Intuitive Surgical, Inc. (ISRG) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Solid Procedure Growth and Capital Placements: The company experienced nearly 17% growth in procedures compared to the same quarter last year, with strong capital placements including 341 da Vinci systems.

• Advancements in System Platforms: Progress was made across all three system platforms, including the next phase rollout of da Vinci 5, stabilization of Ion supply, and expansion of da Vinci SP installs in Europe.

• Revenue Growth: A 14% increase in revenue was reported, reflecting solid procedure performance and strong capital placements.

• Product Margin Improvements: Product margins exceeded expectations due to cost reductions, fixed overhead leverage, and some one-time benefits.

• Digital Products and Services Adoption: Adoption of digital products and services grew, with nearly 14,000 surgeons using the My Intuitive App and a significant increase in Intuitive Hub usage.

Pessimistic Highlights

• Multi-port Procedure Headwinds: Continued headwinds from the previous quarter were noted for multi-port procedures.

• Lower System Utilization: Global system utilization for multiport platforms grew by only 2% year-over-year, lower than historical trends.

• Pressure in Europe and China: Capital placements faced pressure in Europe and China, with Europe reflecting health system budget constraints and China impacted by delayed tenders and emerging domestic robotic systems.

• Bariatric Procedure Decline: Bariatric procedures in the U.S. declined in the mid-single-digit range.

• Procedure Growth Headwinds in Asia: Growth in China was lower than previous averages, and Korea's growth continued to be impacted by physician strikes.

Company Outlook

• Procedure Growth Forecast: Full-year 2024 procedure growth is now expected to be between 15.5% to 17%, with the low end assuming further softening in bariatric procedures and headwinds in Asia.

• Gross Profit Margin Increase: Pro forma gross profit margin guidance for 2024 has been increased to between 68.5% and 69% of net revenue.

• Operating Expense Growth Lowered: Guidance for pro forma operating expense growth has been lowered to between 10% and 13%.

• Capital Expenditures: Capital expenditure estimates remain between $1 billion to $1.2 billion, primarily for planned facility construction activities.

Q & A Highlights

• Q: Can you discuss the ramp in da Vinci 5 placements in the second half? (Larry Biegelsen, Wells Fargo)

  A: Expect da Vinci 5 placements in the U.S. to increase modestly quarter-to-quarter, with a focus on incremental capacity for customers versus the trading cycle. (Jamie Samath)

• Q: How will the new stimulus in China impact placements? (Larry Biegelsen, Wells Fargo)

  A: The stimulus is not expected to have a material impact on placements or the quota in China. The operating environment remains challenging due to economic rebasing and the emergence of domestic systems. (Dave Rosa)

• Q: What feedback are you receiving from physicians and institutions on da Vinci 5? (Robbie Marcus, JPMorgan)

  A: Feedback points to improvements in precision, imaging, ergonomics, and integration leading to efficiency improvements. Surgeons prefer using da Vinci 5 for its features, and there's interest in how force feedback and case insights can improve surgical outcomes. (Dave Rosa, Gary Guthart)

• Q: What new incremental TAM will da Vinci 5 unlock? (Rick Wise, Stifel)

  A: Da Vinci 5 aims to unlock the routine use of robotic surgery every day, going deeper into the procedure base we're already in and helping care teams adopt robotic surgery. (Gary Guthart)

• Q: Can you elaborate on the hardware and software changes planned for da Vinci 5? (Adam Maeder, Piper Sandler)

  A: Near-term additions include integration of Intuitive Hub capabilities, access to 3D models and intraoperative video from the console, and software updates based on customer feedback. Future enhancements will leverage AI and ML algorithms for advanced features. (Dave Rosa)