks about the robust 24% growth in international (OUS) markets and its sustainability. Jamie Samath responds by highlighting strong procedure growth, mentioning increased adoption of da Vinci 5 in the U.S. He then elaborates on the international growth, noting significant contributions from early-stage markets like India and Taiwan and the progress made through engagements with key opinion leaders and surgical societies. Additionally, incremental reimbursements in Taiwan and solid growth across Europe, particularly in the U.K., have driven this performance.

The paragraph discusses the company's strategies and developments in the U.K. and other international markets, focusing on expanding capacity for procedure growth and addressing constraints in countries like Germany, Japan, and the U.K. There is potential for growth through increased utilization despite these constraints. The discussion then shifts to two areas of increased customer interest: after-hours surgery and cardiac surgery. The after-hours surgery initiative aims to provide equal access to minimally invasive surgeries for patients who need treatments outside regular hospital hours. Additionally, a new leader was recently hired for the cardiac surgery area to drive progress and growth in that sector.

The paragraph discusses the importance of providing access to capital for training after-hours care teams to support surgeons dealing with emergent conditions, often involving laparoscopic, minimally-invasive, or open surgeries. It highlights the significance of having the da Vinci system as an option to improve patient outcomes. In the cardiac field, there has been a rise in interventional procedures by cardiologists, but minimally-invasive surgery is now also recognized as a valuable option for certain patients. The paragraph emphasizes that technological advancements, like DV5, and collaborations with societies, academic institutions, and experienced surgeons make it an opportune time for investment in this area, which has been experiencing growth.

The paragraph discusses the current use and future development of force feedback technology in surgical instruments. Six instruments currently incorporate this technology, selected for their role in procedures that could benefit from force feedback. While the exact number of cases using this technology is not specified, it's noted that thousands of cases have already been conducted. The clinical validation strategy involves starting with early single institution studies where individual or small groups of surgeons analyze their results. Over time, this will expand to cross-institutional studies with larger patient groups, as referenced in a clinical trial involving 200 patients. The goal is to progressively gather data until the technology's impact can be evaluated on a larger scale. Gary Guthart adds comments following this explanation.

The paragraph discusses the use and demand for force sensing instruments and force feedback technologies in surgical procedures, highlighting that while these tools are showing promising outcomes for younger surgeons, their adoption is currently limited by supply constraints. The paragraph then shifts to a question from Ryan Zimmerman about the potential impact of Medicaid cuts on patients. Jamie Samath responds by noting that the payer mix between private and Medicare varies by market, but it is too early to comment on the potential effects of Medicaid cuts, as it remains speculative at this stage.

In the paragraph, Gary Guthart and Ryan Zimmerman discuss the potential impact of Medicaid amendments on the utilization of robotics in healthcare. Guthart notes that while Medicaid is part of their procedure mix, it is not dominant, making it too early to predict outcomes. David Roman from Goldman Sachs asks about potential Medicaid cuts to hospitals and how Intuitive might be part of the solution amidst a challenging hospital capital expenditure environment. Guthart suggests that a well-run program using Intuitive's solutions can provide excellent patient outcomes, higher satisfaction among doctors and patients, and lower treatment costs, implying that Intuitive's offerings can help hospitals manage financial pressures effectively while continuing to provide care.

The paragraph discusses the challenges and opportunities faced by healthcare providers regarding capital and operating budgets in U.S. hospitals. It highlights the disconnect between those managing operating budgets, who see positive economic returns, and those handling capital budgets, who are motivated differently. The company aims to help healthcare providers improve utilization, manage workflows, and optimize resources like machinery. They acknowledge the high value of minimally invasive care, such as da Vinci systems, and express optimism about the potential for improving surgical and acute interventions.

The paragraph discusses the efforts of a company, likely Intuitive, in collaborating with hospitals and care teams to achieve five primary goals: improving patient outcomes, enhancing experiences for patients and care teams, reducing healthcare costs, and increasing access to care. The company emphasizes the importance of understanding the human aspect in surgery and acute care and envisions a future with less invasive and more efficient healthcare. They express gratitude for support and look forward to future discussions. The operator concludes the conference call.

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