Q4 2021 Intuitive Surgical Inc Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the acuity of Q4 2021 earnings release call. At this time all participants are in a listen only mode. If you wish to ask a question during today's call. Please press. One then zero on your Touchtone phone.

As a reminder, today's call is being recorded now to the concept of our host Bryan King head of Investor Relations for intuitive surgical. Please go ahead.

Thank you so good afternoon and welcome to intuitive its fourth quarter earnings Conference call with me today, we have Gary <unk>, our CEO and Jamie Smith, our CFO .

Before we begin I would like to inform you that comments mentioned on today's call may be deemed to contain forward looking statements actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are described in detail in our security and exchange Commission filings, including our most recent Form 10-K .

Filed on February 10, 2021, and Form 10-Q filed on October 22021.

Our SEC filings can be found through our website or at the SEC's website investors are cautioned not to place undue reliance on such forward looking statements.

Please note that this conference call will be available for audio replay on our website at intuitive dot com on the latest events section under our Investor Relations page today's press release and supplementary financial data tables have been posted to our website.

Today's format will consist of providing you with highlights of our fourth quarter results as described in our press release announced earlier today, followed by a question and answer session.

Gary will present, the quarter's business and operational highlights Jamie will provide a review of our financial results.

And I will discuss procedure and clinical highlights and provide our financial outlook for 2022, and finally, we will host a question and answer session and with that I'll turn it over to Gary.

Thank you for joining us today 2021 required agility as we drove through significant headwinds to support customers and manage our supply chain.

Teams performed well, helping customers return to surgery, when COVID-19 allowed them.

Maintaining the integrity of our supply chain and workforce.

Given our recent press release updating procedures capital placements and revenues I'll be brief in describing our full year 2021 results and spend a little more time outlining our plans for 2022 and beyond.

Putting 2021 and context demand for a robotically assisted interventions has been resilient during COVID-19 .

All these interventions get delayed during COVID-19 peaks, a return as Covid wanes and that is encouraging.

Pandemic stresses on health care systems emphasized the need for the kind of high quality minimally invasive interventions our products enable.

MS procedures allow greater use of ambulatory surgery free up resources in <unk> relative to other approaches and often enabled faster patient returned to home and overall recovery.

In 2021 da Vinci procedures grew 28% compared to full year 2020, reflecting a partial recovery in surgery. After the first wave of the pandemic.

Over the two year period 2020 in 2021, the compound annual growth rate in procedures was 14%.

Capital installs were healthy in 2021 with our team, placing 1347 da Vinci and 93 ion systems in the year driving da Vinci placement growth of 44% over 2020 and at a CAGR of 10% over the past two years.

With a two year CAGR and procedures of 14% and installed base growth of 10% over the same period utilization of installed systems continued to climb through the pandemic.

We think this is good for our customers and good for us.

Jamie will give regional capital trends and Brian will give detailed procedure dynamics later in the call.

The past two years have stress more than health system health systems.

Our ability to attract develop and retain outstanding staff remains a key focus for us.

Our team has performed well supporting our customers and each other.

In the year, we added approximately 700 employees to our team with net head count growth of approximately 180 in R&D 920, <unk> operations, and 340 and our commercial force.

Of the 1700 net additions 700 were outside of the United States.

Looking out over the next decade, we believe that the method, we have developed to identify clinical need there.

Then design a technology enabled ecosystem for improving the quadruple aim then deliver and train customers on this ecosystem can positively impact a broad set of minimally invasive interventions.

The opportunity and challenge for intuitive is to evolve our ecosystem to support our customers and ourselves at scale.

And to choose procedural opportunities and platform architectures that made sense.

Turning to investments in the mid term our priority for use of our capital is to reinvest in the business to develop new opportunities that improve the quadruple lane and to strengthen our operating capabilities and global scale.

We are focused on driving a vital set of initiatives and I'd like to describe the dynamics for you and a little more detail.

And multi port we believe our Gen. Four architecture is outstanding and we've been adding capability to this product line since launch.

Including significant expansion and upgrades to energy and stapling product lines improved endoscopic imaging the introduction of da Vinci X. The introduction of extended used instruments training technologies and finally, the introduction of new and upgraded connectivity and data management tools.

Given the precision robustness and overall performance of our generation four robotics architecture, we will continue to innovate on this platform, bringing additional value to those customers who have standardized on generation four fleets.

We are also investing in new core capabilities for our multi port systems, both generation four and beyond that we'll describe as they get closer to market. You should expect continued innovation from us here.

Turning to island, our first indication addresses a large unmet need in lung cancer biopsy and our focus is fully enabling our production capability and customer ecosystem for this indication.

There is strong demand for lung biopsy, and we're and we are working to expand manufacturing capacity of all processes for greater quality and lower costs at scale and run trials and address regulatory requirements that enabled global expansion.

Over time, we plan for total ion program profitability to approach that of our corporate average as we execute against our volume design and process improvement goals.

We are pursuing additional applications for Ireland, and we will describe them as we get closer to market.

For our single Port system da Vinci SP has the opportunity to change the standard of care in two different types of soft tissue surgery.

Those that require the attraction of tissue that can be done through a small single port and those procedures that benefit from narrow entry into the body as a whole.

We are ion at its current stage of launch has a single indication that represents large patient population Sps opportunity is the aggregation of several mid sized indications for example, SP use in trends oil robotic surgery is growing steadily in the U S.

To broaden Sps applicability in the U S and other markets were undertaking clinical trials to support regulatory review, we believe that SP will serve several additional surgical specialties, which will allow our customers and us to leverage capital investments in the program.

Ion we plan for SP platform profitability to approach that of historical platforms over time, and we are encouraged by recent progress.

Our customer digital efforts now represent roughly 5% of our total operating expenses and drive the business in four ways.

First the use of data and digital tools by customers to analyze their operations helps improve outcomes reduce costs and increase customer satisfaction and retention.

Second digital and internal investments can decrease our cost to serve our customer.

Third some of our digital tools generate revenue themselves and finally use of data and analytics internally can help our teams make better decisions.

Because digital and data tools spend our platforms and our used externally and internally, we do not account for them using the same financial models as our platforms, nor do we break them out as Standalone financial engines that said, we do evaluate digital and data projects against internal strategic and return analysis.

Over the past five years, the annual number of instruments, we produced has grown roughly 200%.

In the annual number of systems, we produce has more than doubled.

The number of customer professionals trained annually has nearly doubled and our engineering staff has nearly tripled.

Our product volume growth has also allowed us to in source some of our high volume accessories, while investing in automation.

This is a threefold benefit improving supply chain robustness, improving manufacturing quality and lowering unit costs.

As our training R&D and manufacturing efforts move to scale, we're investing in infrastructure factory builds training center expansion and automation.

These infrastructure investments are lumpy and our current growth cycle requires building capacity.

These projects have been planned over the past couple of years and we'll start amortizing first moderately in 2022 and more substantially in 2023 and 'twenty. Four then normalizing over the next few years.

For example over the next four years will be growing and consolidating facilities for operations R&D and customer training space in Atlanta, doubling our mexicali manufacturing footprint doubling our R&D design space and operation space, as our California headquarters and finally, consolidating and growing our commercial training operations and R&D.

Space and fiber Germany.

In summary, we will build on our generation four capabilities in multi port, while innovating and clinical utility for multi port surgery broadly.

We'll continue to bring our flexible endoscopy platform ion to scale and drive capacity quality and cost improvements, while seeking to broaden access to new markets and.

And SP, we expect to expand indications in regional markets, while driving manufacturing quality and scale.

We will invest in regional training R&D and manufacturing centers globally to support the growth of the business and pursue opportunities for operating leverage given volume some of which we'll share with customers to catalyze elastic markets.

Finally, we will continue to advance our digital efforts to enable fast accurate and actionable decisions with our customers and for our company.

Lastly for 2022, particularly we're focused on the following first outstanding customer support in the face of continued pandemic disruption.

Second execution of a robotic and digital platform expansion in pursuit of new indications and new markets.

Third general surgery growth in the United States.

And finally diversified growth outside the U S beyond urology.

As we turn to our financial report I'd like to formally thank Marshall Mohr, our outgoing CFO and new head of global business services for his outstanding stewardship over the past 15 years.

Turn the time over to our incoming CFO , Jamie <unk>, who will take you through financial matters in greater detail.

Good afternoon, I'll describe the highlights of our performance on a non-GAAP pro forma basis.

I will also summarize our GAAP performance later in my prepared remarks.

A reconciliation between our pro forma and GAAP results is posted on our website.

Q4 in 2021 revenue and procedures are in line with our preliminary press release on January 12.

Before I dive into our Q4 results, let me start with a summary of our full year 2021 performance.

Given the significant impact of Covid. We believe it is appropriate to review our 2021 results on both a year over year and two year compound annual growth rate basis.

<unk> increased by 28% as compared to 2020.

<unk> increased by approximately 14% using a two year CAGR.

We placed 1347 systems of customers during the year and increased 44% as compared to 2020.

And up 10% using a two year CAGR.

As a result of this procedure and system placement performance 2021 revenue increased by 31% year over year and increased by 13% using a two year CAGR.

Key business metrics for the fourth quarter were as follows.

Fourth CT procedures increased approximately 19% compared with the fourth quarter of 2020 and increased.

Approximately 13% using a two year CAGR.

During the call are procedures continued to recover in October and November from the impact of the <unk> in Q3.

However in December procedures were adversely impacted by the increasing hospitalizations in the U S and parts of Europe as the <unk> spread rapidly.

This trend is less and so far into January .

Fourth quarter system placements of 385 increased 18% from 326 systems placed last year.

As a result net of trade ins and retirements, we expanded our installed base of da Vinci systems over the last year by 12%.

On a two year CAGR, our installed base is up 10%.

Utilization of clinical systems in the field measured by procedures per system increased approximately 7% compared to last year and increased approximately 3% using a two year CAGR.

During the call the supply chain environment became more challenging and remains highly dynamic.

Our supply chain teams continue to work tirelessly with our supply chain partners to fulfill customer demand.

In Q4, we experienced minor constraints on our ability to meet customer demand. For example, we had some limitations on supply of skill stimulators.

While these constraints were relatively minor and were immaterial to our overall Q4 financial results. They highlight the risk of potential significant disruption to our manufacturing operations due to the current supply chain challenges.

U S procedures grew approximately 16% over Q4 2020 with relative strength in bariatrics, and cholecystectomy and hernia repair.

In December impacted the current wave of Covid on U S procedures varied by region with a greater impact in the northeast and Midwest.

Benign procedures, such as benign hysterectomy experienced the most significant impact in December reflecting the different the ESL and elective surgeries.

In Europe , the impact of Covid on procedures in December was most notable in France and Italy.

Despite the fact that hospitals are generally patent equipped to handle COVID-19 patients today.

<unk> to the outset of the pandemic.

COVID-19 resurgence is like those currently being experienced in the U S and parts of Europe are challenged hospital resources and have negatively impacted da Vinci procedures.

In the U S high Covid related hospitalization rates have been exacerbated by staffing shortages.

According to data reported by the department of Health and human services.

The proportion of hospitals, we're pulling a critical staffing shortage doubled between July and December .

In addition delays in diagnosis and treatment of underlying conditions happen will also negatively impact da Vinci procedures.

Q4 procedures in Asia, we're not significantly impacted by a resurgence in COVID-19 and we saw strong procedure growth across multiple specialties in China Korea and Japan.

While it is difficult to predict how long the current wave of Kobe will last.

The extent to which you will impact additional geographies, we expect that da Vinci procedures will be significantly adversely impacted in Q1.

Brian will provide additional procedure commentary later in this call.

Overall system placement results in Q4 was solid with U S placements of 235 up 20% from 196 in Q4 of 2020.

System placements at Greenfield customers was strong up approximately 45% as compared to Q4 of 2020, driven by U S <unk> and new customers and O U S markets.

Outside the U S. We placed 150 systems in the fourth quarter.

With 130 in the fourth quarter of 2020.

Current core system placements included 63 into Europe .

Seven into Japan in 2014 into China, compared with 54 into Europe , 22 into Japan, and 13 into China in the fourth quarter of 2020.

Capital strength in Japan was driven primarily by new customers in the private sector.

As of the end of 2021. It was 63 systems remaining under the current quota in China.

Which may be accessible to competitors should they received local regulatory clearance.

Globally trading track transactions represented 13% of placements in the quarter down from 40% last quarter and 49% for 2020.

The remaining installed base of <unk> systems in the U S is approximately 343 systems.

We expect the volume of trade ins to be significantly lower in 2022 as compared to 2021.

Macroeconomic conditions created by Covid, including supply chain constraints and staffing shortages are challenging and could impact hospital capital spending.

In addition, as competition progresses in various markets, we will likely experience longer selling cycles and price pressure.

Additional revenue statistics and trends are as follows.

Total fourth quarter revenue was $1 55 billion, an increase of 17% from last year.

Leasing represented 37% of Q4 placements compared with 41% last quarter.

Flat to Q4 of 2020.

The lower leasing mix in Q4 relative to last quarter reflected higher multi system placements with a couple of idms, who prefer to purchase systems.

While leasing will fluctuate from quarter to quarter, we continue to expect that the proportion of placements under operating leases will continue to increase over time.

Fourth quarter system average selling prices were $1 $45 million similar to <unk>, four 3 million last year and lower than one $5 7 million last quarter.

The sequential decline was primarily driven by a higher mix of both by transactions with large customers.

We recognized $26 million of lease buyout revenue in the fourth quarter.

Paired with $25 million last quarter and $14 million last year.

Lease buyout revenue has varied significantly quarter to quarter and will likely continue to do so.

Instrument and accessory revenue per procedure was approximately $1940 per procedure compared with 19 $800 per procedure in the third quarter of 2021 and down 6%.

$2060 realized in the fourth quarter of last year.

The year over year decrease primarily reflects the benefit of stocking orders in Q4 of 2020 associated with the launch of our extended use insurance program in the U S and Europe .

The sequential increase primarily reflects continued growth of our advanced instrument portfolio.

As we highlighted recently revenue for our advanced instrument portfolio has grown over a five year period compound annual growth rate of 35% and.

And we are starting to see early and accelerating adoption in O U S markets.

Tenants assistance placed in the fourth quarter were SP systems, including three systems placed at customers in Korea.

Our installed base of SP systems is now 99.

During the call. We further developed our SP ecosystem received five 10-K clearance for our Firefly imaging technology.

We also received five 10-K clearance for enhancements to our SP instruments.

Including an extension of lives to six of our eight instruments.

Growth of the SP platform will continue to be gated by additional clinical indications and clearances in markets beyond the U S and Korea.

We placed 31 ion systems in the quarter, bringing the installed base to 102009 systems.

Looking at the 93 ion systems placed in 2021, 54% of those systems were placed under operating lease arrangements.

For reference the list price of our ion system is 600, K with Asps generally a little below that level.

As a reminder, ion system placements and procedures are excluded from our overall system and procedure counts.

The entirety of our ion installed base is with the existing da Vinci customers, the majority of which have large pulmonary and thoracic departments.

Our ion platform is bolstering stood at the majority of the accounts that have an IP Fellowship program.

We continue to be encouraged by customer feedback and look forward to the completion of our next major milestone the full results from the precise study, which is expected in the second half of 2022.

Moving onto gross margin and operating expenses pro forma gross margin for the fourth quarter of 2021 was 71% compared with 69, 7% for the fourth quarter of 2020, and 71, 3% last quarter.

The fourth quarter of 2020 included higher payroll costs associated with lower production and higher excess and obsolete inventory charges.

Pro forma gross margin was lower than last quarter, primarily as a result of manufacturing inefficiencies and higher logistics costs associated with the supply chain environment lower system Asps and.

And a higher mix of systems revenue.

Pro forma operating expenses increased 27% compared with the fourth quarter of 2020.

The fourth quarter of 2021 included a $30 million contribution to the intuitive foundation compared with a $25 million contribution and.

The fourth quarter of 2020.

The increase in fourth quarter operating expenses from a year ago reflected an increase in head count increased variable compensation and higher travel costs.

We finished 2021 with almost 9800 employees an increase of 21% from the end of 2020.

We believe the opportunity in robotic assisted interventions to be significant and are planning to increase our investments significantly in 2022.

We are in the early stages of our newer platforms SP and ion and we will continue to invest in our digital and data capabilities.

Brian will provide operating expense guidance later in this call.

As Gary described we are also investing in our infrastructure to support our growth objectives and facilitate our ability to scale.

In 2022, we expect a significant increase in capital expenditures in the range of $700 million to $1 billion of capital investment for the year.

A significant portion of this investment involves construction of facilities to provide incremental space for growth to consolidate operations to enhance efficiency and to replace lease spaces with owned spaces.

These capital investments also expand our <unk> footprint and support opportunities for growth in key international markets by da Vinci procedures are in earlier stages of adoption.

These are multiyear investments.

Our pro forma effective tax rate for the fourth quarter was $19, 5% lower than our expectation primarily due to a favorable U S. O U S income mix.

We expect our pro forma tax rate will increase in 2022 due to a previous change in U S tax law that became effective on January one 2022, Brian will provide details later in this call.

Our fourth quarter of 2021 pro forma net income was $477 million for $1 30 per share compared with $434 million or $1 19 per share for the fourth quarter of 2020.

Speaker 1: 30 per share paired with 434 million dollars or a dollar 19 per share for the fourth quarter of 2020. I will now

I will now summarize our GAAP results.

Speaker 1: Gap in their income was $381 million, or $1.04 per share for the fourth quarter of 2021.

GAAP net income was $381 million or $1 four per share for the fourth quarter of 2021, compared with GAAP net income of $365 million or $1 one per share for the fourth quarter of 2020.

Speaker 1: and pair with GAAP net income of $365 million for a dollar one per share for the fourth quarter of 2020.

Speaker 1: The adjustments between pro forma and gap net income are outlined and quantified on our website and include excess tax benefits associated with employee stock awards.

The adjustments between pro forma and GAAP net income are outlined and quantified on our website and include excess tax benefits associated with employee stock awards employee stock based compensation amortized.

Speaker 1: employee stock-based compensation, amortization of intangibles and IP charges, acquisition-related items,

Amortization of intangibles, and IP charges and acquisition related items and legal settlements.

Speaker 1: We ended the year with cash and investments of 8.6 billion compared with 6.9 billion at December 31st 2020.

We ended the year with cash and investments of $8 6 billion compared with $6 9 billion at December 31 2020.

Speaker 1: The increase in cash in the fourth quarter primarily reflected cash generated from operations. We did not repurchase any cash.

The increase in cash in the fourth quarter, primarily reflected cash generated from operations we.

We did not repurchase any shares during the quarter.

Speaker 1: And with that, I would like to turn it over to Brian , who will discuss clinical highlights and provide our outlook for 2022.

With that I would like to turn it over to Brian who will discuss clinical highlights and provide our outlook for 2022.

Speaker 2: Thank you, Jamie. Overall, procedure growth for the full year 2021 was approximately 28 percent as compared

Thank you Jamie.

Overall procedure growth for the full year 2021 was approximately 28% as compared to 1% in 2020 and increased 14% using a two year compound annual growth rate.

Speaker 2: and increased 14% using a two-year compound annual growth.

Speaker 2: Overall procedure growth was comprised of 27 percent growth in the U.S. and 32 percent growth in the U.S.

Overall procedure growth was comprised of 27% growth in the U S and 32% growth in O U S markets.

Speaker 2: The U.S. fourth quarter growth was driven by growth in procedures within general surgery.

In the U S fourth quarter growth was driven by growth in procedures within general surgery.

Speaker 2: bariatrics, cholecystectomy, and hernia repair were the largest contributors to procedure growth within the quarter.

Bariatrics, and cholecystectomy and hernia repair were the largest contributors to procedure growth within the quarter.

Speaker 2: fourth quarter OUS procedure volume grew approximately 28 percent compared with 11 percent for the fourth quarter of 2020 and 30 percent for the fourth quarter of 2020.

Fourth quarter <unk> procedure volume grew approximately 28% compared with 11% for the fourth quarter of 2020, and 30% last quarter and.

Speaker 2: In 2021, non-urology specialties approached half of all OUS procedures and grew faster than urologic procedures.

In 2021, non urology specialties approaching half of all U S procedures grew faster than Urologic procedures.

Speaker 2: More specifically, at a region and country level, in China Q4 procedures also have broad-based growth in urology, thoracic, general surgery, and gynecology.

More specifically at our region and country level in China Q4 procedures also had broad based growth in urology thoracic general surgery and gynecology.

Speaker 2: General surgery, thoracic and gynecology procedures grew faster than urology. And combined, made up more than total urology procedures in the fourth.

General surgery, and thoracic in gynecology procedures grew faster than urology and combined made up more than total urology procedures in the fourth quarter.

Speaker 2: In Japan, da Vinci prostatectomy has emerged as standard of care for the surgical treatment of prostate cancer.

In Japan da Vinci Prostatectomy has emerged as standard of care for the surgical treatment of prostate cancer.

Speaker 2: We have also gained significant market share in other urologic procedures, including partial nephrectomy and......

We have also gained significant market share and other urologic procedures.

<unk> partial nephrectomy and cystectomy.

Speaker 2: The robust growth that we continue to see in Japan is now attributable to growth in general surgery, thoracic, and gynecology procedures.

The robust growth that we continue to see in Japan is now attributable to growth in general surgery thoracic gynecology procedures that were granted reimbursement status subsequent to urologic procedures.

Speaker 2: that were granted reimbursement status subsequent to urologic procedures.

In Europe .

Speaker 2: Procedure performance varied by country, but in procedures outside of urology, growth was driven by colorectal, hysterectomy for cancer, and thoracic.

Procedure performance varied by country, but in procedures outside of urology growth was driven by colorectal hysterectomy for cancer and thoracic procedures.

Speaker 2: Now turning to the clinical side of our business, I'll highlight two recently published studies that we deemed to be not a good fit for our business.

Now turning to the clinical side of our business I'll highlight two recently published studies that we deem to be notable however to gain a more complete understanding of the body of evidence we encourage all stakeholders to thoroughly review the extensive detail of scientific studies that have been published over the years.

Speaker 2: However, to gain a more complete understanding of the body of evidence, we encourage all stakeholders to thoroughly review the extensive detail of scientific studies that have been published over the years.

Speaker 2: During the quarter, researchers from the University Hospital of Southern Jutland and the University of Southern Denmark published results from a systematic review and meta-analysis evaluating the short-term outcomes of robotic-assisted and laparoscopic colon surgery for patients.

During the quarter researchers from the University hospital in Southern Jutland, and the University of Southern Denmark published results from a systematic review and meta analysis evaluating the short term outcomes of robotic assisted and laparoscopic colon surgery for patients with cancer.

Speaker 2: This analysis included 20 studies from 2005 to 2020.

This analysis included 20 studies from 2005 to 2020.

Speaker 2: subscribing, comparing outcomes from over 13,000 subjects.

Describing comparing outcomes from over 13000 subjects with over 1500, robotic assisted procedures and over 12000 laparoscopic procedures.

Speaker 2: with over 1,500 robotic assistive procedures and over 12,000 laparoscopic.

Between the two groups a significant difference favoring the robotic assisted approach demonstrated a 46% lower risk of anixter monarch leakage.

Speaker 2: Between the two groups, a significant difference favoring the robotic-assisted approach demonstrated a 46% lower risk of anastomotic leakage.

Speaker 2: In addition, robotic-assisted colon surgery showed a 69% lower risk of conversion to open when compared to the laparoscopic approach, while also demonstrating a 15% reduction in the overall complication rate, favoring the robotic-assisted approach and a seven-hour reduction in time to regular diet.

In addition, robotic assisted colon surgery showed a 69% lower risk of conversion to open when compared to the laparoscopic approach, while also demonstrating a 15% reduction in the overall complication rate.

During the robotic assisted approach and a seven hour reduction in time to regular diet.

Speaker 2: Interestingly, a subgroup analysis was performed analyzing right-sided hemicolectomies, noting the prevalence of this procedure in the studies analyzed. And with over 850 subjects in the robotic-assisted group and over 3,000 subjects in the laparoscopic group, the robotic-assisted approach was similarly favored with regards to anastomotic leakage, rate of conversion to open.

Interestingly a subgroup analysis was performed analyzing right excited hemi colectomy, noting the prevalence of this procedure in our studies analyzed and with over 850 subjects in the robotic assisted group and over 3000 subjects in a laparoscopic group. The robotic assisted approach was similarly favorites with regards to anastomotic leakage.

The rate of conversion to open and length of stay.

Speaker 2: The authors concluded in part, quote, robotic-assisted colon surgery showed advantages in colon cancer surgery regarding surgical efficacy and morbidity compared to laparoscopic colon surgery.

The authors concluded in part.

Robotic assisted colon surgery showed advantages in colon cancer surgery regarding surgical efficacy and morbidity compared to laparoscopic colon surgery close quote.

Speaker 2: In November of last year, Christopher Cedar from Rush University Medical Center in Chicago published propensity-adjusted analysis comparing robotic-assisted and thoracoscopic anatomic lung resection in obese patients.

In November of last year, Christopher Cedar from Rush University Medical Center in Chicago published propensity adjusted analysis, comparing robotic assisted <unk> anatomic lung resection and obese patients.

Speaker 2: leveraging data from the Society of Thoracic Surgeons General Thoracic Database, Ethathor of French National Database, and McMaster University Thoracic Surgical Database. Over 8,000 subjects were identified for analysis with over 2,100 robotic-assisted subjects and over 5,900 Vatch subjects included.

Leveraging data from the society of thoracic Surgeons General thoracic database efforts of our French National database, and Mcmaster University thoracic surgical database over 8000 subjects were identified for analysis with over 2100 robotic assisted subjects and over 5900 that subjects included.

Speaker 2: After propensity score adjustment of the populations, the VATS patient showed a 15% rate of conversion to open compared to only 3% in the robotic cohort, which corresponded to risk of conversion five times higher for the VATS approach.

After propensity score adjustments of the populations the vast patient showed a 15% rate of conversion to open compared to only 3% in the robotic cohort, which corresponded to risk of conversion five times higher for the advanced approach and.

Speaker 2: In addition, the robotic assisted group demonstrated a shorter mean length of stay of approximately 0.7 days, 1% lower risk of respiratory failure, and were more likely to be discharged home after.

In addition, the robotic assisted group demonstrated a shorter length of stay of approximately 0.7 days, 1% lower risk of respiratory failure, and we're more likely to be discharged home after the procedure.

Speaker 2: Of note, this analysis is the first propensity-adjusted analysis comparing vats and robotic-assisted anatomic lung resection in obese patients, as well as the first to pool contemporary international patient-level data.

Of note. This analysis is the first propensity adjusted analysis, comparing bats, and robotic assisted anatomic lung resection and obese patients as well as the first to pour contemporary international patient level data.

Speaker 2: The authors concluded in part, quote, overall, these data suggest that obese patients with early stage non-small cell lung cancer undergoing minimally invasive anatomic lung resection with vats have a higher rate of conversion to thoracotomy when compared to patients undergoing anatomic lung resection with robotic-assisted surgery, close quote.

The authors concluded in part quote overall these data suggest that obese patients with early stage non small cell lung cancer undergoing minimally invasive anatomic lung resection with that.

Have a higher rate of conversion to thoracotomy, when compared to patients undergoing anatomic lung resection with robotic assisted surgery.

Those quote.

I will now turn to our financial outlook for 2022.

Starting with procedures as.

Speaker 2: As described in our announcement earlier this month, total 2021 da Vinci procedures grew approximately 28% year-over-year and 14% at a two-year compound annual growth rate to roughly 1,594,000 procedures performed worldwide.

As described in our announcement earlier. This month total 2021 da Vinci procedures grew approximately 28% year over year and 14% at a two year compound annual growth rate to roughly $1 million 594000 procedures performed worldwide.

Speaker 2: During 2022, we anticipate four year procedure growth within a range of 11 to 50.

During 2022, we anticipate full year procedure growth within a range of 11% to 15%.

Speaker 2: This range reflects the uncertainty associated with the course of the pandemic.

This range reflects the uncertainty associated with the course of the pandemic.

Speaker 2: The low end of this range assumes ongoing COVID pressure and hospital staffing shortages, while the high end assumes no significant new surges after the current.

The low end of this range assumes ongoing COVID-19 pressure and hospital staffing shortages, while the high end assumes no significant new surgeons after the current width.

Speaker 2: In addition, this range does not contemplate any material supply chain disruptions throughout

In addition, this range does not contemplate any material supply chain disruptions throughout the year.

Speaker 2: We expect 2022 procedure growth to continue to be driven by U.S. general surgery and procedure growth in all U.S. markets, where we are at earlier stages of adoption.

We expect 2022 procedure growth to continue to be driven by U S General surgery and procedure growth in O U S markets, where we are at earlier stages of adoption.

Speaker 2: We expect similar seasonal timing of procedures in 2022, as we have experienced in previous years prior to COVID.

We expect similar seasonal timing of procedures in 2022, as we have experienced in previous years prior to Covid.

Speaker 2: Q1 being the seasonally weakest quarter as patient deductibles are reset.

With Q1 being seasonally weaker <unk> seasonally weakest quarter as patient deductibles are reset.

Speaker 2: We expect Omicron to have a significant adverse impact on procedures in the following slides.

We expect <unk> to have a significant adverse impact on procedures in the first quarter.

Speaker 2: With respect to revenue, as we have mentioned previously, capital sales are ultimately driven by procedure.

With respect to revenue as we have mentioned previously capital sales are ultimately driven by procedure demand catalyzing hospitals to establish or expand robotic system capacity.

Speaker 2: catalyzing hospitals to establish or expand robotic system capacity.

Speaker 2: Capital sales can vary substantially from period to period based upon many factors.

Capital sales can vary substantially from period to period based upon many factors, including U S. Healthcare policy hospital capital spending cycles reimbursement and government quotas product cycles economic cycles and competitive factors.

Speaker 2: including U.S. healthcare policy, hospital capital spending cycles, reimbursement and government quotas, product cycles, economic cycles, and competitive factors.

Speaker 2: Within this framework, we'd expect 2022 capital placement seasonality to generally follow historical patterns by quarter, but could also be impacted by hospital staff shortages and the allocation of resources to managing current care.

Within this framework, we'd expect 2022 capital placement seasonality to generally follow historical patterns by quarter, but cros to be impacted by hospital staff shortages and the allocation of resources to managing current care.

Speaker 2: during Q3 and Q4, 40 percent and 30 percent, respectively, of syphilis.

During Q3, and Q4, 40% and 30% respectively of systems placements involved trade ins of older systems to our da Vinci Si.

Speaker 2: placements involved trade-ins of older systems to our DaVinci XI.

Speaker 2: As we mentioned last quarter, we expect the volume of trade-ins to be significantly lower in 2022 as compared to 2021.

As we mentioned last quarter, we expect the volume of trade ins to be significantly lower in 2022 as compared to 2021.

Speaker 2: Turning to gross profits. Our full year 2021 pro forma gross profit margin was 71.7%

Turning to gross profit our full year 2021 pro forma gross profit margin was 71, 2%.

Speaker 2: 2022, we expect our pro forma gross profit margin to be within a range of between 69.5% and 70.5% of net revenue.

In 2022, we expect our pro forma gross profit margin to be within a range of between 69, 5% and 75% of net revenue.

Speaker 2: The slightly lower gross profit margin anticipated in 2022 reflects higher fixed costs from investments to drive growth of the business.

The slightly lower gross profit margin anticipated in 2022 reflects higher fixed costs from investments to drive growth of the business.

Speaker 2: strengthen our operating capabilities, and also reflects the impact of higher supply.

Strengthen our operating capabilities and also reflects the impact of higher supply chain costs. Our actual gross profit margin will vary quarter to quarter, depending largely on product regional and trade in mix and the impact of new product introductions.

Speaker 2: Our actual gross profit margin will vary quarter to quarter depending largely on product, regional and trade-in mix, and the impact of new product introductions.

Speaker 2: Turning to operating expenses, in 2021, our pro forma operating expenses grew.

Turning to operating expenses in 2021, our pro forma operating expenses grew 19%.

Speaker 2: In 2022, we expect proforma operating expense growth to be between 21% and 50%.

In 2022, we expect pro forma operating expense growth to be between 21% and 27%.

Speaker 2: The operating expense growth reflects increased investment in R&D for our new product platform.

The operating expense growth reflects increased investment in R&D for our new product platforms.

Speaker 2: expanding OUS capabilities, and the return of other spending that was previously restricted by COVID-19.

Expanding <unk> capabilities and the return of other spending that was previously restricted by Covid.

Speaker 2: We expect our non-cash stock compensation expense to range between $510 million.

We expect our noncash stock compensation expense to range between $510 million to $550 million in 2022 compared to $452 million in 2021.

Speaker 2: $550 million in 2022, compared to $452 million in 2021. We expect other income.

We expect other income which is comprised mostly of interest income to total between $45 million and $55 million in 2022.

Speaker 2: total between $45 million and $55 million in 2022.

With regard to income tax in 2021, our pro forma income tax rate was 22, 2%.

Speaker 2: In 2021, our pro forma income tax rate was 22.2%.

Speaker 2: As we look forward, we estimate our 2022 pro forma tax rate to be between 22% and 24% of pre-tax income.

As we look forward, we estimate our 2022 pro forma tax rate to be between 22% and 24% of pretax income with the increase primarily due to a change in U S tax treatment of certain expenditures that was enacted in 2017, but became effective on January one 2022.

Speaker 2: with the increase primarily due to a change in U.S. tax treatment of certain expenditures that was enacted in 2017, but became effective on January 1.

Lastly, we'd like to highlight that our annual sustainability report will be available. After this call on our Investor Relations website.

Speaker 2: Lastly, we'd like to highlight that our annual sustainability report will be available after this call on our Investor Relations website.

Speaker 2: In the latest report, we provide an overview of the current state of our sustainability strategy.

And the latest report we provide an overview of the current state of our sustainability strategy areas.

Areas of focus key actions taken over the past year to develop sustainable solutions that meet our customer needs in new ways.

Speaker 2: actions taken over the past year to develop sustainable solutions that meet our customer needs in new ways and are resol-

And our results achieved to date.

Speaker 2: That concludes our prepared comments. We will now open the call to

That concludes our prepared comments, we will now open the call to your questions.

Speaker 3: Thank you. Ladies and gentlemen, if you do have a question, please press 1, then 0 at this time. You'll hear acknowledgement that you've been placed in queue. You may remove yourself from queue at any time by pressing 1, 0 again. Once again, ladies and gentlemen, if you do have a question, please press 1, then 0 at this time.

Thank you ladies and gentlemen, if you do have a question. Please press. One then zero at this time Youll hear acknowledgment that you've been placed in Q you may remove yourself from the queue at any time by pressing one zero again once again, ladies and gentlemen, if you do have a question. Please press one then zero at this time.

Speaker 3: Our first question is going to come from the line of Larry Bigelstein from Wells Fargo. Please go ahead.

Our first question is going to come from the line of Larry <unk> from Wells Fargo. Please go ahead.

Speaker 4: Good afternoon. Thanks for taking the question. Two questions for me. Gary, I wanted to start with a high-level question. You started using the slogan at the point of possibility recently, and you've talked about, you know, being at the point of possibility to build, you know, what's needed next. Can you talk about, you know, why you started using this new slogan and, you know, what are the needs you're trying to address? And I had one follow-up.

Good afternoon, and thanks for taking the question.

Two questions for me, Gary I wanted to start with a high level question. You started using this slow game at the point of possibility recently and you've talked about being at the point the possibility to build whats needed next can you talk about why you started using this new slow game and what are the need.

You are trying to address and I had one follow up.

Speaker 5: You know, I think we have, thanks Larry, I think we have a broad opportunity as a company here to take the methods that we have designed around identifying clinical needs.

I think we have thanks, Larry I think we have a broad opportunity as a company here to take the methods that we have designed.

Around identifying clinical need.

Speaker 5: doing the design and development of tech-enabled ecosystems to address that.

Doing the design and development of tech enabled ecosystems to address that need and are working with customers to deliver it and training.

Speaker 5: and then working with customers to deliver it and train it. And there's, I think, long term, a lot of opportunity. As we look out, there is substantial opportunity in existing markets and in new ones to do better for the Quad AIM. Doing this set, getting that set of ecosystem investments ready is......

I think long term a lot of opportunity as we look out.

There is substantial opportunity in existing markets and in new ones to do better for the Quad <unk>.

Doing this said getting that set of ecosystem investments ready is up.

Speaker 5: It's a multi-year effort, but we think we've shown that it can be done, and I think that's really what we're talking about here, is the ability to start to impact other opportunities in interventional markets as we go forward, and ION is such a good example.

Heavy work hits.

A multi year effort, but we think we've shown that it can be done and I think that's really what we're talking about here is the ability to start to impact.

Other opportunities in an interventional markets as we go forward and ion is such an example.

Speaker 4: Thanks for that, Cary, and, you know, it seems like so far you've mitigated potential supply constraints well. How are you trying to mitigate them going forward, and would you describe the situation as getting better or worse, and, you know, how concerned are you about that? Thanks for taking the question.

Thanks for that Gary and it.

It seems like so far you've mitigated potential supply constraints well.

How are you trying to mitigate them going forward.

And would you describe the situation is getting better or worse.

How concerned are you about that thanks for taking the questions.

Speaker 5: Yeah, kind of. I'll take the top and then I'll let Jamie take some more at the at the very top part. You know, it's kind of three big buckets. One of them is specific products themselves. Semiconductors come to mind. The second bucket is some raw material constraints and the kinds of things we build. And the third is just logistics and motion of materials. Jamie, I'll let you fill in that perspective.

Yes kind of I'll take the top and then I'll, let Jamie take some more at the very top part is kind of three big buckets. One of them is specific products themselves semiconductors come to mind. The second bucket is some raw material constraints in the kinds of things that we build and the third is just logistics and motion of materials.

Jamie I'll, let you fill in that perspective, Hey, Larry So I think we said in our prepared remarks, we saw the supply chain environment actually get worse in Q4, and we highlighted that we actually had some.

Speaker 1: Hey Larry, so I think we said in our prepared remarks, we saw the supply chain environment actually get worse in Q4, and we highlighted that we actually had some, as I called it, minor constraints on our ability to fulfill customer demand. You have a set of metrics there in the supply chain. One example we've given is on-time delivery from our suppliers was worse in Q4 as compared to Q3.

As I quoted minor constraints on our ability to fulfill customer demand you have a set of metrics there in the supply chain. One example, we've given is on time delivery from our suppliers was less in Q4 as compared to Q3.

Speaker 1: As you look forward, I'd say that at this point visibility is still not great. Kind of the best read that we have is that Q1 will be similar-ish to Q4, but I think we have to wait and see what the impact of Omicron might be on our suppliers and just broadly.

As you look forward I would say.

Say that at this point visibility is still not great.

Kind of the best read that we have is that Q1 will be similar to Q4, but I think we have to see wait and see what the impact of a microphone might be on our suppliers and just broadly.

Speaker 1: So I think we're continuing to navigate through it. As I said, our supply chain teams are really still in hand-to-hand combat every day working with our partners.

So I think we're continuing to navigate through it as I said, our supply chain teams are really still in hand to hand combat everyday working with our partners.

Thanks for taking the questions.

Speaker 3: Our next question then will come from I know Geico Peterson from JP Morgan, please go ahead.

Our next question and then I'll come from the line of Geico Peterson from Jpmorgan. Please go ahead.

Speaker 6: Hey, good afternoon. You know, Gary, you talked about being at the end of the replacement cycle for a little while now. And obviously, you're retiring the S models. I'm curious how we should interpret that comment about being near the end of the replacement cycle. And as we think about maybe where you could be headed from an innovation standpoint, is it all about driving down the length of procedures, making procedures easier with less training, and expanding into newer indications? Or maybe just, I'm curious, from a technology standpoint, if you could talk a little bit about at a high level where you're headed.

Hey, good afternoon.

Gary you talked about being at the end of the replacement cycle for a little while now and obviously you're retiring in the S models I'm curious, how we should interpret that comment about being near the end of the replacement cycle and as we think about maybe where you could be headed from an innovation standpoint is it all about kind of driving down the length of procedures, making procedures easier with less training and <unk>.

Handing into newer indications or maybe just I'm curious if from a technology standpoint, if you could talk a little bit about at a high level, where youre headed.

Speaker 5: Yeah, let's talk for a moment about replacement cycles. I think you're referring to the SI. Jamie had mentioned it in his prepared remarks and Brian had touched on it.

Yes, let's let's talk for a moment about replacement cycles, I think youre, referring to the Si Jamie.

Jamie had mentioned it in his prepared remarks, and Brian touched on it.

Speaker 5: I think they were pretty clear and I won't go through that. I do think that from a business model point of view, we don't think that we need to drive

I think there they were pretty clear and I won't go through that I do think that.

From a business model point of view, we don't think that we need to drive <unk>.

Speaker 5: uh... capital upgrades on intuitives calendar to have a healthy business uh... what we look at is working we drive the quadruple aim and how can we effectively do that

Capital upgrades on intuitive calendar to have a healthy business. What we look at is where can we drive the quadruple aim and how can we effectively do that for our customers and in that setting we have been investing in.

Speaker 5: And in that setting, we have been investing in our Gen4 platform and expansion. I talked about that in my prepared remarks as well. And it's been great for the customers and for us. That's not the only thing we'll do, but it's an important thing that we do.

Our Gen four platform and expansion I talked about that in my prepared remarks, as well and that's been great.

For the customers and for US that's not the only thing we will do but it's an important thing that we do.

Speaker 5: You had mentioned a little bit on the technology stack what are the kinds of things we care about. And a lot of what we were driven by are what kinds of things can we do inside the body, in imaging, in informatics, that will dramatically change outcomes or the experience of the patients or the care team.

You had mentioned a little bit on the technology stack.

The kinds of things we care about.

A lot of what we're driven by or what kinds of things can we do inside the body in imaging and informatics that will dramatically change outcomes or the experience of the patients or the care team.

Speaker 5: And that has, you can see that in the kinds of things that we've brought to market. We have fantastic teams. We have things that we're working on that we have not yet discussed that we think will drive differences in outcomes. So it's not just working on new indications or just working on ease of use. I think those things are both important, but it's not limited to that. There are other things that are going on that we think can change the nature of our interactions.

And that that has you can see that in the kinds of things that we've brought to market.

Have a fantastic teams, we have things that we're working on that we have not yet discussed that we think will drive differences in outcomes. So it's not just working on new.

New indications or just working on ease of use I think those things are both important but it is not limited to that there are other things that are going on that we think can change the nature of our interaction with tissue.

Speaker 1: and drive outcomes again and raise the bar there once more. Jamie, anything you'd want to add on the issue of SI replacement cycle? I would just maybe give you some numbers. In 2021, globally, we did about 510 trade-ins.

And drive.

Outcomes.

Again and raise the bar there once more.

Jimmy Thank anything you'd want to add on on the issue of our replacement cycle.

I would just maybe Houston.

<unk> in 2021 globally, we did about 510 trade ins.

Speaker 1: About 80%-ish of those were in the U.S., so the U.S. has been driving those trade-ins.

About 80% ish of those were in the U S. U S has been driving those trade ins.

Speaker 1: And so then if you compare that to the remaining installed base of 343, it's why we provided the commentary that we expect overall trade in volume in 22 to be significantly lower than 21, just because the remaining installed base is being depleted.

So then if you compare that to the remaining install base of 343.

Why we provided the commentary that we expect overall trading volume in 'twenty two to be significantly lower than 'twenty. One just because the remaining store base is being depleted.

Sure.

Speaker 6: Okay, that's helpful. And speaking of innovation, can you touch on some of the SP enhancements? You talked about 5-10 clearance for Extension of Life for some of the instruments. Can you just clarify exactly what you got?

Okay. That's helpful and speaking of innovation can you touch on some of the SP enhancements you you talked about 510 clearance for extension of life for some of the instruments can you just clarify exactly what you got through.

Speaker 1: Yes, we've received obviously customer feedback along the way since we launched SP.

Yes, we've received obviously customer feedback along the way since we launched SP and some of our customers have asked for.

Speaker 1: and some of our customers have asked for a greater ability to do extraction. That's really around the range of motion.

Our ability to do extraction and thats really around the range of motion within the anatomy of our instruments that do extraction and grip strength as you because your grasp tissue, we've had customer feedback that we could improve the grip strength and so along with the extension of lives we responded to customer feedback.

Speaker 1: within the anatomy of our instruments that do extraction.

Speaker 1: and grip strength as you as you grasp tissue. We've had customer feedback that we could improve the grip strength and so along with the extension of lives we responded to customer feedback and improve the instruments accordingly as described.

<unk> improved the instruments Accordingly, as described we've done some other things too we have as you know dual console that helps with training new surgeons and teaching environments, we extended the dual console capability into the MSP space.

Speaker 5: We've done some other things too. We have, as you know, dual console that helps with training of new surgeons in teaching environments. We extended the dual console capability into the operating system.

Recently, we've.

Speaker 5: launched and then upgraded some of the accessories that go with SP. So part of the process, for those of you who have been with us for a while, is continuous innovation that these things don't end where they start.

Launched and then upgraded some of the accessories that go with SP. So part of the process for those of you have been with us for a while.

Continuous innovation that these things built and where they start.

And that's been true for SP.

Great. One last one just on the head count you started the call off highlighting all the additions last year should we think about that kind of similar magnitude of increase in 'twenty two.

Speaker 6: Great. One last one just on the head count. You know, you started the call off, you know, highlighting all the additions last year. Should we think about a kind of similar magnitude of increase in 22?

Speaker 1: I think if you look at the OPEX increase range that Brian provided, I think you can kind of draw a correlation between how headcount has kind of correlated to spending increase and I think that's a relevant starting point for 22.

I think if you look at the.

Opex.

Increased range that Bryan provided I think you can kind of draw a correlation between how head count is kind of correlated to spending increase in and I think.

Relevant starting point for 'twenty two.

Speaker 5: We also gave you a mix in the script of kind of where they're headed, you know, how much is R&D, how much is operations commercial, and that's not a bad guide either as to kind of where the mix is going.

We also think we also gave you a mix and the script of kind of where they're headed.

How much is R&D, how much is operations commercial and and Thats not a bad guide either as to kind of where the mix is going.

Okay. Thank you.

Speaker 3: Our next question will come from Amit Hazan from Goldman Sachs, please go ahead.

Our next question that will come from the line of Ahmed Hassan from Goldman Sachs. Please go ahead.

Speaker 7: Oh, thanks. Hey, good afternoon. I'll start with a shorter-term one and then a longer-term one for Gary. Shorter-term, just on the first quarter, just realizing, you know, the moving parts and its fluid inside of the quarter.

Thanks, Hey, good afternoon, I'll start with a shorter term one and then and then longer term one for Gary.

And then just on the first quarter.

Realizing the moving parts and it's fluid inside of the quarter, but how much help can you give us as to what you've seen so far and how do we.

Speaker 7: How much help can you give us as to what you've seen so far? How do we?

Speaker 7: model procedures in this environment. You said severely impacted, but we have to put a number out there. So I'm curious, you know, how much help you can give us for, you know, whether procedures are, you know, down at the moment or how much they're down. That would be terrific. And then also on capital, you know, if you're seeing anything quite yet in terms of, you know, delays in capital spending because of everything going on at hospital level and how we should think about 22 for capital spending relative to last year, what you feel the environment.

Model procedures in this environment, you said severely impacted but we got to we have to put a number out there. So I'm curious how much help you can give us for where the procedures are down at the moment or how much they're down that would be terrific and then also on capital.

If youre seeing anything quite yet in terms of delays in capital spending because of everything going on at hospital level and how we should think about 'twenty two for capital spending relative to last year like what you feel the environment is like.

Speaker 1: I'll give you a couple of data points. So the greatest correlation we've seen historically on procedures is rates of hospitalization.

I mean, I'll give you a couple of data points. So.

The greatest correlation we have seen historically on procedures is racing hospitalizations I believe currently U S hospitalizations related to COVID-19 or beyond any of the previous ways and so I think you can kind of track how that has progressed, so far and what.

Speaker 1: I believe that currently U.S. hospitalizations related to COVID are beyond any of the previous waves. So, I think you can kind of track how that's progressed so far and what some of the third parties are projecting for the remainder of the quarter. There's some modeling benefit to doing that. What I would point to is if you look at pre-COVID, so 2017, 18, 19, and 2018, you can see that the number of hospitalizations in the U.S. has increased. So, I think you can kind of track how that's progressed so far and what some of the third parties are projecting for the remainder of the quarter. So, I think you can kind of track how that's progressed so far and what some of the third

Some of the third parties are projecting for the remainder of the quarter.

Some modeling benefit to doing that.

One other point too is if you look at pre Covid. So 2017 18 19.

Speaker 1: the sequential change between Q4 and Q1 was about even, meaning it was about the same Q1 as Q4. So that's in a normal quarter. Most of the current wave will be in Q1. The impact of Omicron in Q4 was kind of later in the quarter. So I kind of start with a normal quarter would be flat sequentially, and then model the rest of Q1 based on just hospitalization rates.

The sequential change between Q4, and Q1 was about even meaning it was about the same Q1 is Q4. So that's in a normal course.

Most of the current wave will be in Q1.

The impact of <unk> in Q4 was kind of later in the call.

So I kind of start with our normal quote would be flat sequentially and then model. The rest of Q1 based on just hospitalization rates.

Speaker 1: With respect to capital, there's nothing at this point that we would call out. I do think that the combination of what's happening right now with COVID, along with staffing shortages, along with the extent to which the supply chain environment broadly could impact hospitals, could make it challenging for hospital capital spending. They may need to manage that more carefully in such an environment, but there's nothing specific that we would call out at this point. What was the third part of your question, Amit?

With respect to capital there is nothing at this point.

Pull out I do think that the.

Combination of what's happening right now with Covid, along with staffing shortages, along with the extent to which the supply chain environment broadly could impact hospitals could make it challenging for us.

Hospital capital spending they may they may manage that more carefully in such an environment, but there's nothing specific that we would call out at this point most of the third part of your question Amit.

No that was actually it.

Have a longer term one for <unk>.

For Gary on just given some of your comments that you made I just kind of brings up.

And just to ask you about what your thoughts generally are about a SaaS type model and more specifically the same now.

He's got to some of your customers over the past year or so and it seems like some of them are being charged to <unk> software's, you're somewhere around $20000 a year.

Speaker 5: some of them are being charged for SimNow software, somewhere around $20,000 a year in the service line. And so I wanted to see how you would frame that specific opportunity inside of kind of thinking about it with your install base, and then more broadly and more importantly, just to see if you could just talk to this kind of SaaS type of model and whether you'll, we'll be seeing more of these types of offerings from you in the future. Thanks so much. Sure, on the issue of kind of recurring revenue or service models versus kind of capital single charge, are we, Good afternoon.

In the service line and so I wanted to see how you would frame that specific opportunity inside of kind of thinking about it with your installed base and then more broadly and more importantly, just to see if you could just talk to this kind of SaaS type of model and whether yield will.

We'll be seeing more of these types of offerings from you in the future. Thanks, so much.

Speaker 5: Sure. On the issue of kind of recurring revenue or

Sure.

The issue of kind of recurring revenue or <unk>.

Speaker 5: service models versus kind of capital single charge. We have taken a posture of being really flexible with what our customer wants. There are some really nice things about as the transition, as the company has transitioned to a recurring model that customers can kind of choose when they're ready to engage us and it doesn't require a large upfront capital expenditure.

Service models versus kind of capital single charge.

We have taken a posture of being really flexible with what our customer wants a.

There are some really nice things about as the transition as the company has transitioned to a recurring model that.

Customers can come to choose when they are ready.

To engage with us and it doesn't require a large upfront capital expenditures up.

Speaker 5: For some things that are inherently services and if you think about simulation, it's not really about the hardware in the case of simulation. It's really about access to modules.

For some things that are inherently services and if you think about simulation, it's not really about the hardware in the case of simulation, it's really about access to modules and modules that improve over time and modules that get built to be specific to competency based training.

Speaker 5: Modules that improve over time and modules that get built

Speaker 5: specific to competency-based training. Subscriptions make a lot of sense because you're not really trying to sell a piece of hardware you're really helping.

Subscriptions make a lot of sense, because you're not really trying to sell a piece of hardware you really helping them.

Speaker 5: develop a training program over time. So we think increasingly as our business in software and analytics

<unk> training program over time, so we think increasingly is as our business and software and analytics.

Speaker 5: some of the digital tools that we're bringing come up, then subscriptions may make sense.

Some of the digital tools that we're bringing come up then subscriptions may makes sense and to the extent that they align with customers we're happy to do it.

Speaker 5: And to the extent that they align with customers, we're happy to do it. I also like the idea of recurring revenue in that it focuses the organization on earning the customer's business every day, that it's a lot less lumpy for them and it's a lot less lumpy for us.

Also like the idea of recurring revenue in that it focuses the organization on earning our customers' business every day.

It's a lot less lumpy for them and it's a lot less lumpy for us.

Speaker 5: If we're bringing value and helping them achieve their quadruple-aimed goals, then they're happy to stay with us in those events.

If we are bringing value in helping them achieve the quadruple aim goals then they're happy to.

Stay with us in those and those events. So I would expect that the recurring revenue portion of our business keeps creeping up as a percentage of total revenue over time, so long as customers are aligned to that that that makes sense from their finances point of view, then thats, what we will pursue and to the extent that they are interested in other models and we're open minded.

Speaker 5: So I would expect that the recurring revenue portion of our business.

Speaker 5: keeps creeping up as a percentage of total revenue over time.

Speaker 5: So long as customers are aligned to that, that that makes sense from their finance's point of view, then that's what we'll pursue. And to the extent that they're interested in other models.

Thank you.

Sure.

Speaker 3: Our next question will come from Rick Wise from Skyfold, please go ahead.

Our next question will come from line of Rick Wise from Stifel. Please go ahead.

Speaker 4: Good afternoon. Hi, Gary. I thought I'd follow up on a couple of things. You highlighted very specifically for both ION and DaVinci SP this concept of margins aren't where they will be and, you know, over time you're going to bring the business to scale. I was wondering if you'd expand on that, maybe give us a flavor for where margins are now.

Hi, Good afternoon, Hi, Gary.

I thought I'd follow up on a couple of things.

You highlighted.

Very specifically for both ion and da Vinci SP.

This concept.

Margin.

They will be in.

Over time, Youre going to bring the business to scale.

I was wondering if you could expand on that.

Maybe give us a flavor for where margins are now.

Speaker 4: You know, how do we think about, is this two years away? Is it five years away? How do we think about the trajectory going forward there?

How do we think about this two.

Two years away five years away, how do we think about.

The trajectory growing going forward there.

Speaker 5: Thanks for the question. On the, you know, kind of where we're headed, we look at those architectures and we think based on our experiences, understanding our supply chains, understanding what iterations in engineering and manufacturing look like, that both of those platforms should be able to hit historical norms in future years and not forever in future years.

Thanks for the question on <unk>.

Kind of where we're headed with.

We look at those architectures and we think based on our experiences understanding our supply chains understanding with iterations and engineering and manufacturing look like that both of those platforms should be able to hit historical norms.

In the future years.

Not forever in future years that said in the early innings here Europe , lower volumes relative to where youre going to be Youre also working through some manufacturing.

Speaker 5: That said, in the early innings here, you're at lower volumes relative to where you're going to be. You're also working through some manufacturing process improvements and doing some of the capital investments.

Manufacturing process improvements and doing some of the capital investments that you need to do in order to get unit cost down.

Speaker 5: in order to get UNIS costs down. I'll look to Jamie in terms of characterizing kind of roughly where they are. FP is a little more mature product line in our hands in terms of manufacturing.

I'll look to Jamie in terms of characterizing kind of roughly where they are.

SP is a little more mature product line in our hands in terms of manufacturing and our GM and her team over there are doing a really nice job identifying those opportunities and sequentially knocking them down overtime feels really good rins, a little earlier in and it's going through a little bit different growth ramp and so it is going to have to work its way down that process although.

Speaker 5: And our GM and her team over there are doing a really nice job identifying those opportunities and sequentially knocking them down over time. It feels really good. I ended a little earlier, and it's going through a little bit different growth ramp, and so it's going to have to work its way down that process, although we also feel good about kind of the core architecture.

We also feel good about kind of the core architectures.

Speaker 5: that would give us some confidence that we could hit those objectives.

That gives us some confidence that we can hit those objectives.

Speaker 1: Jamie, anything that you would want to add? Rick, I would split the question kind of into two categories. There's gross margin, and then there's, let's call it, the equivalent of operating margin. On a gross margin basis, kind of the...

Jamie anything that you would want to add.

Rick I would split the question kind of into two categories. Those gross margin and then there is.

This call is the equivalent of operating margin on a gross margin basis kind of the actions.

Speaker 1: that we have to take to get both ION and SP to kind of let's call it target gross margins are well understood and it's really about execution over a period of time. A component of that will obviously be building scale.

We have to take to get both ion and SP to kind of let's call. It target gross margins are well understood and it's really.

Execution over a period of time, a component of that will obviously be building scale.

Speaker 1: But I think those actions are well-defined. They're a multiple-year effort.

But I think those actions.

Ill defined there are multiple year effort on the operating margin side is really most revenue in relation to the amounts that we're investing.

Speaker 1: On the operating margin side, it's really what's revenue in relation to the amounts that we're investing.

Speaker 1: And that's obviously going to be a function of, in the case of ION, how we adopt in lung cancer biopsy over time. And with SP, it's the additional indications and new geographies in terms of clearances. I don't have a scale for when we might reach those corporate average margins. I would say, though, for 22, given that SP and ION are newer products, the gross margins there are diluted.

And as always scanning a function of in the case of ion.

How we adopt in lung cancer biopsy overtime and with SP is the additional indications and new geographies in terms of clearances.

I don't have a scale.

And when we might reach those.

Corporate average margins I would say, though for 'twenty, two given the SP and ion on newer products. The gross margins that auto new to this you would you expect.

Speaker 4: Yeah. And just a follow-up from me.

Yes.

And just a follow up from me.

Speaker 4: I mean, it's clear you highlighted multiple times, multiple ways that Asia performed well this quarter, if I understood you correctly, procedures, I think you said, were robust. And I'm just thinking about that thought in conjunction with your comments about where you're investing. And it sounds like a lot of the investments were in Asia. And I was just wondering if we should just...

I mean, it's clear.

You highlighted.

Multiple ways that Asia performed well this quarter, if I understood you correctly procedures I think you said robust.

And I'm just thinking about that.

That thought in conjunction with your comments about where you are investing and it sounded like a lot of the investments were in Asia.

And I was just wondering if we should do.

Yes.

Speaker 4: How do I ask this, does this suggest that you're thinking as we look over the next three to five years that there's more growth for more growth opportunity for intuitive.

Hello.

Does this suggest that you were thinking as we look over the next three to five years that there is more growth or more growth opportunity for intuitive.

Speaker 4: in the Asia-Pacific region, or – how do we – how do I think about those two facts and those initiatives, if that makes any sense? Thank you.

In the Asia Pacific region, or how do we.

How do I think about those two facts.

Initiatives, if that makes any sense. Thank you.

Speaker 5: You know, I'd characterize it a little bit differently, Rick. The starting point on Asia, it is clearly an interesting market, country by country. We are making investments in Asia. I don't think I'd say that they are the dominant investments, but they're substantial because we think there's substantial opportunity there to make a difference in those markets. So it's a leg of growth, but not the only one. There are opportunities for us in other regions.

Yes.

I would characterize it a little bit differently.

<unk> point on Asia. It is it is clearly an interesting market country by country, we are making investments in Asia.

I don't think I would say that they are the <unk>.

Nominate investments, but they're substantial because we think there is substantial opportunity there to make a difference in those in those markets.

So it is a leg of growth, but not the only one there are opportunities for us and other regions, whether it's Europe or elsewhere. There are also opportunities for us in other clinical indications and some of the clinical trial work, we're doing as well as the expansion of <unk>.

Speaker 5: Europe or elsewhere. There are also opportunities for us and other critical indicators.

Speaker 5: the clinical trial work we're doing, as well as the expansion of platforms.

Platforms and our.

Speaker 5: other technologies that we're working on. So I'd characterize it as one of the legs, not necessarily the dominant.

Other technologies that we're working on so I would characterize it as one of the legs not necessarily as a dominant player.

Speaker 1: Jamie, anything you would like to add? I would just say both regions are attractive to us. It's fair to say that, at least in the last couple of years, Asia procedure growth has been a little ahead of Europe . But on a strategic view, both of those regions are attractive and we're investing accordingly.

Jamie anything you would like to add I would just say both regions are attractive to us.

Fair to say the.

At least in the last couple of years Asia procedure growth has been a little ahead of Europe , but on a strategic view both of those.

Regions are attractive and we're investing accordingly.

Thanks, so much.

Speaker 3: Our next question now will come from Matt Taylor from UBS. Please go ahead.

Our next question will come from the line of Matt Taylor from UBS. Please go ahead.

Hi, guys. Thanks for taking my question.

Speaker 8: So I wanted to ask one on innovation and one on competition. So on innovation, I appreciate some of the color that you gave on multi-port. And I guess I've also noticed that you've, on your website, been hiring a lot of folks.

So I wanted to ask one on innovation and one on competition. So on innovation I. Appreciate some of the color that you gave on multi port.

<unk> also noticed that you have.

On your website and hiring a lot of folks in kind of these in the alumina all roles in looking at.

Speaker 8: in kind of these endoluminal roles and looking at roles around things like note surgery. Could you talk about some of your investments there? Is there anything beyond what you're doing with FP and ION that we should look out for? And overall, are there any bigger...

Rolls around things like note surgery could you talk about some of your investments there is there anything beyond what youre doing with SP and ion that we should look out for an overall are there any bigger.

Speaker 8: launches that we should expect this year, even if you're not going to tell them what they are. Could you characterize what the cadence could look like of any kind of system upgrades are on?

Launches that we should expect this year, even if youre not going to tell them. What they are could you characterize what.

The cadence could look like of any kind of system upgrades are conscious.

Speaker 5: Yeah, on the – with regard to kind of forecasting future launches, of course, we won't give you any detail here. We'll launch them when we're ready to launch. In terms of the framing of your question, we are routinely developing applications for the platforms we have, whether it's –

Yeah on the.

With regard to kind of forecasting future launches of course, we won't give you any detail.

Detail here, we'll launch them when we're ready to launch.

In terms of the framing of your question.

We are routinely developing applications for the platforms, we have whether it's very <unk> and thoracic surgery and our multi port.

Speaker 5: bariatrics and thoracic surgery and our multi-port indications to new indications in SP and we're doing some trials in thoracic surgery and colorectal to new opportunities in flexible robotics and ion.

Indications two new indications in SP, and we're doing some trials in thoracic surgery and colorectal to new opportunities in flexible robotics in Ireland.

And.

Speaker 5: and other platform investments that are currently not disclosed, the things that we're working on. So we're going to continue to do that and some of them will come to fruition and be fantastic and some of them may be things that we assess and then pivot as we learn more. So there's all of those things going on and somebody was out scanning what we're hiring

And other platform investments that are currently not disclose things that we're working on so we're going to continue to do that and some of them will come to fruition and be fantastic and some of them.

They may be things that we assess and then pivot as we learn more so there is all of those things going on and somebody was out scanning what we're hiring in scanning the kinds of patent applications. We have you will see a great diversity of things we're interested in and so a little bit like the first question on the on the call. When we say what are we talking about in terms of.

Speaker 5: scanning the kinds of patent applications we have, you'll see a great diversity of things we're interested.

Speaker 5: It's a little bit like the first question on the call. When we say what are we talking about in terms of possibility, we really scour the acute intervention opportunity from the bottom of your feet to the top of your head and everything in between.

Possibility, we really scour.

The acute intervention opportunity from the bottom of your feet to the top of your head and everything in between.

Speaker 5: and start asking questions about whether we think there's a real opportunity for improvements in the Quad Aim and whether we could design a tech-enabled ecosystem to do something about it. And that's what informs a lot of that hiring. Some of it is nearer term in existing platforms and some of it's future-oriented on platforms that may come to pass. So that's it.

And start asking questions about whether we think there's a real opportunity for improvements in the quality and whether we could design a tech enabled ecosystem to do something about it and that's what informs a lot of that hiring some of it is nearer term in existing platforms.

Some of its future oriented on platforms that may come to pass so that's kind of how we think about it.

Speaker 8: Okay, thanks for that. And maybe just one of the competition. We'll give you one follow up.

Okay. Thanks for that and maybe just one on the competition will give you one follow up.

Speaker 3: Okay. Just on competition, you mentioned there's a potential for that to prolong selling cycles. It certainly doesn't seem like you're seeing any of that so far. Could you characterize whether there's been any change in the competitive environment, you know, to date versus a few quarters ago?

Okay.

Just on competition you mentioned there is the potential for that to prolonged selling cycle and certainly doesn't seem like you're seeing any of that so far could you characterize whether there's been any change in the competitive environment to date versus a few quarters ago.

Speaker 1: Certainly, you can see that competition is active at accounts.

Certainly you can see the competition is active accounts.

Speaker 1: I think we characterize that mostly as kind of reciprocal arrangements with respect to training center investments or reciprocal research investments.

I think we characterize that mostly as kind of a reciprocal arrangements with respect to.

Training Center invest.

Investments over typical research investments.

Speaker 9: I don't think we call out any specific significant impact yet on selling cycles, but certainly you can see the potential for it over time. Great. Thanks, Jamie.

I don't think we call out any specific significant impact yet on selling cycles.

You can see the potential for overtime.

Okay, great. Thanks, Jamie.

Alright, well. Thank you all of that was our last question.

Speaker 5: In closing, we continue to believe there is a substantial and durable opportunity to fundamentally improve surgery and acute intervention.

In closing we continue to believe there is a substantial and durable opportunity to fundamentally improve surgery and acute interventions. Our teams continue to work closely with hospitals physicians and care teams in pursuit of what our customers have termed the quadruple aim.

Speaker 5: Our teams continue to work closely with hospitals, physicians, and care teams in pursuit of what our customers have termed a quadruple aim.

Speaker 5: better, more predictable patient outcomes, better experiences for patients, better experiences for their care teams, and ultimately a lower total cost of care.

Better more predictable patient outcomes better experiences for patients better experiences for their care teams and ultimately a lower total cost of care.

Speaker 5: We believe value creation in surgery in acute care is foundationally human. It flows from respect for and understanding of patients and care teams, their needs and their environment.

Value creation in surgery, and acute care is foundational to human.

It flows from respect for and understanding of patients and care teams their needs and their environment.

Speaker 5: At Intuitive, we envision a future of care that is less invasive and profoundly better, where diseases are identified earlier and treated quickly so patients can get back to what matters most.

At intuitive, we envision a future of care that is less invasive and profoundly better.

Rare diseases are identified earlier and treated quickly so patients can get back to what matters most.

Speaker 5: Thank you for your support on this extraordinary journey. We look forward to talking with you again in three months.

You for your support on this extraordinary journey, we look forward to talking with you again in three months.

Okay.

Speaker 3: Ladies and gentlemen, that will conclude our conference for today. Thank you for your participation and for using AT&T Event Services. You may now disconnect.

Ladies and gentlemen that will conclude our conference for today. Thank you for your participation for using AT&T event services you may now disconnect.

Speaker 10: We're sorry, your conference is ending now. Please hang up.

We're sorry your conferences ending now please hang up.

[music].

[music].

Speaker 3: Ladies and gentlemen, thank you for standing by and welcome to the Intuitive Q4 2021 earnings release call. At this time, all participants are in a listen-only mode. If you wish to ask a question during today's call, please press one, then zero on your touchtone phone. As a reminder, today's call is being recorded. Now I turn the conference over to our host, Brian King, Head of Investor Relations for Intuitive Surgical. Please go ahead.

Ladies and gentlemen, thank you for standing by and welcome to the Attunity Q4, 2021 earnings release call. At this time all participants are in a listen only mode. If you wish to ask a question during today's call. Please press. One then zero on your Touchtone phone as a reminder, today's call is being recorded after the concert for our host Bryan King head of Investor Relations.

As for intuitive surgical please go ahead.

Speaker 2: Thank you. So good afternoon and welcome to Intuitives fourth quarter earnings conference call. With me today we have Gary Guthardt our CEO and Jamie Smath our CFO .

Thank you so good afternoon and welcome to intuitive its fourth quarter earnings Conference call with me today, we have Gary <unk>, our CEO and Jamie Smith, our CFO .

Speaker 2: Before we begin, I would like to inform you that comments mentioned on today's call may be deemed to contain forward-looking statements. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties.

Before we begin I would like to inform you that comments mentioned on todays call maybe deemed to contain forward looking statements actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are described in detail in our security and exchange Commission filings, including our most recent Form 10-K .

Speaker 2: These risks and uncertainties are described in detail in our Security and Exchange Commission file.

Speaker 2: including our most recent Form 10-K filed on February 10, 2021, and Form 10-Q filed on October 20.

Filed on February 10, 2021, and Form 10-Q filed on October 22021.

Speaker 2: Our SEC filings can be found through our website or at the SEC website.

Our SEC filings can be found through our website or at the SEC's website investors are cautioned not to place undue reliance on such forward looking statements.

Speaker 2: Investors are cautioned not to place any reliance on such forward-looking statements.

Speaker 2: Please note that this conference call will be available for audio replay on our website at intuitive.com on the latest events section under our investor relations page. Today's press release and supplementary financial data tables have been posted to our website.

Please note that this conference call will be available for audio replay on our website at intuitive dot com on the latest events section under our Investor Relations page today's press release and supplementary financial data tables have been posted to our website.

Speaker 2: Today's format will consist of providing you with highlights of our fourth quarter results, as described in our press release announced earlier today, followed by a question and answer session.

Today's format will consist of providing you with highlights of our fourth quarter results as described in our press release announced earlier today, followed by a question and answer session.

Speaker 2: Gary will present the quarter's business and operational highlights. Jamie will provide a review of our financial results.

Gary will present, the quarter's business and operational highlights Jamie will provide a review of our financial results.

Speaker 2: then I will discuss procedure and clinical highlights and provide our financial outlook for 2022. And finally, we will host a question and answer.

I will discuss procedure and clinical highlights and provide our financial outlook for 2022, and finally, we will host a question and answer session and with that I'll turn it over to Gary.

Speaker 5: Thank you for joining us today. 2021 required agility as we drove through significant headwinds to support customers and manage our supply chain.

Thank you for joining us today.

'twenty one required agility as we drove through significant headwinds to support customers and manage our supply chain.

Speaker 5: Our teams perform well, helping customers return to surgery when COVID allowed them, and maintaining the integrity of our supply chain and workforce.

Teams performed well, helping customers returned to surgery when COVID-19 allowed them.

Maintaining the integrity of our supply chain and workforce.

Speaker 5: Given our recent press release, updating procedures, capital placements, and revenues, I'll be brief in describing our full year 2021 results and spend a little more time outlining our plans for 2022 and beyond.

Given our recent press release updating procedures capital placements and revenues I'll be brief in describing our full year 2021 results and spend a little more time outlining our plans for 2022 and beyond.

Speaker 5: Putting 2021 in context, demand for our robotically assisted interventions has been resilient during COVID.

Putting in 2021 and context demand for a robotically assisted interventions has been resilient during COVID-19 .

Speaker 5: All these interventions get delayed during COVID peaks. The return is COVID wanes, and that is encouraged.

These interventions get delayed during COVID-19 piques their return as Covid wanes and that is encouraging.

Speaker 5: pandemic stresses on health care systems emphasize the need for the kind of high quality, minimally invasive interventions our products enable.

Pandemic stresses on health care systems emphasized the need for the kind of high quality minimally invasive interventions our products enable.

Speaker 5: MIS procedures allow greater use of ambulatory surgery, free up resources in ORs relative to other approaches, and often enable faster patient return to home and overall recovery.

Mras procedures allow greater use of ambulatory surgery free up resources in <unk> relative to other approaches and often enables faster patient returned to home and overall recovery.

Speaker 5: In 2021, da Vinci procedures grew 28% compared to full year 2020, reflecting a partial recovery in surgery after the first wave of the pandemic.

In 2021 da Vinci procedures grew 28% compared to full year 2020, reflecting a partial recovery in surgery. After the first wave of the pandemic.

Speaker 5: Over the two-year period 2020 and 2021, the compound annual growth rate in procedures was 14%.

Over the two year period 2020 in 2021, the compound annual growth rate in procedures was 14%.

Speaker 5: Capital installs were healthy in 2021, with our team placing 1,347 DaVinci and 93 ION systems in the year, driving DaVinci placement growth of 44% over 2020 and at a CAGR of 10% over the past two years.

Capital installs were healthy in 2021 with our team, placing 1347 da Vinci and 93 ion systems in the year driving da Vinci placement growth of 44% over 2020 and at a CAGR of 10% over the past two years.

Speaker 5: With a two-year CAGR in procedures of 14% and install-based growth of 10% over the same period, utilization of installed systems continued to climb through the pandemic. We think this is good for our customers.

With a two year CAGR and procedures of 14% and installed base growth of 10% over the same period utilization of installed systems continued to climb through the pandemic.

We think this is good for our customers and good for us.

Speaker 5: Jamie will give regional capital trends and Brian will give detailed procedure dynamics later in the call. The past two years have stressed

Jamie will give regional capital trends and Brian will give detailed procedure dynamics later in the call.

The past two years have stress more than health system health systems.

Speaker 5: Our ability to attract, develop, and retain outstanding staff remains a key focus for us.

Our ability to attract develop and retain outstanding staff remains a key focus for us.

Speaker 5: Our team has performed well, supporting our customers and each other. In the year, we added approximately 1,700 employees to our team.

Our team has performed well supporting our customers and each other in.

In the year, we added approximately 700 employees to our team with net head count growth of approximately 180 in R&D 920, <unk> operations, and 340 and our commercial force.

Speaker 5: with net headcount growth of approximately 180 in R&D, 920 in operations, and 340 in our commercial force.

Speaker 5: of the 1700 net edition 700 were outside of the United States.

Of the 1700 net additions 700 were outside of the United States.

Speaker 5: Looking out over the next decade, we believe that the method we have developed to identify clinical need, then design a technology-enabled ecosystem for improving the quadruple aim, then deliver and train customers on this ecosystem, can positively impact a broad set of minimally invasive interventions.

Looking out over the next decade, we believe that the method we have developed to identify clinical need then design a technology enabled ecosystem for improving the quadruple aim then deliver and train customers on this ecosystem can positively impact a broad set of minimally invasive interventions.

Speaker 5: The opportunity and challenge for intuitive is to evolve our ecosystem to support our customers and ourselves at scale and to choose procedural opportunities and platform architectures that made sense.

The opportunity and challenge for intuitive is to evolve our ecosystem to support our customers and ourselves at scale.

And to choose procedural opportunities and platform architectures that made sense.

Speaker 5: Turning to investments in the midterm, our priority for use of our capital is to reinvest in the business.

Turning to investments in the mid term our priority for use of our capital is to reinvest in the business to develop new opportunities that improve the quadruple aim and to strengthen our operating capabilities and global scale.

Speaker 5: to develop new opportunities that improve the quadruple lane, and to strengthen our operating capabilities at global scale.

Speaker 5: We are focused on driving a vital set of initiatives, and I'd like to describe the dynamics for you in a little more detail.

We're focused on driving a vital set of initiatives and I'd like to describe the dynamics for you and a little more detail.

Speaker 5: In multiport, we believe our Gen4 architecture is outstanding, and we've been adding capability to this product line since launch, including significant expansion and upgrades to energy and stapling product lines.

And multi port we believe our Gen. Four architecture is outstanding and we've been adding capability to this product line since launch.

Including significant expansion and upgrades to energy and stapling product lines improved endoscopic imaging the introduction of da Vinci X. The introduction of extended used instruments training technologies and finally, the introduction of new and upgraded connectivity and data management tools.

Speaker 5: improved endoscopic imaging, the introduction of DaVinci X.

Speaker 5: the introduction of extended use instruments, training technologies, and finally, the introduction of new and upgraded connectivity and data management tools.

Speaker 5: Given the precision, robustness, and overall performance of our Generation 4 robotics architecture, we will continue to innovate on this platform, bringing additional value to those customers who have standardized on Generation 4 fleets.

Given the precision robustness and overall performance of our generation four robotics architecture, we will continue to innovate on this platform, bringing additional value to those customers who have standardized on generation four fleets.

Speaker 5: We are also investing in new core capabilities for our multi-port systems, both generation four and beyond, that we'll describe as they get closer to market. You should expect continued innovation from us here.

We are also investing in new core capabilities for our multi port systems, both generation four and beyond that we'll describe as they get closer to market. You should expect continued innovation from us here.

Speaker 5: Turning to ION, our first indication addresses a large unmet need in lung cancer biopsy and our focus is fully enabling our production capability and customer ecosystem for this indication.

Turning to island, our first indication addresses a large unmet need in lung cancer biopsy and our focus is fully enabling our production capability and customer ecosystem for this indication.

Speaker 5: There is strong demand for lung biopsy, and we are working to expand manufacturing capacity, evolve processes for greater quality and lower costs at scale, and run trials and address regulatory requirements that enable global expansion.

There is strong demand for lung biopsy and work and we are working to expand manufacturing capacity of all processes for greater quality and lower costs at scale and run trials and address regulatory requirements that enabled global expansion.

Speaker 5: Over time, we plan for total ION program profitability to approach that of our corporate average as we execute against our volume, design, and process improvement goals.

Over time, we plan for total ion program profitability to approach that of our corporate average as we execute against our volume design and process improvement goals.

Speaker 5: We are pursuing additional applications for ION and we'll describe them as we get closer to market.

We are pursuing additional applications for Ireland, and we will describe them as we get closer to market.

Speaker 5: For our single port system, DaVinci SP has the opportunity to change the standard of care in two different types of soft tissue surgery.

For our single Port system da Vinci SP has the opportunity to change the standard of care in two different types of soft tissue surgery.

Speaker 5: those that require the extraction of tissue that can be done through a small single port, and those procedures that benefit from narrow entry into the body as a whole.

Those that require the attraction of tissue that can be done through a small single port and those procedures that benefit from narrow entry into the body as a whole.

Speaker 5: where ion at its current stage of launch has a single indication that represents large patient population, SP's opportunity is the aggregation of several midsize indications.

We are ion at its current stage of launch has a single indication that represents a large patient population Sps opportunity is the aggregation of several midsized indications.

Speaker 5: For example, SP use in transoral robotic surgery is growing steadily in the US.

For example, SP use and trends all robotic surgery is growing steadily in the U S.

Speaker 5: To broaden SP's applicability in the U.S. and other markets, we're undertaking clinical trials to support regulatory review. We believe that SP will serve several additional surgical specialties, which will allow our customers and us to leverage capital investments in the program.

Broadened Sps applicability in the U S and other markets were undertaking clinical trials to support regulatory review.

We believe that as people serve several additional surgical specialties, which will allow our customers and us to leverage capital investments in the program.

Speaker 5: Like ION, we plan for SP platform profitability to approach that of historical platforms over time and we're encouraged by recent progress.

Like ion we plan for SP platform profitability to approach that of historical platforms overtime and we're encouraged by recent progress.

Speaker 5: Our customer digital efforts now represent roughly 5% of our total operating expenses and drive the business in four ways.

Our customer digital efforts now represent roughly 5% of our total operating expenses and drive the business in four ways.

Speaker 5: First, the use of data and digital tools by customers to analyze their operations helps improve outcomes, reduce costs, and increase customer satisfaction and retention.

First the use of data and digital tools by customers to analyze their operations helps improve outcomes reduce costs and increase customer satisfaction and retention.

Speaker 5: Second, digital and internal investments can decrease our cost of serving our customers.

Second digital and internal investments can decrease our cost to serve our customer.

Speaker 5: Third, some of our digital tools generate revenue themselves, and finally, use of data and analytics internally can help our teams make better decisions.

Third some of our digital tools generate revenue themselves and finally use of data and analytics internally can help our teams make better decisions because digital and data tools spend our platforms and our used externally and internally, we do not account for them using the same financial models as our platforms, nor do we break them out as standalone.

Speaker 5: Because digital and data tools span our platforms and are used externally and internally, we do not account for them using the same financial models as our platforms, nor do we break them out as stand-alone financial engines.

Financial engines that said, we do evaluate digital and data projects against internal strategic and return analysis.

Speaker 5: That said, we do evaluate digital and data projects against internal strategic and return analysis.

Speaker 5: Over the past five years, the annual number of instruments we produce has grown roughly 200 percent, and the annual number of systems we produce has more than doubled.

Over the past five years, the annual number of instruments, we produce has grown roughly 200%.

In the annual number of systems, we produce has more than doubled.

Speaker 5: The number of customer professionals trained annually has nearly doubled, and our engineering staff has nearly tripled. Our product volume growth has also allowed us to in-source some of our high-volume accessories while investing in automation.

The number of customer professionals trained annually has nearly doubled and our engineering staff has nearly tripled.

Our product volume growth has also allowed us to in source some of our high volume accessories, while investing in automation.

Speaker 5: This has a threefold benefit, improving supply chain robustness, improving manufacturing quality, and lowering unit cost.

This is a threefold benefit improving supply chain robustness, improving manufacturing quality and lowering unit costs.

Speaker 5: As our training, R&D, and manufacturing efforts move to scale, we're investing in infrastructure, factory builds, training center expansion, and automation.

As our training R&D and manufacturing efforts move to scale, we're investing in infrastructure factory builds training center expansion and automation.

Speaker 5: These infrastructure investments are lumpy, and our current growth cycle requires building capacity.

These infrastructure investments are lumpy and our current growth cycle requires building capacity.

Speaker 5: These projects have been planned over the past couple of years and we'll start amortizing first moderately in 2022 and more substantially in 2023 and 24, then normalizing over the next few years.

These projects have been planned over the past couple of years and we'll start amortizing first moderately in 2022 and more substantially in 2023 and 'twenty. Four then normalizing over the next few years.

Speaker 5: For example, over the next four years, we'll be growing and consolidating facilities for operations, R&D, and customer training space in Atlanta, doubling our Mexicali manufacturing footprint, doubling our R&D design space and operations space as our California headquarters, and finally, consolidating and growing our commercial training operations and R&D space in Freiburg, Germany.

For example over the next four years will be growing and consolidating facilities for operations R&D and customer training space in Atlanta, doubling our mexicali manufacturing footprint doubling our R&D design space and operation space, as our California headquarters and finally, consolidating and growing our commercial training operations and R&D.

Space and fiber Germany.

Speaker 5: In summary, we'll build on our Generation IV capabilities in multiport while innovating in clinical utility for multiport surgery.

In summary, we will build on our generation four capabilities in multi port, while innovating and clinical utility for multi port surgery broadly.

Speaker 5: We'll continue to bring our flexible endoscopy platform ION to scale and drive capacity, quality, and cost improvements while seeking to broaden access to new markets.

We'll continue to bring our flexible endoscopy platform ion to scale and drive capacity quality and cost improvements, while seeking to broaden access to new markets and.

Speaker 5: In SP, we expect to expand indications in regional markets while driving manufacturing quality and scale. We will invest in regional training, R&D, and manufacturing centers globally to support the growth of the business and pursue opportunities for operating leverage, given volume, some of which we'll share with customers to catalyze elastic markets.

And SP, we expect to expand indications in regional markets, while driving manufacturing quality and scale.

We will invest in regional training R&D and manufacturing centers globally to support the growth of the business and pursue opportunities for operating leverage given volume some of which we'll share with customers to catalyze elastic markets.

Speaker 5: Finally, we will continue to advance our digital efforts to enable fast, accurate, and actionable decisions with our customers and for our companies.

Finally, we will continue to advance our digital efforts to enable fast accurate and actionable decisions with our customers and for our company.

Speaker 5: Lastly, for 2022 particularly, we're focused on the following. First, outstanding customer support in the face of continued pandemic disruption.

Lastly for 2022, particularly we're focused on the following first outstanding customer support in the face of continued pandemic disruption.

Speaker 5: Second, execution of a robotic and digital platform expansion in pursuit of new indications and new markets.

Second execution of a robotic and digital platform expansion in pursuit of new indications and new markets.

Speaker 5: Third, general surgery growth in the United States. And finally, diversified growth outside the U.S. beyond urology.

Third general surgery growth in the United States.

And finally diversified growth outside the U S beyond urology.

Speaker 5: As we turn to our financial report, I'd like to formally thank Marshall Moore, our outgoing CFO and new head of Global Business Services, for his outstanding stewardship over the past 15 years. And turn the time over to our incoming CFO , Jamie Sameth, who will take you through financial matters in greater detail.

As we turn to our financial report I'd like to formally thank Marshall Mohr, our outgoing CFO and new head of global business services for his outstanding stewardship over the past 15 years.

Turn the time over to our incoming CFO , Jamie <unk> will take you through financial matters in greater detail.

Speaker 1: Good afternoon. I will describe the highlights of our performance on a non-GAP or performer basis.

Good afternoon, I'll describe the highlights of our performance on a non-GAAP pro forma basis.

Speaker 1: I will also summarise our GAP performance later in my prepared remarks.

I will also summarize our GAAP performance later in my prepared remarks.

Speaker 1: Reconciliation between our pro forma and GAAP results is posted on our website.

A reconciliation between our pro forma and GAAP results is posted on our website.

Speaker 1: Q4 and 2021 revenue and procedures are in line with our preliminary press release of January 12.

Q4 in 2021 revenue and procedures are in line with our preliminary press release of January 12.

Speaker 1: Before I dive into our Q4 results, let me start with a summary of our four year 2021 performance.

Before I dive into our Q4 results, let me start with a summary of our full year 2021 performance.

Speaker 1: Given the significant impact of COVID, we believe it is appropriate to review our 2021 results on both a year-over-year and a two-year compound annual growth rate basis.

Given the significant impact of Covid. We believe it is appropriate to review our 2021 results on both a year over year and two year compound annual growth rate basis.

Speaker 1: Procedures increased by 28% as compared to 2020, and increased by approximately 14% using a two-year CAGR.

<unk> increased by 28% as compared to 2020 and increased by approximately 14% using a two year CAGR.

Speaker 1: We placed 1,347 systems of customers during the year, an increase of 44% as compared to 2020, and up 10% using a two-year CAGR. As a result of this procedure and system

We placed 1347 systems of customers during the year, an increase of 44% as compared to 2020 and up 10% using a two year CAGR.

As a result of this procedure and system placement performance 2021 revenue increased by 31% year over year and increased by 13% using a two year CAGR.

Speaker 1: 2021 revenue increased by 31% year-over-year and increased by 13% using a two-year CAGR. Key business metrics for

Key business metrics for the fourth quarter were as follows.

Speaker 1: Fourth quarter procedures increased approximately 19% compared with the fourth quarter of 2020.

Fourth CT procedures increased approximately 19% compared with the fourth quarter of 2020.

Speaker 1: and increased approximately 13% using a two-year CAGR.

And increased approximately 13% using a two year CAGR.

Speaker 1: During the quarter, procedures continue to recover in October and November from the impact of the Delta variant in Q3.

During the call are procedures continued to recover in October and November from the impact of the <unk> in Q3.

Speaker 1: However, in December , procedures were adversely impacted by the increase in hospitalizations in the U.S. and parts of Europe as the Omicron variant spread rapidly. This trend is worse than so far.

However in December procedures were adversely impacted by the increasing hospitalizations in the U S and parts of Europe .

OMA <unk> bearings spread rapidly this.

This trend is less and so far into January .

Speaker 1: Fourth quarter system placements of 385 increased 18% from the 326 systems placed last year.

Fourth quarter system placements of 385 increased 18% from 326 systems placed last year.

Speaker 1: As a result, net of trade-ins and retirements, we expanded our installed base of DaVinci systems over the last year by 12%.

As a result net of trade ins and retirements, we expanded our installed base of da Vinci systems over the last year by 12%.

Speaker 1: On a two-year CAGR, our installed base is up 10%.

On a two year CAGR, our installed base is up 10%.

Speaker 1: utilization of clinical systems in the field measured by procedures per system increased approximately 7% compared to last year and increased approximately 3% using a two-year cake.

Utilization of clinical systems in the field measured by procedures per system increased approximately 7% compared to last year and increased approximately 3% using a two year CAGR.

Speaker 1: During the quarter, the supply chain environment became more challenging and remains highly dynamic.

During the call the supply chain environment became more challenging and remains highly dynamic.

Speaker 1: Our supply chain teams continue to work tirelessly with our supply chain partners to fulfill customer demand.

Our supply chain teams continue to work tirelessly with our supply chain partners to fulfill customer demand.

Speaker 1: In Q4, we experienced minor constraints on our ability to meet customer demand. For example, we had some limitations on supply of skill simulators.

In Q4, we experienced minor constraints on our ability to meet customer demand. For example, we had some limitations on supply of skilled stimulators.

Speaker 1: While these constraints were relatively minor and were immaterial to our overall Q4 financial results, they highlight the risk of potential significant disruption to our manufacturing operations due to the current supply chain challenges.

While these constraints were relatively minor and were immaterial to our overall Q4 financial results highlight the risk of potential significant disruption to our manufacturing operations due to the current supply chain challenges.

Speaker 1: US procedures grew approximately 16% over Q4 of 2020, with relative strength in bariatrics, cholecystectomy, and hernia repair.

U S procedures grew approximately 16% over Q4 of 2020 with relative strength in bariatrics, and cholecystectomy and hernia repair.

Speaker 1: The December impact of the current wave of COVID on U.S. procedures varied by region with a greater impact in the Northeast and Midwest.

In December impacted the current wave of Covid on U S procedures varied by region with a greater impact in the northeast and Midwest.

Speaker 1: Benign procedures, such as benign hysterectomy, experienced a more significant impact in December , reflecting the deferability of certain elective surgery.

The nine procedures, such as benign hysterectomy experienced the most significant impact in December reflecting the third pillar ESL in elective surgeries.

Speaker 1: In Europe , the impact on COVID on procedures in December was most notable in France and...

In Europe , the impact of Covid on procedures in December was most notable in France and Italy.

Speaker 1: Despite the fact that hospitals are generally better equipped to handle COVID patients today compared to the outset of the pandemic, COVID-19 resurgences, like those currently being experienced in the US and parts of Europe , have challenged hospital resources and have negatively impacted provincial procedures.

Despite the fact that hospitals are generally patent equipped to handle COVID-19 patients today compared to the outset of the pandemic.

COVID-19 recession seems like those currently being experienced in the U S and parts of Europe are challenged hospital resources and have negatively impacted da Vinci procedures.

Speaker 1: In the US, high COVID-related hospitalization rates have been exacerbated by staffing shortages.

In the U S high Covid related hospitalization rates have been exacerbated by staffing shortages.

Speaker 1: according to data reported by the Department of Health and Human Services.

According to data reported by the department of Health and human services.

Speaker 1: the proportion of hospitals reporting a critical staffing shortage doubled between July and December .

The proportion of hospitals, we're pulling a critical staffing shortage doubled between July and December .

Speaker 1: In addition, delays in diagnosis and treatment of underlying conditions have and will also negatively impact da Vinci procedures.

In addition delays in diagnosis and treatment of underlying conditions happen will also negatively impact da Vinci procedures.

Speaker 1: Q4 procedures in Asia were not significantly impacted by a resurgence in COVID. We saw strong procedure growth across multiple specialties in China, Korea and Japan.

Q4 procedures in Asia, we're not significantly impacted by a resurgence in COVID-19 .

Strong procedure growth across multiple specialties in China, Korea and Japan.

Speaker 1: While it is difficult to predict how long the current wave of COVID will last, or the extent to which it will impact additional geographies,

While it is difficult to predict how long the current wave of Kobe will last or the extent to which you will impact additional geographies, we expect that da Vinci procedures will be significantly adversely impacted in Q1.

Speaker 1: We expect that da Vinci procedures will be significantly adversely impacted in Q1.

Speaker 1: Brian will provide additional procedure commentary later in this call.

Brian will provide additional procedure commentary later in this call.

Speaker 1: Overall system placement results in Q4 were solid, with U.S. placements of 235, up 20% from 196 in Q4 of 2020.

Overall system placement results in Q4 was solid with U S placements of 235 up 20% from 196 in Q4 of 2020.

Speaker 1: System placements at Greenfield customers were strong, up approximately 45% as compared to Q4 of 2020, driven by US IDNs and new customers in OUS markets.

System placements at Greenfield customers was strong up approximately 45% as compared to Q4 of 2020, driven by U S <unk> and new customers and O U S markets.

Speaker 1: Outside the U.S., we placed 150 systems in the fourth quarter compared with 130 in the fourth quarter of 2020.

Outside the U S. We placed 150 systems in the fourth.

With 130 in the fourth quarter of 2020.

Speaker 1: Current quarter system placements included 63 into Europe , 37 into Japan, and 14 into China, compared with 54 into Europe , 22 into Japan, and 13 into China in the fourth quarter of 2020.

Current core system placements included 63 into Europe .

Seven into Japan in 2014 into China, compared with 54 into Europe , 22 into Japan, and 13 into China in the fourth quarter of 2020.

Speaker 1: Capital strength in Japan was driven primarily by new customers in the private sector.

Capital strength in Japan was driven primarily by new customers in the private sector.

Speaker 1: As of the end of 2021, there were 63 systems remaining under the current quota in China, which may be accessible to competitors should they receive local regulatory clearance.

As of the end of 2021. It was 63 systems remaining under the current quota in China.

Which may be accessible to competitors should they received local regulatory clearance.

Speaker 1: Globally, trading transactions represented 30% of placements in the quarter, down from 40% last quarter and 49% for 2020.

Globally trading track transactions represented 13% of placements in the quarter down from 40% last quarter and 49% for 2020.

Speaker 1: The remaining installed base of SI systems in the US is approximately 343 systems.

The remaining installed base of <unk> systems in the U S is approximately 343 systems.

Speaker 1: We expect the volume of trade ins to be significantly lower in 2022 as compared to 2021.

We expect the volume of trade ins to be significantly lower in 2022 as compared to 2021.

Speaker 1: Macroeconomic conditions created by COVID, including supply chain constraints and staffing shortages, are challenging and could impact hospital capital spending.

Macroeconomic conditions created by Covid, including supply chain constraints and staffing shortages are challenging and could impact hospital capital spending.

Speaker 1: In addition, as competition progresses in various markets, we will likely experience longer selling cycles and price pressure.

In addition, as competition progresses in various markets, we will likely experience longer selling cycles and price pressure.

Additional revenue statistics and trends are as follows.

Speaker 1: Total fourth quarter revenue is $1.55 billion, an increase of 17% from last year.

Total fourth quarter revenue was $1 55 billion, an increase of 17% from last year.

Speaker 1: Leasing represented 37% of Q4 placements compared with 41% last quarter and flat to Q4 of 2020.

Leasing represented 37% of Q4 placements compared with 41% last quarter.

That to Q4 of 2020.

Speaker 1: The lower leasing mix in Q4 relative to last quarter reflected higher multi-system placements with a couple of IDNs who prefer to purchase systems.

The lower leasing mix in Q4 relative to last quarter reflected higher multi system placements with a couple of idms, who prefer to purchase systems.

Speaker 1: While leasing will fluctuate from quarter to quarter, we continue to expect that the proportion of placements under operating leases will continue to increase over time.

While leasing will fluctuate from quarter to quarter, we continue to expect that the proportion of placements under operating leases will continue to increase over time.

Speaker 1: Fourth quarter system average selling prices were $1.45 million, similar to $1.43 million last year and lower than $1.57 million last quarter.

Fourth quarter system average selling prices were $1 45 million similar to $143 million last year and lower than one $5 7 million last quarter.

Speaker 1: sequential decline was primarily driven by a higher mix of bulk buy transactions with large customers.

The sequential decline was primarily driven by a higher mix of both by transactions with large customers.

Speaker 1: We recognize 26 million of lease buyout revenue in the fourth quarter, compared with 25 million last quarter and 14 million last year.

We recognized $26 million of lease buyout revenue in the fourth quarter.

With $25 million last quarter and $14 million last year.

Speaker 1: Lease-by-out revenue has varied significantly quarter to quarter and will likely continue to do so.

<unk> revenue has varied significantly quarter to quarter.

We continue to do so.

Speaker 1: instrument and accessory revenue per procedure is approximately $1,940 per procedure compared with $1,900 per procedure in the third quarter of 2021 and down 6% from $2,060 realized in the fourth quarter of last year.

Instrument and accessory revenue per procedure was approximately $1940 per procedure compared with 19 $800 per procedure in the third quarter of 2021 and down 6%.

$2060 realized in the fourth quarter of last year.

Speaker 1: The year-over-year decrease primarily reflects the benefit of stocking orders in Q4 of 2020 associated with the launch of our Extended Use Instruments Program in the U.S. and Europe .

The year over year decrease primarily reflects the benefit of stocking orders in Q4 of 2020 associated with the launch of our extended use instruments program in the U S and Europe .

Speaker 1: sequential increase primarily reflects continued growth of our advanced instrument portfolio.

The sequential increase primarily reflects continued growth of our advanced instrument portfolio.

Speaker 1: As we highlighted recently, revenue for our advanced instrument portfolio has grown over a five-year period, a compound annual growth rate of 35 percent, and we are starting to see early and accelerating adoption in OUS markets.

As we highlighted recently revenue for our advanced instrument portfolio has grown over a five year period compound annual growth rate of 35%.

To see early and accelerating adoption and O U S markets.

Speaker 1: Ten of the systems placed in the fourth quarter were SP systems, including three systems placed at customers in Korea. Our installed base of SP systems is now 99.

10 of the systems placed in the fourth quarter were SP systems, including three systems placed at customers in Korea.

Our installed base of SP systems is now 99.

Speaker 1: During the quarter, we further developed our SP ecosystem, receiving 510k clearance for our Firefly imaging technology.

During the call. We further developed our SP ecosystem, receiving five 10-K clearance for our Firefly imaging technology.

Speaker 1: We also received 510k clearance for enhancements to our SP instruments, including an extension of lives to suit

We also received five 10-K clearance for enhancements to our SP instruments, including an extension of lives to six of our eight instruments.

Speaker 1: Growth of the SP platform will continue to be gated by additional clinical indications and clearances in markets beyond the U.S. and Korea.

Growth of the SP platform will continue to be <unk> by additional clinical indications and clearances in markets beyond the U S and Korea.

Speaker 1: We placed 31 ion systems in the quarter, bringing the installed base to 129 systems.

We placed 31 ion systems in the quarter, bringing the installed base to 102009 systems.

Speaker 1: Looking at the 93 ion systems placed in 2021, 54% of those systems were placed under operating lease arrangements.

Looking at the 93 ion systems placed in 2021, 54% of those systems were placed under operating lease arrangements.

Speaker 1: For reference, the list price of our ion system is 600k, with ASPs generally a little below that level.

For reference the list price of our ion system is 600, K with Asps generally a little below that level.

Speaker 1: As a reminder, ion system placements and procedures are excluded from our overall system and procedure count.

As a reminder, ion system placements and procedures are excluded from our overall system and procedure counts.

Speaker 1: The entirety of our ION installed base is with existing DaVinci customers, the majority of which have large pulmonary and thoracic departments.

The entirety of our ion installed base.

Existing da Vinci customers.

Which have large pulmonary and thoracic departments.

Speaker 1: Our ION platform is also installed at the majority of accounts that have an IP fellowship program.

Our ion platform is bolstering stood at the majority of the accounts that have an IP Fellowship program.

Speaker 1: We continue to be encouraged by customer feedback and look forward to the completion of our next major milestone, the full results from the PRECISE Study, which is expected in the second half of 2022.

We continue to be encouraged by customer feedback and look forward to the completion of our next major milestone the full results from the precise study, which is expected in the second half of 2022.

Moving onto gross margin and operating expenses pro forma gross margin for the fourth quarter of 2021 was 71% compared with 69, 7% for the fourth quarter of 2020 and <unk>.

Speaker 1: Performer gross margin for the fourth quarter of 2021 was 70.1% compared with 69.7% for the fourth quarter of 2020 and 71.3% last quarter.

71, 3% last quarter.

Speaker 1: The fourth quarter of 2020 included higher period costs associated with lower production and higher access and obsolete inventory charges.

The fourth quarter of 2020 included higher period costs associated with lower production and higher excess and obsolete inventory charges.

Speaker 1: Performer gross margin was lower than last quarter, primarily as a result of manufacturing inefficiencies and higher logistics costs associated with the supply chain environment, lower system ASPs, and a higher mix of systems revenues.

Pro forma gross margin was lower than last quarter, primarily as a result of manufacturing inefficiencies and higher logistics costs associated with the supply chain environment lower system Asps and.

And a higher mix of systems revenue.

Speaker 1: Proforma operating expenses increased 27% compared with the fourth quarter of 2020.

Pro forma operating expenses increased 27% compared with the fourth quarter of 2020.

Speaker 1: fourth quarter of 2021 included a $30 million contribution to the Intuitive Foundation, paired with a $25 million contribution in the fourth quarter of 2020.

The fourth quarter of 2021 included a $30 million contribution to the intuitive foundation compared with a $25 million contribution and.

In the fourth quarter of 2020.

Speaker 1: The increase in fourth quarter operating expenses from a year ago reflected an increase in headcount, increased variable compensation, and higher travel costs.

The increase in fourth quarter operating expenses from a year ago reflected an increase in head count increased variable compensation and higher travel costs.

Speaker 1: We finished 2021 with almost 9,800 employees, an increase of 21% from the end of 2020.

We finished 2021 with almost 9800 employees an increase of 21% from the end of 2020.

Speaker 1: We believe the opportunity in robotic assisted interventions to be significant and are planning to increase our investments significantly in 2022.

We believe the opportunity in robotic assisted interventions to be significant.

Planning to increase our investments significantly in 2022.

Speaker 1: We are at the early stages of our newer platforms, SP&I on, and we will continue to invest in our digital and data capabilities. Brian will provide operating expense.

We are in the early stages of our newer platforms SP and ion and we will continue to invest in our digital and data capabilities.

Ian will provide operating expense guidance later in this call.

Speaker 1: As Gary described, we're also investing in our infrastructure to support our growth objectives and facilitate our ability to scale.

As Gary described we are also investing in our infrastructure to support our growth objectives and facilitate our ability to scale.

Speaker 1: By 2022, we expect a significant increase in capital expenditures.

In 2022, we expect a significant increase in capital expenditures in the range of $700 million to $1 billion of capital investment for the year.

Speaker 1: in the range of $700 million to $1 billion of capital investment for the year.

Speaker 1: A significant portion of this investment involves construction of facilities to provide incremental space for growth.

A significant portion of this investment involves construction of facilities to provide incremental space for growth to consolidate operations to enhance efficiency and to replace lease spaces with owned spaces.

Speaker 1: consolidate operations to enhance efficiency and to replace leased spaces with own spaces.

Speaker 1: These capital investments also expand our OUS footprint in support of opportunities for growth in key international markets where da Vinci procedures are in earlier stages of adoption.

These capital investments also expand our <unk> footprint and support opportunities for growth in key international markets like da Vinci procedures are in earlier stages of adoption.

These are multiyear investments.

Speaker 1: Our performer effective tax rate for the fourth quarter was 19.5%, lower than our expectation, primarily due to a favorable U.S. or U.S. income mix.

Our pro forma effective tax rate for the fourth quarter was $19, 5% lower than our expectation primarily due to a favorable U S. O U S income mix.

Speaker 1: We expect that our pro forma tax rate will increase in 2022 due to a previous change in US tax law that became effective on January 1st, 2022. Brian will provide details later in this call.

We expect our pro forma tax rate will increase in 2022 due to a previous change in U S tax law that became effective on January one 2022.

Brian will provide details later in this call.

Speaker 1: Our fourth quarter 2021 performer net income was $477 million or $1.30 per share paired with $434 million or $1.19 per share for the fourth quarter of 2020. I will now

Our fourth quarter of 2021 pro forma net income was $477 million for $1 30 per share compared with $434 million or $1 19 per share for the fourth quarter of 2020.

I will now summarize our GAAP results.

Speaker 1: Gap in the income was $381 million or $1.04 per share for the fourth quarter of 2021.

GAAP net income was $381 million.

<unk> four per share for the fourth quarter of 2021.

Speaker 1: pair with GAAP net income of $365 million for $1.01 per share for the fourth quarter of 2020.

Paired with GAAP net income of $365 million or $1 one per share for the fourth quarter of 2020.

Speaker 1: The adjustments between pro forma and gap net income are outlined and quantified on our website and include excess tax benefits associated with employee stock awards.

The adjustments between pro forma and GAAP net income are outlined and quantified on our website and include excess tax benefits associated with employee stock awards in place stock based compensation.

Speaker 1: employee stock-based compensation, amortization of intangibles and IP charges, acquisition-related items.

Sensation of intangibles and IP charges.

Acquisition related items and legal settlements.

Speaker 1: We ended the year with cash and investments of $8.6 billion, compared with $6.9 billion at December 31, 2020.

We ended the year with cash and investments of $8 6 billion compared with $6 9 billion at December 31 2020.

Speaker 1: The increase in cash in the fourth quarter primarily reflected cash generated from operations. We did not repurchase any shares.

The increase in cash in the fourth quarter, primarily reflecting cash generated from operations we.

We did not repurchase any shares during the quarter.

Speaker 1: With that, I would like to turn it over to Brian , who will discuss clinical highlights and provide our outlook for 2022.

With that I would like to turn it over to Brian who will discuss clinical highlights and provide our outlook for 2022.

Speaker 2: Thank you Jamie. Overall procedure growth for the full year 2021 was approximately 28% as compared to

Thank you Jamie.

Overall procedure growth for the full year 2021 was approximately 28% as compared to 1% in 2020 and increased 14% using a two year compound annual growth rate.

Speaker 2: and increased 14% using a two-year compound annual growth.

Speaker 2: Overall procedure growth was comprised of 27% growth in the U.S. and 32% growth in OUS.

Overall procedure growth was comprised of 27% growth in the U S and 32% growth in O U S markets.

Speaker 2: In the US, fourth quarter growth was driven by growth in procedures within general surgery.

In the U S fourth quarter growth was driven by growth in procedures within general surgery.

Speaker 2: Bariatrics, cholecystectomy, and hernia repair were the largest contributors to procedure growth within the quarter.

<unk> cholecystectomy and hernia repair were the largest contributors to procedure growth within the quarter.

Speaker 2: fourth quarter OUS procedure volume grew approximately 28% compared with 11% for the fourth quarter of 2020, and 30% for the fourth quarter of 2020.

Fourth quarter <unk> procedure volume grew approximately 28% compared with 11% for the fourth quarter of 2020, and 30% last quarter and.

Speaker 2: In 2021, non-urology specialties approached half of all OUS procedures and grew faster than urologic procedures.

In 2021, non urology specialties approached half of all U S procedures grew faster than Urologic procedures.

Speaker 2: More specifically, at a region and country level, in China, Q4 procedures also have broad-based growth in urology, thoracic, general surgery, and gyne.

More specifically at our region and country level in China Q4 procedures also had broad based growth in urology thoracic general surgery and gynecology.

Speaker 2: General surgery thoracic and gynecology procedures grew faster than urology, and combined, made up more than total urology procedures in the fourth.

General surgery, thoracic and gynecology procedures grew faster than urology and combined made up more than total urology procedures in the fourth quarter.

Speaker 2: In Japan, the Vinci prostatectomy has emerged as standard of care for the surgical treatment of prostate.

In Japan da Vinci Prostatectomy has emerged as standard of care for the surgical treatment of prostate cancer.

Speaker 2: We have also gained significant market share in other urologic procedures, including partial nephrectomy and...

We have also gained significant market share and other urologic procedures.

<unk> partial nephrectomy and cystectomy.

Speaker 2: The robust growth that we continue to see in Japan is now attributable to growth in general surgery, thoracic and gynecology procedures.

The robust growth that we continue to see in Japan is now attributable to growth in general surgery thoracic and gynecology procedures that were granted reimbursement status subsequent to urologic procedures.

Speaker 2: that were granted reimbursement status subsequent to urologic procedures.

In Europe .

Speaker 2: Procedure performance varied by country, but in procedures outside of urology, growth was driven by colorectal, hysterectomy for cancer, and thoracic.

Procedure performance varied by country, but in procedures outside of urology growth was driven by colorectal hysterectomy for cancer and thoracic procedures.

Speaker 2: Now, turning to the clinical side of our business, I'll highlight two recently published studies that we deem to be.

Now turning to the clinical side of our business I'll highlight two recently published studies that we deem to be notable however to gain a more complete understanding of the body of evidence we encourage all stakeholders to thoroughly review the extensive detail of scientific studies that have been published over the years.

Speaker 2: However, to gain a more complete understanding of the body of evidence, we encourage all stakeholders to thoroughly review the extensive detail of scientific studies that have been published over the years.

Speaker 2: During the quarter, researchers from the University Hospital of Southern Jutland and the University of Southern Denmark published results from a systematic review and meta-analysis evaluating the short-term outcomes of robotic-assisted and laparoscopic colon surgery for patients.

During the quarter researchers from the University hospital in the Southern Jutland and the University of Southern Denmark published results from a systematic review and meta analysis evaluating the short term outcomes of robotic assisted and laparoscopic colon surgery for patients with cancer.

Speaker 2: This analysis included 20 studies from 2005 to 2020.

This analysis included 20 studies from 2005 to 2020.

Speaker 2: Subscribing, comparing outcomes from over 13,000 subjects.

Describing comparing outcomes from over 13000 subjects with over 1500, robotic assisted procedures and over 12000 laparoscopic procedures.

Speaker 2: with over 1,500 robotic assisted procedures and over 12,000 laparoscopic procedures.

Speaker 2: Between the two groups, a significant difference favoring the robotic-assisted approach demonstrated a 46 percent lower risk of anastomotic leakage.

Between the two groups a significant difference favoring the robotic assisted approach demonstrated a 46% lower risk of annex demonic leakage.

Speaker 2: In addition, robotic-assisted colon surgery showed a 69% lower risk of conversion to open when compared to the laparoscopic approach, while also demonstrating a 15% reduction in the overall complication rate, favoring the robotic-assisted approach and a seven-hour reduction in time to regular diet.

In addition, robotic assisted colon surgery showed a 69% lower risk of conversion to open when compared to the laparoscopic approach, while also demonstrating a 15% reduction in the overall complication rate.

During the robotic assisted approach and a seven hour reduction in time to regular diet.

Speaker 2: Interestingly, a subgroup analysis was performed analyzing right-sided hemichalectomies, noting the prevalence of this procedure in the studies analyzed. And with over 850 subjects in the robotic-assisted group and over 3,000 subjects in the laparoscopic group, the robotic-assisted approach was similarly favored with regards to anastomotic leakage, rate of conversion to open. Here's our final results.

Interestingly a subgroup analysis was performed analyzing right cited hemi colectomy, noting the prevalence of this procedure in the studies analyzed and with over 850 subjects in the robotic assisted group and over 3000 subjects in a laparoscopic group. The robotic assisted approach was similarly favored with regards to and asked him Arctic leakage.

Rate of conversion to open and length of stay.

Speaker 2: The authors concluded in part, quote, robotic-assisted colon surgery showed advantages in colon cancer surgery regarding surgical efficacy and morbidity compared to laparoscopic colon surgery. Close.

The authors concluded in part.

Robotic assisted colon surgery showed advantages in colon cancer surgery regarding surgical efficacy and morbidity compared to laparoscopic colon surgery close quote.

Speaker 2: In November of last year, Christopher Cedar from Rush University Medical Center in Chicago published propensity-adjusted analysis comparing robotic-assisted enteracoscopic anatomic lung resection in obese patients.

In November of last year, Christopher Cedar from Rush University Medical Center in Chicago published propensity adjusted analysis, comparing robotic assisted interactive scopic anatomic lung resection and obese patients.

Speaker 2: leveraging data from the Society of Thoracic Surgeons General Thoracic Database, Ethathor French National Database, and McMaster University Thoracic Surgical Database. Over 8,000 subjects were identified for analysis with over 2,100 robotic-assisted subjects and over 5,900 VAT subjects included.

Leveraging data from the society of thoracic Surgeons General thoracic database efforts of our French National database, and Mcmaster University thoracic surgical database over 8000 subjects were identified for analysis with over 2100 robotic assisted subjects and over 5900 that subjects included.

Speaker 2: After propensity score adjustments of the populations, the VATS patient showed a 15% rate of conversion to open compared to only 3% in the robotic cohort, which corresponded to risk of conversion five times higher for the VATS approach.

After propensity score adjustments of the populations the vast patient showed a 15% rate of conversion to open compared to only 3% in the robotic cohort, which corresponded to risk of conversion five times higher for the advanced approach and.

Speaker 2: In addition, the robotic assisted group demonstrated a shorter mean length of stay of approximately 0.7 days, 1% lower risk of respiratory failure, and were more likely to be discharged home after.

In addition, the robotic assisted group demonstrated a shorter length of stay of approximately 0.7 days, 1% lower risk of respiratory failure, and we're more likely to be discharged home after the procedure.

Speaker 2: Of note, this analysis is the first propensity-adjusted analysis comparing vats and robotic-assisted anatomic lung resection in obese patients, as well as the first to pool contemporary international patient-level data.

Of note. This analysis is the first propensity adjusted analysis, comparing that's in robotic assisted anatomic lung resection and obese patients as well as the first to pour contemporary international patient level data.

Speaker 2: The authors concluded in part, quote, overall these data suggest that obese patients with early stage non-small cell lung cancer undergoing minimally invasive anatomic lung resection with VATS have a higher rate of conversion to thoracotomy when compared to patients undergoing anatomic lung resection with robotic assisted surgery. Close quote.

The authors concluded in part quote overall these data suggest that obese patients with early stage non small cell lung cancer undergoing minimally invasive anatomic lung resection with bats.

Have a higher rate of conversion to thoracotomy, when compared to patients undergoing anatomic lung resection with robotic assisted surgery.

Quote.

I will now turn to our financial outlook for 2022.

Starting with procedures.

Speaker 2: As described in our announcement earlier this month, total 2021 da Vinci procedures grew approximately 28% year over year, and 14% at a two year compound annual growth rate to roughly 1,594,000 procedures performed worldwide.

As described in our announcement earlier. This month total 2021 da Vinci procedures grew approximately 28% year over year and 14% at a two year compound annual growth rate to roughly $1 million 594000 procedures performed worldwide.

Speaker 2: During 2022, we anticipate four-year procedure growth within a range of 11 to

During 2022, we anticipate full year procedure growth within a range of 11% to 15%.

Speaker 2: This range reflects the uncertainty associated with the course of the pandemic.

This range reflects the uncertainty associated with the course of the pandemic.

Speaker 2: The low end of this range assumes ongoing COVID pressure and hospital staffing shortages, while the high end assumes no significant new surges after the current.

The low end of this range assumes ongoing COVID-19 pressure and hospital staffing shortages, while the high end assumes no significant new searches after the current wave.

Speaker 2: In addition, this range does not contemplate any material supply chain disruptions throughout

In addition, this range does not contemplate any material supply chain disruptions throughout the year.

Speaker 2: We expect 2022 procedure growth to continue to be driven by U.S. general surgery and procedure growth in OUS markets, where we are at earlier stages of adoption.

We expect 2022 procedure growth to continue to be driven by U S General surgery and procedure growth in O U S markets, where we are at earlier stages of adoption.

Speaker 2: We expect similar seasonal timing of procedures in 2022, as we have experienced in previous years prior to COVID.

We expect similar seasonal timing of procedures in 2022, as we have experienced in previous years prior to Covid.

Speaker 2: Q1 being the seasonally weakest quarter as patient deductibles are reset.

Q1, being seasonally weakest seasonally weakest quarter as patient deductibles are reset.

Speaker 2: We expect Omicron to have a significant adverse impact on procedures in the

We expect <unk> to have a significant adverse impact on our procedures in the first quarter.

Speaker 2: With respect to revenue, as we have mentioned previously, capital sales are ultimately driven by procedure.

With respect to revenue as we have mentioned previously capital sales are ultimately driven by procedure demand catalyzing hospitals to establish or expand robotic system capacity.

Speaker 2: catalyzing hospitals to establish or expand robotic system capacity.

Speaker 2: Capital sales can vary substantially from period to period based upon many factors.

Capital sales can vary substantially from period to period based upon many factors, including U S. Healthcare policy hospital capital spending cycles reimbursement and government quotas product cycles economic cycles and competitive factors.

Speaker 2: including US healthcare policy, hospital capital spending cycles, reimbursement and government quotas, product cycles, economic cycles, and competitive factors.

Speaker 2: Within this framework, we'd expect 2022 capital placement seasonality to generally follow historical patterns by quarter, but could also be impacted by hospital staff shortages and the allocation of resources to managing current care.

Within this framework, we'd expect 2022 capital placement seasonality to generally follow historical patterns by quarter, but cros to be impacted by hospital staff shortages and the allocation of resources to managing current care.

Speaker 2: During Q3 and Q4, 40 percent and 30 percent, respectively, of

During Q3, and Q4, 40% and 30% respectively of systems placements involved trade ins of older systems to our da Vinci Si.

Speaker 2: placements involved trade-ins of older systems to our DaVinci XI.

Speaker 2: As we mentioned last quarter, we expect the volume of trade ends to be significantly lower in 2022 as compared to 2021.

As we mentioned last quarter, we expect the volume of trade ins to be significantly lower in 2022 as compared to 2021.

Speaker 2: Turning to gross profits. Our full year 2021 pro forma gross profit margin was 71.2.

Turning to gross profit our full year 2021 pro forma gross profit margin was 71, 2%.

Speaker 2: 2022, we expect our pro forma gross profit margin to be within a range of between 69.5% and 70.5% of net revenue.

In 2022, we expect our pro forma gross profit margin to be within a range of between 69, 5%.

75% of net revenue.

Speaker 2: The slightly lower gross profit margin anticipated in 2022 reflects higher fixed costs from investments to drive growth of the business.

The slightly lower gross profit margin anticipated in 2022 reflects higher fixed costs from investments to drive growth of the business.

Speaker 2: strengthen our operating capabilities, and also reflects the impact of higher supply quality.

Strengthen our operating capabilities and also reflects the impact of higher supply chain costs. Our actual gross profit margin will vary quarter to quarter, depending largely on product regional and trade in mix and the impact of new product introductions.

Speaker 2: Our actual gross profit margin will vary quarter to quarter depending largely on product, regional and trade-in mix, and the impact of new product introduction.

Speaker 2: Turning to operating expenses, in 2021, our pro forma operating expenses grew.

Turning to operating expenses in 2021, our pro forma operating expenses grew 19%.

Speaker 2: In 2022, we expect pro forma operating expense growth to be between 21% and 50%.

In 2022, we expect pro forma operating expense growth to be between 21% and 27%.

Speaker 2: The operating expense growth reflects increased investment in R&D for our new product platform.

The operating expense growth reflects increased investment in R&D for our new product platforms.

Speaker 2: expanding OUS capabilities, and the return of other spending that was previously restricted by COVID.

Expanding <unk> capabilities and the return of other spending that was previously restricted by Covid.

Speaker 2: We expect our non-cash stock compensation expense to range between $510 million and $110 million.

We expect our noncash stock compensation expense to range between $510 million to $550 million in 2022 compared to $452 million in 2021.

Speaker 2: $550 million in 2022 compared to $452 million in 2021. We expect other income.

We expect other income which is comprised mostly of interest income to total between $45 million and $55 million in 2022.

Speaker 2: total between $45 million and $55 million in 2022.

With regard to income tax in 2021, our pro forma income tax rate was 22, 2%.

Speaker 2: In 2021, our pro forma income tax rate was 22.2%.

Speaker 2: As we look forward, we estimate our 2022 performance tax rate to be between 22% and 24% of pre-tax income.

As we look forward, we estimate our 2022 pro forma tax rate to be between 22% and 24% of pre tax income with the increase primarily due to a change in U S tax treatment of certain expenditures that was enacted in 2017, but became effective on January one 2022.

Speaker 2: with the increase primarily due to a change in US tax treatment of certain expenditures that was enacted in 2017 but became effective on January 1st.

Speaker 2: Lastly, we'd like to highlight that our annual sustainability report will be available after this call on our investor relations website.

Lastly, we'd like to highlight that our annual sustainability report will be available. After this call on our Investor Relations website.

Speaker 2: In the latest report, we provide an overview of the current state of our sustainability strategy.

In the latest report we provide an overview of the current state of our sustainability strategy areas.

Areas of focus key actions taken over the past year to develop sustainable solutions that meet our customer needs in new ways.

Speaker 2: actions taken over the past year to develop sustainable solutions that meet our customer needs in new ways and our results.

And our results achieved to date.

Speaker 2: That concludes our prepared comments. We will now open the call.

That concludes our prepared comments, we will now open the call to your questions.

Speaker 3: Thank you. Ladies and gentlemen, if you do have a question, please press 1, then 0 at this time. You will hear acknowledgement that you've been placed in queue. You may remove yourself from queue at any time by pressing 1, 0 again. Once again, ladies and gentlemen, if you do have a question, please press 1, then 0 at this time.

Thank you ladies and gentlemen, if you do have a question. Please press. One then zero at this time you will hear acknowledgment that you've been placed in Q you may remove yourself from queue at any time by pressing one zero again once again, ladies and gentlemen, if you do have a question. Please press one then zero at this time.

Speaker 3: Our first question is going to come from the line of Larry Bigelstein from Wells Fargo. Please go ahead.

Our first question is going to come from the line of Larry <unk> from Wells Fargo. Please go ahead.

Speaker 11: Good afternoon. Thanks for taking the question. Two questions for me. Gary, I wanted to start with a high-level question. You started using the slogan at the point of possibility recently, and you've talked about, you know, being at the point of possibility to build, you know, what's needed next. Can you talk about, you know, why you started using this new slogan and, you know, what are the needs you're trying to address? And I had one follow-up.

Good afternoon, and thanks for taking the question.

Two questions for me, Gary I wanted to start with a high level question you started using the slogan at the point of possibility recently and you've talked about being at the point the possibility to build whats needed next can you talk about why you started using this new slogan and what are the needs.

You are trying to address and I had one follow up.

Speaker 5: You know, I think we have, thanks Larry, I think we have a broad opportunity as a company here to take the methods that we have designed around identifying clinical needs.

I think we have thanks, Larry I think we have a broad opportunity as a company here to take the methods that we have designed.

Around identifying clinical need.

Speaker 5: doing the design and development of tech-enabled ecosystems to address that.

Doing the design and development of Tech enabled ecosystems to address that need and then working with customers to deliver it and training and.

Speaker 5: and then working with customers to deliver it and train it. And there's, I think, long-term, a lot of opportunity. As we look out, there is substantial opportunity in existing markets and in new ones to do better for the Quad AIM. Doing this set, getting that set of ecosystem investments ready is a...

I think long term a lot of opportunity as we look out there is substantial opportunity in existing markets and in new ones to do better for the quality.

During this set getting that set of ecosystem investments ready is up.

Speaker 5: Heavy work, it's a multi-year effort. But we think we've shown that it can be done. And I think that's really what we're talking about here is the ability to start to impact other opportunities in interventional markets as we go forward. And Ion is such a great example of that.

Heavy work hits.

A multi year effort, but we think we've shown that it can be done and I think that's really what we're talking about here is the ability to start to impact.

Other opportunities in an interventional markets as we go forward and ion is such an example.

Speaker 11: Thanks for that, Cary. And, you know, it seems like so far you've mitigated potential supply constraints well. How are you trying to mitigate them going forward? And would you describe the situation as getting better or worse? And, you know, how concerned are you about that? Thanks for taking the question.

Thanks for that Gary and it seems like so far you've mitigated potential supply constraints well.

How are you trying to mitigate them going forward.

Would you describe the situation is getting better or worse.

How concerned are you about that thanks for taking the questions.

Speaker 5: Yeah, I'll take the top and then I'll let Jamie take some more. At the very top part, you know, it's kind of three big buckets. One of them is specific products themselves, semiconductors come to mind. The second bucket is some raw material constraints and the kinds of things we build. And the third is just logistics and motion of materials. Jamie, I'll let you fill in that perspective.

Yes kind of I'll take the top and then I'll, let Jamie take some more.

The top part is kind of three big buckets, one of them is specific products themselves semiconductors come to mind.

The second bucket is some raw material constraints in the kinds of things that we build and the third is just logistics.

<unk> materials.

Jamie I'll, let you fill in that perspective.

Speaker 1: Hey Larry, so I think we said in our prepared remarks, we saw the supply chain environment actually get worse in Q4, and we highlighted that we actually had some, as I called it, minor constraints on our ability to fulfill customer demand. You have a set of metrics there in the supply chain. One example we've given is on-time delivery from our suppliers was worse in Q4 as compared to Q3.

So I think we said in our prepared remarks, we saw the supply chain environment actually get worse in Q4, and we highlighted that we actually had some.

As I quoted minor constraints on our ability to fulfill customer demand you have a set of metrics there in the supply chain. One example, we've given is on time delivery from our suppliers with less in Q4 as compared to Q3.

Speaker 1: As you look forward, I'd say that at this point, visibility is still not great. Kind of the best read that we have is that Q1 will be similar-ish to Q4, but I think we have to see, wait and see what the impact of Omicron might be on our suppliers and just broadly.

As you look forward.

Say that at this point visibility is still not great.

The best read that we have is that Q1 will be similar to Q4, but I think the.

We have to see wait and see what the impact of a microphone might be on our suppliers and just broadly.

Speaker 1: And so I think we're continuing to navigate through it. As I said, our supply chain teams are really still in hand-to-hand combat every day working with our partners.

And so I think with.

Continuing to navigate through it as I said, our supply chain teams are really still in hand to hand combat everyday working with our partners.

Thanks for taking the questions.

Speaker 3: Our next question then will come from I know Geico Peterson from JP Morgan, please go ahead.

Our next question then will come from the line of Geico Peterson from JP Morgan. Please go ahead.

Speaker 6: You know, Gary, you've talked about being at the end of the replacement cycle for a little while now, and obviously you're, you know, retiring the S models. I'm curious, you know, how we should interpret, you know, that comment about being, you know, near the end of the replacement cycle. And as we think about maybe where you could be headed from an innovation standpoint, you know, is it all about kind of driving down the length of procedures, making procedures easier with less training and expanding into newer indications? Or maybe just, I'm curious if from a technology standpoint, if you could talk a little bit about at a high level where you're headed.

Hey, good afternoon.

Gary you've talked about being at the end of the replacement cycle for a little while now and obviously youre retiring the S models I'm curious, how we should interpret that comment about being near the end of the replacement cycle and as we think about maybe where you could be headed from an innovation standpoint is it all about kind of driving down the like the procedures, making procedures easier with less training and expand.

And the newer indications or maybe just I'm curious if from a technology standpoint, if you could talk a little bit about at a high level, where youre headed.

Speaker 5: Yeah, let's talk for a moment about replacement cycles. I think you're referring to the SI. Jamie had mentioned it in his prepared remarks and Brian had touched on it.

Yes, let's let's talk for a moment about replacement cycles, I think youre, referring to the Si.

Jamie had mentioned it in his prepared remarks, and Brian touched on it.

Speaker 5: I think they were pretty clear and I won't go through that. I do think that from a business model point of view, we don't think that we need to drive.

I think there they were pretty clear and I won't go through that I do think that.

From a business model point of view.

I think that we need to drive.

Speaker 5: capital upgrades on Intuitive's calendar to have a healthy business. What we look at is where can we drive the quadruple lane and how can we effectively do that.

Capital upgrades on intuitive calendar to have a healthy business. What we look at is where can we drive the quadruple aim and how can we effectively do that for our customers and in that setting we have been investing in.

Speaker 5: And in that setting, we have been investing in our Gen 4 platform and expansion. I talked about that in my prepared remarks as well. And it's been great for the customers and for us. That's not the only thing we'll do, but it's an important thing that we do.

Our Gen four platform and expansion I talked about that in my prepared remarks, as well and it's been great.

For the customers and for US that's not the only thing we will do but it's an important thing that we do.

Speaker 5: You had mentioned a little bit on the technology stack, what are the kinds of things we care about, and a lot of what we were driven by are what kinds of things can we do inside the body, in imaging, in informatics, that will dramatically change outcomes or the experience of the patients or the care team.

You had mentioned a little bit on the technology stack.

The kinds of things we care about.

A lot of what we're driven by or what kinds of things can we do inside the body in imaging and informatics that will dramatically change outcomes or the experience of the patients or the care team.

Speaker 5: And that has, you can see that in the kinds of things that we've brought to market. We have fantastic teams, we have things that we're working on that we have not yet discussed that we think will drive differences in outcomes. So it's not just working on new indications or just working on ease of use. I think those things are both important, but it's not limited to that. There are other things that are going on that we think can change the nature of our interactions.

And that's as you can see that in the kinds of things that we brought to market.

Have a fantastic teams, we have things that we're working on that we have not yet discussed that we think will drive differences in outcomes. So it's not just working on new.

New indications or just working on ease of use I think those things are both important but it is not limited to that there are other things that are going on that we think can change the nature of our interaction with tissue.

Speaker 1: and drive outcomes again and raise the bar there once more. Jamie, anything you'd want to add on the issue of SI replacement cycle? I would just maybe give you some numbers. In 2021, globally, we did about 510 trade-ins.

And drive.

Outcomes.

Again and raise the bar there once more.

Jimmy Thank anything you'd want to add on on the issue of our replacement cycle.

I would just maybe Houston.

<unk> in 2021 globally, we did about 510 trade ins.

Speaker 1: About 80%-ish of those were in the U.S. The U.S. has been driving those trade-ins.

About 80% ish of those were in the U S. U S has been driving those trade ins.

Speaker 1: And so then if you compare that to the remaining installed base of 343, it's why we provided the commentary that we expect overall trade in volume in 22 to be significantly lower than 21 just because the remaining installed base is being depleted.

So then if you compare that to the remaining installed base of 343.

Why we provided the commentary that we expect overall trading volume in 'twenty two to be significantly lower than 'twenty, one just because the remaining full bases being depleted.

Sure.

Speaker 6: Okay, that's helpful. And speaking of innovation, can you touch on some of the SP enhancements? You talked about 510 clearance for Extension of Life for some of the instruments. Can you just clarify exactly what you got?

Okay. That's helpful and speaking of innovation can you touch on some of the SP enhancements, you're just talking about 510 clearance for extension of life for some of the instruments can you just clarify exactly what you got through.

Speaker 1: Yes, we've received, obviously, customer feedback along the way since we launched SP, and some of our customers have asked for...

Yes, we've received obviously customer feedback along the way since we launched SP and some of our customers have asked for.

Speaker 1: greater ability to do extraction that's really around the range of motion

Our ability to do extraction, and that's really around the range of motion within the anatomy of our instruments that do extraction and grip strength as you because your grasp tissue, we've had customer feedback that we could improve the grip strength and so along with the extension of lives we responded to customer feedback.

Speaker 1: within the anatomy of our instruments that do extraction.

Speaker 1: and grip strength as you grasp tissue. We've had customer feedback that we could improve the grip strength. And so along with the extension of lives, we responded to customer feedback and improve the instruments accordingly as described.

<unk> improved the instruments Accordingly, as described we've done some other things too we have as you know dual console that helps with training new surgeons and teaching environments, we extended the dual console capability into the Sps space.

Speaker 5: We've done some other things, too. We have, as you know, dual console that helps with training of new surgeons in teaching environments. We extended the dual console capability.

Recently, we've.

Speaker 5: launched and then upgraded some of the accessories that go with SP. So part of the process, for those of you who have been with us for a while, is continuous innovation that these things don't end where they start.

Launched and then upgraded some of the accessories that go with SP. So part of the process for those of you have been with us for a while.

Continuous innovation that.

These things don't end, where they start.

And that's been true for SP.

Speaker 6: Great. One last one just on the headcount. You know, you started the call off, you know, highlighting all the additions last year. Should we think about a kind of similar magnitude of increase in 22?

Great. One last one just on the head count you started the call off highlighting all the additions last year should we think about that kind of similar magnitude of increase in 'twenty two.

Speaker 1: I think if you look at the OPEX increase range that Brian provided, I think you can kind of draw a correlation between how headcount has kind of correlated to spending increase and I think that's a relevant starting point for 22.

I think if you look at the Opex increase range that Bryan provided I think you can kind of draw a correlation between how head count is kind of correlated to spending increase in and I think thats. It.

The relevant starting point for 'twenty two.

Speaker 5: We also gave you a mix in the script of kind of where they're headed, you know, how much is R&D, how much is operations commercial, and that's not a bad guide either as to kind of where the mix is going.

We also gave you a mix and the script of kind of where they're headed how much is R&D how much is operations commercial and.

And that's not a bad guide either as to kind of where the mix is going.

Okay. Thank you.

Speaker 3: Our next question then will come from Amit Hazan from Goldman Sachs. Please go ahead.

Our next question that will come from the line of Amit <unk> from Goldman Sachs. Please go ahead.

Speaker 7: Oh, thanks. Hey, good afternoon. I'll start with a shorter term one and then then longer term one for Gary. Shorter term just on the first quarter just realizing the moving parts and it's fluid inside of the quarter, but

Thanks, Hey, good afternoon, I'll start with a shorter term one and then and then a longer term one for Gary.

Just on the first quarter just.

Realizing the moving parts and it's fluid inside of the quarter, but how much help can you give us as to what you've seen so far and how do we.

Speaker 7: How much help can you give us as to what you've seen so far? How do we, you know,

Speaker 7: model procedures in this environment. You said severely impacted, but we have to put a number out there. So I'm curious how much help you can give us for, you know, whether procedures are, you know, down at the moment or how much they're down. That would be terrific. And then also on capital, you know, if you're seeing anything quite yet in terms of, you know, delays in capital spending because of everything going on at hospital level and how we should think about 22 for capital spending relative to last year, what you feel the environment.

Model procedures in this environment, you said severely impacted but we got to we have to put a number out there. So I'm curious how much help you can give us for where the procedures are down at the moment or how much they're down that would be terrific and then also on capital.

If youre seeing anything quite yet.

Terms of delays in capital spending because of everything going on at hospital level and how we should think about 'twenty two for capital spending relative to last year like what you feel the environment is like.

Speaker 1: I mean, I'll give you a couple of data points. So, the greatest correlation we've seen historically on procedures is rates of hospitalizations.

I mean, I'll give you a couple of data points. So.

The greatest correlation we've seen historically on procedures is racing hospitalizations I believe currently U S hospitalizations related to COVID-19 or beyond any of the previous ways.

Speaker 1: I believe that currently U.S. hospitalizations related to COVID are beyond any of the previous waves.

Speaker 1: So I think you can kind of track how that's progressed so far and what some of the third parties are projecting for the remainder of the quarter. There's some modeling benefit to doing that. What I would point to is if you look at pre-COVID, so 2017-18-19,

You can kind of track how that has progressed, so far and what.

Some of the third parties are projecting for the remainder of the call.

Some modeling benefit to doing that.

One other point too is if you look at pre Covid. So 2017 18 19.

Speaker 1: the sequential change between Q4 and Q1 was about even, meaning it was about the same Q1 as Q4. So that's in a normal quarter. Most of the current wave will be in Q1. The impact of Omicron in Q4 was kind of later in the quarter. So I kind of start with a normal quarter would be flat sequentially, and then model the rest of Q1 based on just hospitalization rates.

Those.

Sequential change between Q4, and Q1 was about even meaning it was about the same Q1 is Q4. So that's in a normal course.

Most of the current wave will be in Q1.

The impact of <unk> in Q4 was kind of later in the call.

So I kind of start with our normal quote would be flat sequentially and then model. The rest of Q1 based on just hospitalization rates.

Speaker 1: With respect to capital, there's nothing at this point that we would call out. I do think that the combination of what's happening right now with COVID, along with staffing shortages, along with the extent to which the supply chain environment broadly could impact hospitals, could make it challenging for hospital capital spending. They may need to manage that more carefully in such an environment, but there's nothing specific that we would call out at this point. What was the third part of your question, Amit?

With respect to capital there is nothing at this point.

Pull out I do think that the.

Combination of what's happening right now with Covid, along with staffing shortages, along with the extent to which the supply chain environment broadly could impact hospitals could make it challenging for us.

Hospital capital spending they may they may manage that more carefully in such an environment.

There is nothing specific that we would call out at this point most of the third part of your question Amit.

Speaker 7: No, that was actually it. I just have a longer term one for for Gary on just just given some of your comments that you made. It just kind of brings up in my mind just to ask you about

And that was actually it may just have a longer term one for <unk>.

For Gary on just given some of your comments that you made I just.

Kind of brings up.

In my mind, just to ask you about what your thoughts generally are about a SaaS type model and more specifically the same now.

Speaker 7: what your thoughts generally are about a SaaS type model and more specifically to SIM Now. You know, we've talked to some of your customers, you know, over the past year or so and it seems like, you know, some of them are being charged for SIM Now software, somewhere around $20,000 a year in the service line. And so, you know, I wanted to see how you would frame that specific opportunity inside of kind of thinking about it with your install base and then more broadly and more importantly just to see...

He's got to some of your customers over the past year or so and it seems like some of them are being charged for steam that software's, you're somewhere around $20000 a year.

In the service line and so I wanted to see how you would frame that specific opportunity inside of kind of thinking about it with your installed base and then more broadly and more importantly, just to see if you could just talk to this kind of SaaS type of model and whether you will.

Speaker 7: If you could just talk to this kind of SaaS type of model and whether we'll be seeing more of these types of offerings from you in the future. Thanks.

Be seeing more of these types of offerings from you in the future. Thanks, so much.

Speaker 5: Sure. On the issue of kind of recurring revenue or or.

Sure.

On the issue of kind of recurring revenue or <unk>.

Speaker 5: service models versus kind of capital single charge. We have taken a posture of being really flexible with what our customer wants. There are some really nice things about as the transition, as the company has transitioned to a recurring model that customers can kind of choose when they're ready to engage us and it doesn't require a large upfront capital expenditure.

Service models versus kind of capital single charge.

We have taken a posture of being really flexible with what our customer wants.

There are some really nice things about as the transition as a company this transition to a recurring model that.

Customers can come to choose when they are ready.

To engage with us and it doesn't require large upfront capital expenditures.

Speaker 5: For some things that are inherently services and if you think about simulation, it's not really about the hardware in the case of simulation. It's really about access to modules.

For some things that are inherently services and if you think about simulation, it's not really about the hardware in the case of simulation, it's really about access to modules and modules that improve over time and modules that get built to be specific to competency based training.

Speaker 5: Modules that improve over time and modules that get built

Speaker 5: specific to competency-based training. Subscriptions make a lot of sense because you're not really trying to sell a piece of hardware you're really helping.

Subscriptions make a lot of sense, because you're not really trying to sell a piece of hardware you really helping them.

Speaker 5: develop a training program over time. So we think increasingly as our business in software and analytics

<unk> training program over time, so we think increasingly is as our business and software and analytics.

Speaker 5: some of the digital tools that we're bringing come up, then subscriptions may make sense. And to the extent that they align with customers, we're happy to do it. I also like the idea of recurring revenue in that it focuses the organization on earning the customer's business every day. That it's a lot less lumpy for them and it's a lot less lumpy for us.

Some of the digital tools that we're bringing come up then subscriptions may makes sense and to the extent that they align with customers we're happy to do it.

Also like the idea of recurring revenue in that it focuses the organization on earning our customers' business every day.

It's a lot less lumpy for them and it's a lot less lumpy for us.

Speaker 5: If we're bringing value and helping them achieve their quadruple-aimed goals, then they're happy to stay with us in those events. So I would expect that the recurring revenue portion of our business.

If we are bringing value in helping them achieve the quadruple aim goals then they're happy to.

Stay with us in those and those events. So I would expect that the recurring revenue portion of our business keeps creeping up as a percentage of total revenue over time, so long as customers are aligned to that that that makes sense from their finances point of view then that's what we'll pursue and to the extent that they are interested in other models and we're open minded.

Speaker 5: keeps creeping up as a percentage of total revenue over time.

Speaker 5: So long as customers are aligned to that, that that makes sense from their finances point of view, then that's what we'll pursue. And to the extent that they're interested in other models, then we'll pursue that.

Thank you.

Our next question will come from the line of Rick Wise from Stifel. Please go ahead.

Speaker 4: Good afternoon. Hi, Gary. I thought I'd follow up on a couple of things. You highlighted very specifically for both ION and DaVinci SP, this concept of margins aren't where they will be and, you know, over time you're going to bring the business to scale. I was wondering if you'd expand on that, maybe give us a flavor for where margins are now and

Hi, Good afternoon, Hi, Gary.

I thought I'd follow up on a couple of things.

You highlighted.

Very specifically for both ion and da Vinci SP.

This concept.

Margin.

They will be in.

Over time, Youre going to bring the business to scale.

I was wondering if you could expand on that.

Maybe give us a flavor for where margins are now in.

Speaker 4: you know, how do we think about, is this two years away? Is it five years away? How do we think about the trajectory going forward there?

How do we think about this two.

Two years away five years away, how do we think about.

The trajectory growing going forward there.

Speaker 5: Thanks for the question. On the, you know, kind of where we're headed, we look at those architectures and we think based on our experiences, understanding our supply chains, understanding what iterations in engineering and manufacturing look like, that both of those platforms should be able to hit historical norms in future years and not forever in future years.

Thanks for the question on the.

Where we're headed.

Look at those architectures, and we think based on our experiences understanding our supply chains understanding what iterations and engineering and manufacturing looked like that both of those platforms should be able to hit historical norms.

In the future years.

Forever in future years.

That said in the early innings here Europe , lower volumes relative to where youre going to be Youre also working through some manufacturing process improvements and doing some of the capital investments that you need to do in order to get unit cost down.

Speaker 5: in order to get units costs down. I'll look to Jamie in terms of characterizing kind of roughly where they are. SP is a little more mature product line in our hands in terms of manufacturing.

I'll look to Jamie in terms of characterizing kind of roughly where they are S.

SP is a little more mature product line in our hands in terms of manufacturing and our GM and her team over there are doing a really nice job identifying those opportunities and sequentially knocking them down overtime feels really good irons, a little earlier in and it's going through a little bit different growth ramp and so it's going to have to work its way down that process. Although you.

Speaker 5: And our GM and her team over there are doing a really nice job identifying those opportunities and sequentially knocking them down over time. It feels really good. I ended a little earlier, and it's going through a little bit different growth ramp, and so it's going to have to work its way down that process, although we also feel good about kind of the core architecture.

I also feel good about kind of the core architectures.

Speaker 5: that would give us some confidence that we could hit those objectives.

That would give us some confidence that we can hit those objectives Jamie.

Speaker 1: Jamie, anything that you would want to add? Rick, I would split the question kind of into two categories. There's gross margin, and then there's, let's call it, the equivalent of operating margin. On a gross margin basis, kind of the

Jamie anything that you'd want to add.

Rick I would split the question kind of into two categories. There's gross margin and then there is.

Let's call it the equivalent of operating margin on a gross margin basis kind of the actions.

Speaker 1: that we have to take to get both ion and SP to kind of let's call it target gross margins are well understood and it's really about execution over a period of time. A component of that will obviously be building scale.

We have to take to get both ion and SP to kind of let's call. It target gross margins are well understood and it's really about execution over a period of time a component of that will obviously be building scale.

Speaker 1: But I think those actions are well-defined. They're a multiple-year effort.

But I think those actions.

Ill defined there are multiple year effort on the operating margin side.

Speaker 1: On the operating margin side, it's really what's revenue in relation to the amounts that we're investing.

Really most revenue in relation to the amounts that we're investing.

Speaker 1: And that's obviously going to be a function of, in the case of ION, how we adopt in lung cancer biopsy over time. And with SP, it's the additional indications and new geographies in terms of clearances. I don't have a scale for when we might reach those corporate average margins. I would say, though, for 22, given that SP and ION are newer products, the gross margins there are diluted.

And that's obviously going to be a function of in the case of ion.

How we adopt in lung cancer biopsy overtime and with SP is the additional indications and new geographies in terms of clearances.

I don't have a scale.

And when we might reach those.

Corporate average margins I would say, though for 'twenty, two given the SP and ion on newer products. The gross margins that auto Newtubers you would you expect.

Speaker 4: Yeah. And just a thought from me.

Yes.

And just a follow up from me.

Speaker 4: I mean, it's clear you highlighted multiple times multiple ways that Asia performed well this quarter, if I understood you correctly, procedures, I think you said were robust. And I'm just thinking about that thought in conjunction with your comments about where you're investing. And it sounds like a lot of the investments were in Asia. And I was just wondering if we should just...

I mean, it's clear.

You highlighted.

Multiple ways that Asia performed well this quarter, if I understood you correctly procedures I think you said robust.

And I'm just thinking about that.

That thought in conjunction with your comments about where you are investing and it sounded like a lot of the investments were in Asia.

And I was just wondering if we should.

Yes.

Speaker 4: How do I ask this? Does this suggest that you're thinking as we look over the next three to five years that there's more growth for more growth opportunity for intuitive

Hello.

Does this suggest that you were thinking as we look over the next three years to five years that there is more growth for more growth opportunity for intuitive.

Speaker 4: in the Asia-Pacific region or – how do we – how do I think about those two facts and those initiatives, if that makes any sense? Thank you.

In the Asia Pacific region, or how do we.

How do I think about those two facts.

Initiatives, if that makes any sense. Thank you.

Speaker 5: I'd characterize it a little bit differently, Rick. The starting point on Asia, it is clearly an interesting market, country by country. We are making investments in Asia. I don't think I'd say that they are the dominant investments, but they're substantial because we think there's substantial opportunity there to make a difference in those markets. So it's a leg of growth, but not the only one. There are opportunities for us in other regions, whether it's in the U.S. or the U.S.

Yes.

I would characterize it a little bit differently.

<unk> point on Asia. It is it is clearly an interesting market country by country, we are making investments in Asia I don't think I would say that they are.

The dominant investments, but they're substantial because we think there is substantial opportunity there to make a difference in those in those markets.

So it's a leg of growth, but not the only one there are opportunities for us and other regions, whether it's Europe or elsewhere. There are also opportunities for us in other clinical indications and some of the clinical trial work, we're doing as well as the expansion of.

Speaker 5: Europe or elsewhere, there are also opportunities for us and other critical indicators.

Speaker 5: clinical trial work we're doing as well as the expansion of platforms.

Speaker 5: other technologies that we're working on. So I'd characterize it as one of the legs, not necessarily the dominant.

Platforms.

Other technologies that we're working on so I would characterize it as one of the legs not necessarily the dominant <unk>.

Speaker 1: Jamie, anything you would like to add? I would just say both regions are attractive to us. It's fair to say that, at least in the last couple of years, Asia procedure growth has been a little ahead of Europe . But on a strategic view, both of those regions are attractive and we're investing accordingly.

Amy anything you would like to add I would just say both regions are attractive to us.

Fair to say that.

And the last couple of years Asia procedure growth has been a little ahead of Europe , but on a strategic to both of those.

Regions are attractive and we're investing accordingly.

Thanks, so much.

Speaker 3: Our next question will come from Matt Taylor from UBS, please go ahead.

Our next question will come from the line of Matt Taylor from UBS. Please go ahead.

Hi, guys. Thanks for taking the question.

Speaker 12: So I wanted to ask one on innovation and one on competition. So on innovation, appreciate some of the color that you gave on multiport. And I guess I've also noticed that you've, on your website, been hiring a lot of folks.

So I wanted to ask one on innovation and one on competition. So on innovation I. Appreciate some of the color that you gave on multi port and <unk> also noticed that you have.

On your website and hiring a lot of folks.

Speaker 12: in kind of these endoluminal roles and looking at roles around things like note surgery. Could you talk about some of your investments there? Is there anything beyond what you're doing with FP and ION that we should look out for? And overall, are there any bigger...

In Canada and alumina all roles in looking at.

Rolls around things like note surgery could you talk about some of your investments there is there anything beyond what youre doing with SP and ion that we should look out for an overall are there any bigger.

Speaker 12: launches that we should expect this year, even if you're not going to tell them what they are.

Launches that we should expect this year, even if youre not going to tell them. What they are could you characterize what.

Speaker 12: cadence could look like of any kind of system upgrades or launch.

The cadence could look like of any kind of system upgrades or purchases.

Speaker 5: Yeah, on the – with regard to kind of forecasting future launches, of course, we won't give you any detail here. We'll launch them when we're ready to launch. In terms of the framing of your question, we are routinely developing applications for the platforms we have, whether it's –

Yeah on the.

With regard to kind of forecasting future launches of course, we won't give you any money.

Detail here, we'll launch them when we're ready to launch.

In terms of the framing of your question.

We are routinely developing applications for the platforms, we have whether it's very <unk> and thoracic surgery and our multi port.

Speaker 5: you know, bariatrics and thoracic surgery in our multiport indications to new indications in SP and, you know, we're doing some trials in thoracic surgery and colorectal to new opportunities in flexible robotics and ion.

Indications two new indications in SP, and we're doing some trials in thoracic surgery and colorectal to new opportunities in flexible robotics in Ireland.

And.

Speaker 5: and other platform investments that are currently not disclosed, the things that we're working on. So we're going to continue to do that. And some of them will come to fruition and be fantastic. And some of them may be things that we assess and then pivot as we learn more. So there's all of those things going on. And somebody was out scanning what we're hiring.

And other platform investments that are currently not disclose that things that were working on so we're going to continue to do that and some of them will come to fruition and be fantastic and some of them.

They may be things that we assess and then pivot as we learn more so there is all of those things going on and somebody was out scanning what we're hiring in scanning the kinds of patent applications. We have you will see a great diversity of things we're interested in and so a little bit like the first question on the on the call. When we say what are we talking about in terms of.

Speaker 5: scanning the kinds of patent applications we have, you'll see a great diversity of things we're interested in.

Speaker 5: It's a little bit like the first question on the call. When we say what are we talking about in terms of possibility, we really scour the acute intervention opportunity from the bottom of your feet to the top of your head and everything in between.

Possibility, we really scour.

The acute intervention opportunity from the bottom of your feet to the top of your head and everything in between.

Speaker 5: and start asking questions about whether we think there's a real opportunity for improvements in the Quad Aim and whether we could design a tech-enabled ecosystem to do something about it. And that's what informs a lot of that hiring. Some of it is nearer term in existing platforms and some of it's future-oriented on platforms that may come to pass. So that's it.

And start asking questions about whether we think there's a real opportunity for improvements in the quality and whether we could design a tech enabled ecosystem to do something about it and that's what informs a lot of that hiring some of it is nearer term in existing platforms.

Some of its future oriented on platforms that may come to pass so that's kind of how we think about it.

Speaker 8: Okay, thanks for that. And maybe just want to the competition. We'll give you one follow up.

Okay. Thanks for that and then maybe just one on the competition will give you will give you one follow up.

Speaker 12: Okay. Just on competition, you mentioned there's a potential for that to prolong selling cycles. It certainly doesn't seem like you're seeing any of that so far. Could you characterize whether there's been any change in the competitive environment, you know, to date versus a few quarters ago?

Okay.

Just on competition, you mentioned the potential for that to prolonged selling cycle and certainly doesn't seem like you're seeing any of that so far could you characterize whether there's been any change in the competitive environment to date versus a few quarters ago.

Speaker 1: Certainly, you can see that competition is active at accounts.

Certainly you can see the competition is active accounts.

Speaker 1: I think we've characterized that mostly as kind of reciprocal arrangements with respect to training center investments or reciprocal research investments.

I think we characterize that mostly as kind of a reciprocal arrangements with respect to.

Training Center invest.

Investments all reciprocal research investments.

Speaker 9: I don't think we call out any specific significant impact yet on selling cycles, but certainly you can see the potential for it over time. Great. Thanks, Jamie.

I don't think we call out any specific significant impact yet on selling cycles.

You can see the potential for over time.

Okay, great. Thanks, Jamie.

Alright, well. Thank you all of that was our last question in closing we continue to believe there is a substantial and durable opportunity to fundamentally improve surgery and acute interventions. Our teams continue to work closely with hospitals physicians and care teams in pursuit of what our customers have termed the quadruple aim.

Speaker 5: In closing, we continue to believe there is a substantial and durable opportunity to fundamentally improve surgery and acute intervention.

Speaker 5: Our teams continue to work closely with hospitals, physicians, and care teams in pursuit of what our customers have termed a quadruple aim.

Speaker 5: better, more predictable patient outcomes, better experiences for patients, better experiences for their care teams, and ultimately a lower total cost of care.

Better more predictable patient outcomes better experiences for patients better experiences for their care teams and ultimately a lower total cost of care.

Speaker 5: We believe value creation in surgery and acute care is foundationally human. It flows from respect for and understanding of patients and care teams, their needs and their environment.

We believe value creation in surgery and acute care is foundational in human.

It flows from respect for and understanding of patients and care teams their needs and their environment.

Speaker 5: At Intuitive, we envision a future of care that is less invasive and profoundly better, where diseases are identified earlier and treated quickly so patients can get back to what matters most.

At intuitive, we envision a future of care that is less invasive and profoundly better.

Rare diseases are identified earlier and treated quickly so patients can get back to what matters most.

Speaker 5: Thank you for your support on this extraordinary journey. We look forward to talking with you again in three months.

You for your support on this extraordinary journey, we look forward to talking with you again in three months.

Speaker 3: Ladies and gentlemen, that will conclude our conference for today. Thank you for your participation and for using the AT&T event services. You may now disconnect.

Ladies and gentlemen that will conclude our conference for today. Thank you for your participation for using AT&T event services you may now disconnect.