Release Date: July 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Intuitive Surgical Inc (ISRG, Financial) reported a solid 17% growth in procedures for Q2 2024 compared to Q2 2023.
- The company placed 341 da Vinci systems in the quarter, including 70 da Vinci 5 systems, indicating strong demand for new technology.
- Revenue growth of 14% in the quarter was driven by solid procedure performance and strong capital placements.
- Product margins exceeded expectations due to cost reductions, fixed overhead leverage, and some one-time nonrecurring benefits.
- Adoption of digital products and services grew significantly, with the My Intuitive app expanding to nearly 14,000 surgeons.
Negative Points
- Multi-port procedural headwinds continued from the previous quarter, impacting overall performance.
- System utilization growth of 2% globally was lower than historical trends, reflecting the previous year's procedure strength due to patient backlog.
- Bariatric procedures in the US declined in the mid-single digit range, indicating a potential area of concern.
- Capital placements in Europe and China faced pressure due to health system budget constraints and emerging domestic robotic systems.
- The operating environment in China remains challenging due to anti-corruption initiatives and economic rebasing, impacting capital placements and procedure growth.
Q & A Highlights
Q: How should we think about the ramp in da Vinci 5 placements in the second half? And how should we think about trade-ins going forward?
A: For the second half of '24, expect DV5 placements in the US to increase modestly quarter to quarter. We are focusing on placing da Vinci 5 for incremental capacity rather than trade-ins. Trade-ins will likely progress over multiple years as customers evaluate da Vinci 5's capabilities and value. (Jamie Samath, CFO)
Q: How are you thinking about the new stimulus announced in China and the impact of the anti-corruption initiative?
A: The new stimulus is not expected to have a material impact on system placements. The operating environment remains challenging due to anti-corruption measures and the emergence of domestic systems. Despite these challenges, we are still seeing double-digit growth in procedures in China. (David Rosa, President)
Q: Can you help us understand the demand side of the DV5 equation and the factors needed for a full launch?
A: Early adopters and larger institutions are showing strong interest in DV5. We need to mature our supply chain, integrate hardware-software updates, and respond to customer feedback before a broad launch. Evidence and customer belief will build over time. (David Rosa, President; Gary Guthart, CEO)
Q: Can you elaborate on the strength in gross margins this quarter?
A: The improvement was driven by lower inventory reserves, cost reductions in components, and logistics. These came in earlier than expected. We also saw a muted effect from da Vinci 5 placements as most were under operating leases. (Jamie Samath, CFO)
Q: What feedback are you getting from physicians and institutions about da Vinci 5?
A: Customers appreciate improvements in ergonomics, precision, and efficiency. There is interest in features like Case Insights and Force Feedback, which are expected to improve over time. Surgeons prefer da Vinci 5 over Xi for its enhanced capabilities. (David Rosa, President; Gary Guthart, CEO)
Q: What are you seeing in the field from an adoption perspective for Ion?
A: Ion is proving effective for diagnosing smaller lesions with high diagnostic yields and improved safety profiles. This often leads to da Vinci procedures, although the final treatment decision is up to the tumor board. (Gary Guthart, CEO)
Q: Can you unpack the dynamics underpinning operating expense growth for the balance of the year?
A: We expect second-half operating expenses to be higher due to increased depreciation and continued investments in R&D. Some headcount additions have been pushed to 2025 for focus. (Jamie Samath, CFO)
Q: How are you thinking about the procedure growth outlook, especially regarding bariatric and China/Asia pressures?
A: We expect bariatric procedures to continue softening due to GLP-1s, and the impact of physician strikes and delayed tenders in Asia. However, we remain confident in the long-term value of our offerings in these markets. (Gary Guthart, CEO; David Rosa, President)
Q: What new incremental TAM will da Vinci 5 unlock?
A: Da Vinci 5 aims to unlock the routine use of robotic surgery every day by addressing barriers to adoption and expanding into new indications over time. (Gary Guthart, CEO; David Rosa, President)
Q: Can you talk about the underlying demand for Xi in the US and the impact of DV5's rollout?
A: Demand for Xi remains strong, especially for customers needing incremental capacity. Some customers are in a wait-and-see mode regarding DV5's value. We expect DV5 placements to increase modestly, impacting Xi demand over time. (Jamie Samath, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
