Q1 2024 Intuitive Surgical Inc Earnings Call
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Operator: Thank you everyone for standing by, and welcome to the Intuitive Q1 2024 Earnings Release Call. At this time, all participants are in a listen-only mode. If you wish to place yourself in queue for questions at any time, you may press 1 and 0 on your telephone keypad. You may remove yourself from the queue at any time by repeating the 1 and 0 command. As a reminder, today's call has been recorded. I will now turn the call over to our host, head of investor relations for Intuitive Surgical, Brian King. Please go ahead.
Speaker Change: Thank you everyone for standing by and welcome to the intuitive Q1, 'twenty 'twenty four earnings release call. At this time all participants are in a listen only mode. If you wish to place yourself in queue for questions at any time.
Speaker Change: You may push one zero on your telephone keypad, you may remove yourself from queue at any time by repeating the one zero command.
Speaker Change: As a reminder, today's call is being recorded I would now turn the call over to our host head of Investor Relations for intuitive surgical Bryan King. Please go ahead.
Brian King: Good afternoon, and welcome to Intuitive's first quarter earnings conference call. With me today are Gary Guthart, our CEO, and Jamie Samath, our CFO.
Brian King: Good afternoon, and welcome to intuitive as first quarter earnings Conference call with me today, we have Gary <unk>, our CEO and Jamie Smith, our CFO.
Brian King: Before we begin, I would like to inform you that comments mentioned on today's call may be deemed to contain forward-looking statements, and 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 Securities and Exchange Commission filings, including our most recent annual report on Form 10-K for the fiscal year ended December 31, 2023, and subsequent filings. Our SEC filings can be found on our website or at the SEC's website. Investors are cautioned not to place too much reliance on such forward-looking statements.
Speaker Change: 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.
Speaker Change: These risks and uncertainties are described in detail in our Securities and Exchange Commission filings.
Speaker Change: Including our most recent annual report on Form 10-K for the fiscal year ended December 31, 2023 and subsequent filings.
Speaker Change: 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.
Brian King: Please note that this conference call will be available for audio replay on our website at intuitive.com in the 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 first 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.
Speaker Change: Please note that this conference call will be available for audio replay on our website at intuitive dot com on the events section under our Investor Relations page.
Speaker Change: Today's press release, and supplementary financial data tables have been posted to our website.
Speaker Change: Today's format will consist of providing you with highlights of our first quarter results as described in our press release announced earlier today.
Speaker Change: All led by a question and answer session.
Speaker Change: Gary will present, the quarter's business and operational highlights Jamie will provide a review of our financial results.
Brian King: Jamie will provide a review of our financial results. Then I will discuss procedure and clinical highlights and provide our updated financial outlook for 2024. And finally, we will host a question and answer session. And with that, I will turn it over to Gary.
Jamie Smith: Then I will discuss procedure and clinical highlights and provide our updated financial outlook for 2024, and finally, we will host a question and answer session and with that I will turn it over to Gary.
Gary S. Guthart: Thank you for joining us today. The first quarter of 2024 was a solid one for Intuitive, where core measures of our business remained healthy, including solid procedure growth and capital placement. Furthermore, our teams delivered important milestones across several parts of our intuitive ecosystem, including launching our next generation multiport platform, DaVinci 5, launching our DaVinci SP platform in Europe, and improving our supply constraints for ion cathodes.
Thank you for joining us today.
Gary: The first quarter of 2024 was a solid one for intuitive where core measures of our business remains healthy, including solid procedure growth in capital placements.
Gary: Furthermore, our teams delivered important milestones across several parts of our intuitive ecosystem.
Gary: Including launching our next generation multi port platform Kubicki five.
Gary: Launching our da Vinci SP platform in Europe, and improving our supply constraints for ion catheters.
Gary S. Guthart: Some regional challenges existed in the quarter, which we'll describe today. However, taken together, we remain enthusiastic about our opportunity and will work through near-term pressures by focusing on what we can control. Starting first with procedures, we experienced solid growth in the quarter of 16% compared with a strong Q1 of 23 that was a result of elevated patient volume from the return of patients post-pandemic. Procedure performance was led by broad growth in general surgery in the United States and by procedures beyond urology outside the United States. Globally, cholecystectomy, colon resection, and foregut procedures led the way.
Gary: Some regional challenges existed in the quarter, which we'll describe today.
Gary: Taken together, we remain enthusiastic about our opportunity and we'll work through near term pressures by focusing on what we can control.
Gary: Starting first with procedures, we experienced solid growth in the quarter of 16%.
Gary: Compared with a strong Q1 of 'twenty three.
Gary: That was a result of elevated patient volume from the return of patients post pandemic.
Gary: Q1 of 2024 procedure performance was led by broad growth in general surgery in the United States and by procedures beyond urology outside the United States globally, Cholecystectomy colon resection and poor got procedures led the way.
Gary S. Guthart: Regional performance included strength in China, Germany and the United Kingdom. In Japan, we saw a moderation of growth in urology as we reach higher levels of penetration, and Q1 2023 benefited from the return of patients and backlog, in Korea, quote, was lower than our expectation, primarily due to a physician strike in the country, which began in February and has continued, Turning to capital, we placed 313 da Vinci systems in the quarter, of which 289 were multiport systems, compared with 302 multiport systems in Q1 of 2023.
Gary: Regional performance included strength in China, Germany, and the United Kingdom.
Gary: In Japan, we saw a moderation of growth in urology as we reach higher levels of penetration in Q1 2023 benefited from the return of patients in backlog.
In Korea, both was lower than our expectation primarily due to a physician strike in the country, which began in February and has continued.
Gary: Turning to capital, we placed 313 da Vinci systems in the quarter of which 289 were multiport systems compared with 302 multi port systems in Q1 of 'twenty three.
Gary S. Guthart: SP placements were 24 in the quarter versus 10 systems a year ago, and ion placements for the quarter were 70 versus 55 a year ago. Capital placements were solid in the United States, our global distribution markets, and in Germany. However, placements in China appear to be impacted by delayed tenders and an apparent increase in provincial preference for domestic robotic competition.
Gary: S. P placements were up 24 in the quarter versus 10 systems a year ago.
Gary: And I am placements for the quarter were 70 versus 55, a year ago.
Capital placements were solid in the United States, our global distribution markets and in Germany.
Gary: Placements in China appear to be impacted by delayed tenders and the apparent increase in perpetual preference for domestic robotic competition.
Gary S. Guthart: We saw some placement weakness in the UK as financial pressures in the NHS constrained access to capital. However, system utilization, defined as procedures per installed system per quarter, grew 1% globally year over year for our multiport platform. Lower than last quarter and our historical trend, a result of a strong placement year in 2023, in which the multiport clinical install base grew 14% while customers addressed a COVID-related backlog. For our newer platforms, utilization grew 10% for SP and 14% for ion in the quarters.
Gary: We saw some placement weakness in U K as financial pressures and the NHS constrained access to capital.
Gary: System utilization defined as procedures per installed system per quarter.
Gary: Grew 1% globally year over year for our multi port platform.
Gary: Lower than last quarter, and our historical trend. Our result of strong placement year in 2023, and which the multi port clinical install base grew 14% while customers address the COVID-19 related backlog.
Gary: For our newer platforms utilization grew 10% for S P and 14% for ion in the quarter.
Gary S. Guthart: Utilization is an important indicator of customer health and is a reflection of customers driving value from their system. Turning to our finances, revenue growth of 11% in the quarter reflects solid procedure performance in capital place. Average system selling prices declined modestly due to regional and product mix.
Gary: Utilization is an important indicator of customer health and is a reflection of customers driving value from their systems.
Gary: Turning to our finances revenue growth of 11% in the quarter reflect solid procedure performance and capital placements.
Gary: Average system selling prices declined modestly due to regional and product mix.
Gary S. Guthart: Product margins were within our expectations, reflecting a higher mix of newer platforms. However, operating expenses came in slightly below planned, resulting in pro forma operating profit growth of 18%. Jamie will take you through our finances in greater detail later in the call. In the quarter, we made good progress with our new platform. In March, we received FDA clearance for our next-generation multiport platform, DaVinci 5. During the quarter, we placed eight DaVinci 5 systems and surgically completed the first case.
Product margins were within our expectations, reflecting a higher mix of newer platforms.
Gary: Operating expenses came in slightly below plan, resulting in pro forma operating profit growth of 18%.
Gary: Jamie will take you through our finances in greater detail later in the call.
Jamie Smith: In the quarter, we made good progress with our new platforms.
Jamie Smith: In March we received FDA clearance for our next generation multi port platform da Vinci five.
Jamie Smith: Within the quarter, we placed eight da Vinci five systems and surging completed their first cases.
Gary S. Guthart: As we engage with customers during their activation of DAVINCI 5, our customers are noting and appreciating improved precision, improved imaging, improved efficiency for surgeons and staff, improved ergonomics, and they are exploring the potential of force feedback, where early surgeons are excited to test hypotheses about its procedural, clinical, and learning values. Digital Analytical Capabilities of DaVinci Five are also drawing positive reviews.
Jamie Smith: As we engage with customers during their activation of da Vinci five our customers are noting in appreciating improved precision improved imaging improved efficiency for surgeon and staff and <unk>.
Proved ergonomics and they are exploring the potential of force feedback where early surgeons are excited to test hypothesis about as procedural clinical and learning value.
Jamie Smith: Digital analytical capabilities of da Vinci fiber also drawing positive reviews.
Gary S. Guthart: In parallel with customer support, we're working hard to optimize our supply chains and manufacturing capabilities for DaVinci 5 components. We will remain in our measured rollout as we stabilize supply and respond to customer input. Turning to ION, our teams have made meaningful progress on resolving supply challenges for our catheter and ION's VisionPros, although work still remains to be done.
Jamie Smith: In parallel with customer support are working hard to optimize our supply chain and manufacturing capabilities for da Vinci five components.
Jamie Smith: We will remain in our measured rollout as we stabilize supply and.
Respond to customer input.
Jamie Smith: Turning to eye on our teams have made meaningful progress on resolving supply challenges for our catheter and ions vision probe.
Jamie Smith: Although work still remains to be done.
Gary S. Guthart: Earlier this month, FDA reviewed our set of design and production changes and cleared an increase in the ion catheter life from five lives to eight lives, alleviating some supply constraints while improving the economics for us and our customers. Also, in March, we received NMPA clearance for ION in China through a special review process for innovative medical devices. While NMPA clearance is only the first step toward commercialization in China, we believe IM can play an important role in helping to address the significant burden of lung cancer in the country.
Jamie Smith: Earlier this month FDA reviewed our set of design and production changes and cleared an increase and an eye on catheter lives from five lives to aid lives alleviate alleviating some supply constraints, while improving the economics for us and our customers.
Jamie Smith: Also in March we received N M P. A clearance for ion in China through a special review process for our innovative medical devices.
Jamie Smith: While the N P. A clearance is only the first step toward commercialization in China. We believe I am can play an important role in helping to address the significant burden of lung cancer in the country.
Gary S. Guthart: Attorney Task P, we received the CE mark in Europe with a broad set of indications in the quarter, and we played the state system. First cases in Europe will be performed this April, and we're encouraged by early customer interest in us. In closing, for 2024, our priorities are as follows. First, we'll support the measured launch of DaVinci 5 and our other new platforms by reaching... Second, we're focused on supporting surgeons' adoption of
Jamie Smith: Turning to S. P. We receive CE Mark in Europe, with a broad set of indications in the quarter and we placed eight systems first.
First cases in Europe will perform this April and we're encouraged by early customer interest for S. P.
In closing for 2024, our priorities are as follows first will support the measured launch of da Vinci, five and our other new platforms by region.
Jamie Smith: Second we're focused on supporting surgeons adoption of focus procedures.
Gary S. Guthart: Third, we're focused on improving our product margins and quality, and finally, we're focused on improving productivity and those functions that benefit from global scale. I'll now turn the time over to Jamie, who will take you through our finances in greater detail.
Jamie Smith: Third we're focused on improving our product margins and quality.
Jamie Smith: And finally, we're focused on improving productivity in those functions that benefit from global scale.
Jamie Smith: Now I'll turn the time over to Jamie who will take you through our finances in greater detail.
Jamie Smith: Good afternoon, I'll describe the highlights of our performance on a non-GAAP oil fulfillment basis I will also summarize our GAAP performance later in my prepared remarks.
Jamie E. Samath: Good afternoon. I will describe the highlights of our performance on a non-GAP or performer basis and will also summarize our GAP performance later in my prepared remarks. A reconciliation between our Proforma and GAP results is posted on our website. In Q1, da Vinci procedures grew 16%, the installed base of systems grew 14% to 8,887 systems, and Average System Utilization increased by 2%, lower than recent trends because of the strength in procedure growth and utilization in Q1 of last year that reflected a significant benefit from the treatment of patient backlog. U.S. procedures grew 14%, driven by broad growth in general surgery. Bariatric surgery procedure growth in the U.S. continued to moderate and was flat year over year.
Jamie Smith: A reconciliation between our pro forma and GAAP results is posted on our website.
Jamie Smith: In Q1 da Vinci procedures grew 16% the installed base of systems grew 14% to 8887 systems.
Jamie Smith: And average system utilization increased by 2%.
Jamie Smith: Lower than recent trends because of the strength in procedure growth and utilization in Q1 of last year that reflected a significant benefit from the treatment of patient backlogs.
Jamie Smith: U S procedures grew 14% driven by broad growth in general surgery.
Jamie Smith: Bariatrics procedure growth in the U S continued to moderate and was flat year over year.
Jamie Smith: O U S procedures grew 20%.
<unk> strong growth in general surgery and thoracic procedures.
Jamie Smith: Brian will provide additional detail on our clinical performance later in the call.
Jamie E. Samath: OUS procedures grew 20%, reflecting strong growth in general surgery and thoracic procedures. Brian will provide additional detail on our clinical performance later in the call. Turning to capital, we placed 313 systems in the first quarter compared to 312 systems in Q1 of last year. Excluding trading transactions, net new system placements grew 16% to 284 systems. In the U.S., we placed 148 systems in Q1, including 8 da Vinci 5 placements, paired with 141 systems placed in Q1 of last year.
Jamie Smith: Turning to capital we placed 313 systems in the first quarter compared to 312 systems in Q1 of last year.
Jamie Smith: Excluding trading transactions net new system placements grew 16% to 284 systems.
Jamie Smith: In the U S. We placed 148 systems in Q1, including eight da Vinci five placements.
Jamie Smith: 141 systems placed in Q1 of last year.
Jamie Smith: Given constrained supply of da Vinci five system placements, maybe choppy this year as some customers that are interested in da Vinci five decided whether to acquire a fourth generation system with an upgrade right or white for adequate supply.
Jamie E. Samath: Given the constrained supply of DaVinci 5, system placements may be choppy this year as some customers that are interested in DaVinci 5 decide whether to acquire a fourth-generation system with an upgrade right or wait for adequate supplies.
Jamie Smith: Outside the U S. We placed 165 systems in Q1, compared with 171 systems last year.
Jamie E. Samath: Outside the US, we placed 165 systems in Q1, compared with 171 systems last year. Current quarter system placements included 84 into Europe, 20 into Japan, and 10 into China, compared with 101 into Europe, 16 into Japan, and 18 into China in Q1 of last year. Placements in the UK were below our expectations and lower than Q1 last year because of the reallocation of NHS capital funding to help address industrial actions in the NHS. Placements in China continue to reflect the impact of domestic robotic competition and delayed tenders due to a broader central government focus on systematic governance across sectors, including healthcare.
Jamie Smith: Current quarter system placements included 84 into Europe.
Jamie Smith: <unk>, Japan, and 10 into China, compared with 101 into Europe, 16 inch Japan, and 18 into China of loss in Q1 of last year.
Placements in the U K were below our expectations and lower than Q1 last year because of the reallocation of NHS capital funding to help address industrial actions in the NHS.
Placements in China continues to reflect the impact of domestic route by competition and the late tenders due to a broader central government focus on systemic systematic governance across sectors, including health care.
Jamie Smith: First quarter revenue was $1.89 billion, an increase of 11% from last year on.
Jamie E. Samath: First quarter revenue was $1.89 billion, an increase of 11% from last year. On a constant currency basis, revenue growth was 12%. Additional revenue statistics and trends are as follows. Leasing represented 51% of Q1 placements compared with 42% in Q1 of last year. Given customer preference for our usage-based models in the U.S. and the launch of DaVinci 5, we continue to expect the proportion of systems placed under lease arrangements to grow over time. Q1 system average selling prices were $1.39m as compared to $1.47m last year. System ASPs were negatively impacted by regional and platform mix and lower pricing in China, partially offset by lower trade.
Jamie Smith: On a constant currency basis revenue growth was 12%.
Jamie Smith: Additional revenues statistics and trends are as follows.
Jamie Smith: Leasing representing 51% of Q1 placements compared with 42% in Q1 of last year.
Given customer preference for our usage based models in the U S and the launch of da Vinci five we continue we continue to expect the proportion of systems placed under lease arrangements to grow over time.
Jamie Smith: Q1 system average selling prices were $1 $39 million as compared to one point for $7 million last year.
Jamie Smith: System Asps were negatively impacted by regional and platform mix and lower pricing in China, partially offset by lower trade ins.
Jamie E. Samath: We recognized $29 million of lease buyout revenue in the first quarter compared with $21 million last quarter and $24 million last year. DaVinci Instrument and Accessory revenue per procedure was approximately $1,780, flat to last year and down $20 compared to last quarter. The sequential decline in INA per procedure is primarily a result of procedure mix in the U.S. given the strong growth in cholecystectomy and the moderation of growth in bariatrics.
Jamie Smith: We recognized $29 million of lease buyout revenue in the first quarter compared with $21 million last quarter and $24 million last year.
Jamie Smith: Da Vinci instrument and accessory revenue per procedure was approximately $1780 flat to last year and down $20 compared to last quarter.
Jamie Smith: The sequential decline in Iron a procedure is primarily a result of a procedure mix in the U S. Given the strong growth in cholecystectomy and the moderation of growth in bariatrics.
Jamie E. Samath: We've also seen larger IVNs in the U.S. look for operational efficiencies by reducing inventory. Turning to ION, there were approximately 19,500 ION procedures performed in the first quarter, an increase of 90% as compared to last year. Since launching the ION platform in 2019, on a cumulative basis, more than 100,000 procedures have now been performed.
Jamie Smith: We have also seen larger IV ends in the U S look for operational efficiencies by reducing inventory.
Jamie Smith: Turning to eye on that.
Jamie Smith: We're approximately 19500 I am procedures in the first quarter, an increase of 19% as compared to last year.
Jamie Smith: Since launching the iOS platform in 2019 on accumulative basis more than 100000 procedures have now been performed.
Jamie E. Samath: In Q1, we placed 70 ion systems compared to 55 in Q1 of 2023 and 44 last quarter. Q1 results reflected a partial recovery from last quarter as catheter supply improved. Our team continues to work on stabilizing supply of the catheter and vision probe.
In Q1, we placed 70 island systems compared to 55 in Q1 of 2023 and 44 last quarter.
Q1 results reflected a partial recovery from last quarter as catheter supply improved our team continued to work on stabilizing supply all of the catheter and division probe.
Jamie E. Samath: Q1 results included four ION system placements in the UK following European clearance last year. The installed base of ion systems increased 61% year-over-year to 604 systems, of which 244 are under operating lease arrangements. 24 of the systems placed in the quarter were SP systems, including 8 systems in Europe reflecting clearance early in the quarter. First Quarter SP Procedure Growth of 60%, with healthy growth in Korea and the U.S. and early stage growth in Japan. In the U.S., during the quarter, we completed a 510K submission for a thoracic indication, made continued regulatory progress toward a colorectal submission, and enrolled additional patients in our IDE for nipple-sparing mastectomy.
Jamie Smith: Q1 results included full ion system placements in the U K following European clearance last year.
Jamie Smith: The installed base of Iron systems increased 61% year over year to 604 systems of which 244 under operating lease arrangements.
24 of the systems placed in the quarter were SP systems, including eight systems in Europe, reflecting clearance early in the quarter.
First core SP procedure growth of 16% with healthy growth in Korea, and the U S and early stage growth in Japan.
Jamie Smith: In the U S. During the quarter, we completed a five 10-K submission for a thoracic indication made continued regulatory progress toward a colorectal submission and enrolled additional patients you know I D for nipple sparing mastectomy.
Jamie E. Samath: The SP installed base group 55% from the year-ago quarter to 201 systems. Moving on to the rest of the P&L, Proforma gross margin for the first quarter of 2024 was 67.6%, compared with 67.2% for the first quarter of 2023 and 68% last quarter. The sequential reduction in pro-forma gross margin primarily reflects higher fixed costs, including depreciation expense for expanded manufacturing capacity and higher costs associated with the launch of DaVinci 5. Our manufacturing and business unit teams made progress in the quarter on activities to improve gross margin over the medium term. This remains an area of key focus for us.
Jamie Smith: The SP installed base grew 55% from the year ago quarter to 201 systems.
Jamie Smith: Moving onto the rest of the P&L pro forma gross margin for the first quarter of 2024 was 67, 6% compared with 67, 2% for the first quarter of 2023, 68% last quarter.
Jamie Smith: The sequential reduction in pro forma gross margin, primarily reflects higher fixed costs, including depreciation expense for expanded manufacturing capacity and higher costs associated with the launch of da Vinci five.
Jamie Smith: Our manufacturing and business unit teams make progress in the quarter on activities to improve gross margin over the medium term.
Jamie Smith: This remains an area of key focus for us.
Jamie E. Samath: First quarter pro forma operating expenses increased 7% compared with last year, slightly lower than expectations due to the timing of certain expenses. Proforma Operating Expenses as a Percentage of Revenue were 140 basis points lower than Q1 last year, reflecting planned leverage in enabling functions. Partially offset by increased R&D to fund innovation and future growth, former other income was $72.5 million for Q1, higher than $67.1 million in the prior quarter, primarily due to higher interest income.
Jamie Smith: First quarter pro forma operating expenses increased 7% compared with last year.
Jamie Smith: Slightly lower than expectations due to the timing of certain expenses.
Jamie Smith: Pro forma operating expenses as a percentage of revenue were 140 basis points lower than Q1 last year, reflecting planned leveraging enabling functions, partially offset by increased R&D to fund innovation and future growth.
Jamie Smith: But on the other income was 7% to $2 $5 million for Q1.
Jamie Smith: And $67 $1 million in the prior quarter, primarily due to higher interest income.
Jamie E. Samath: Our performer's effective tax rate for the first quarter was 22.5%, consistent with our expectations. First quarter 2024 pro forma net income was $544 million, or $1.50 per share, compared with $444 million, or $1.23 per share for the first quarter of last year. I will now summarize our GAP results. Gap net income was $547 million, or $1.51 per share, for the first quarter of 2024, compared with $361 million, or $1 per share, for the first quarter of 2023.
Jamie Smith: Our pro forma effective tax rate for the first quarter was 22, 5% consistent with our expectations.
Jamie Smith: First call. It 2020 for pro forma net income was $544 million or $1 50 per share.
Jamie Smith: With $444 million or $1 23 per share for the first quarter of last year.
Jamie Smith: Yeah.
Speaker Change: I will now summarize our GAAP results.
Speaker Change: Net income was $547 million or $1 51 per share for the first quarter of 2024.
Speaker Change: Paired with GAAP net income of $361 million or dollar per share for the first quarter of 2023.
Speaker Change: First quarter GAAP tax expense was a benefit of $9 million, reflecting excess tax benefits associated with employee equity plans of $111 million.
Jamie E. Samath: First Quarter Gap Tax Expense was a benefit of $9 million, reflecting excess tax benefits associated with employee equity plans of $111 million. The adjustments between pro forma and gap net income are outlined and quantified on our website and include excess tax benefits associated with employee equity plans, employee stock-based compensation, amortization of intangibles, litigation charges, and gains and losses on strategic investments. We ended the quarter with cash and investments of $7.3 billion, flat to the end of last year. The sequential changes in cash included cash generated from operating activities offset by capital expenditures of $242 million and the net impact of employee equity plans of $46 million.
Speaker Change: The adjustments between pro forma and GAAP net income are outlined and quantified on our website and include excess tax benefits associated with employee equity plans.
Speaker Change: Stock based compensation amortization of intangibles litigation charges and gains and losses on strategic investments.
Speaker Change: We ended the call with cash and investments of $7 $3 billion.
Speaker Change: To the end of last year.
Speaker Change: The sequential changes in cash included cash generated from operating activities offset by capital expenditures of $242 million.
Speaker Change: And then the impact of employee equity plans are 46 $46 million.
Speaker Change: And with that I would like to turn it over to Brian.
Brian King: Thank you Jamie.
Brian King: Overall first quarter procedure growth was 16% year over year compared to 26% for the first quarter of 2023 and 21% last quarter.
Brian King: And with that, I would like to turn it over to Brian.
Brian King: Overall, first quarter procedure growth was 16% year over year compared to 26% for the first quarter of 2023 and 21% last quarter. In the U.S., first quarter 2024 procedure growth was 14% year over year, compared to 26% for the first quarter of 2023 and 17% last quarter. First quarter growth was led by procedures within general surgery, with strength and cholecystectomy, colon resection, and foregut procedures. Growth in bariatric procedures continued to moderate and was flat year over year.
Brian King: In the U S first quarter 2024 procedure growth was 14% year over year.
Brian King: Compared to 26% for the first quarter of 2023, and 17% last quarter.
First quarter growth was led by procedures within general surgery.
Brian King: Strength in cholecystectomy, colon resection and forgot procedures.
Brian King: Growth in Bariatrics procedures continued to moderate and was flat year over year.
Brian King: Outside of the U S first quarter procedure volume grew 20% compared with 28% for the first quarter of 2023 and 29% last quarter.
Brian King: Outside of the U.S., first quarter procedure volume grew 20 percent compared with 28 percent for the first quarter of 2023 and 29 percent last quarter. Over 70% of procedure volume growth was led by procedures beyond urology, with strength and colon resection, hysterectomy, and lung resection procedures. In Europe, first quarter growth continued to be led by general surgery and gynecology procedure categories. Germany and the U.K. performed best in the region, with both experiencing strong growth in colon and rectal resection and hysterectomy procedures. In Asia, growth in the first quarter was led by China, with strong procedure performance in urology and gynecology.
Brian King: Over 70% of procedure volume growth led by procedures beyond neurology with strength in colon resection, hysterectomies and lung resection procedures.
Brian King: In Europe first quarter growth continued to be led by general surgery, and gynecology procedure categories.
Brian King: Germany, and the UK procedure performance led the region with both experiencing strong growth in colon and rectal resection and hysterectomy procedures.
Brian King: In Asia growth in the first quarter was led by China with strong procedure performance in urology and gynecology procedures.
Brian King: Year over year procedure growth in the country benefited from a comparison period, where procedures are beginning to recover from COVID-19 during the first quarter of 2023.
In Japan, while we experienced a moderation in growth in urology overall procedure growth was healthy with strength in general surgery procedures, such as colon and rectal resection and gynecology procedures.
Brian King: Year-over-year procedure growth in the country benefited from a comparison period when procedures were beginning to recover from COVID during the first quarter of 2023. In Japan, while we experienced a moderation in growth in urology, overall procedure growth was healthy, with strength and general surgery procedures such as colon and rectal resection and gynecology procedures. Effective June 1, 2024, five additional procedures will be reimbursed in Japan, with two existing rectal resection procedures receiving an increase in reimbursement for equivalency to laparoscopic surgery.
Brian King: Effective June one 2024, five additional procedures will have reimbursement in Japan with two existing rectal resection procedures, receiving an increase in reimbursement for equivalency to laparoscopic surgery.
Brian King: The opportunity for these procedures is relatively modest but continues to support the adoption of minimally invasive robotic surgery across a growing set of procedures.
Brian King: Now turning to the clinical side of our business each quarter on these calls we highlight certain recently published studies that we deem to be notable.
Brian King: 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.
Brian King: The opportunity for these procedures is relatively modest but continues to support the adoption of minimally invasive robotic surgery across a growing set of procedures. Now, turning to the clinical side of our business. Each quarter on these calls, we highlight certain 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. In the first quarter of this year, Dr. Jaywon Choi and his team from the University of South Florida in Tampa, Florida.
In the first quarter of this year, Dr. J hwan, Choi and team from the University of South, Florida in Tampa, Florida.
Brian King: Published a meta analysis of randomized controlled trials, describing outcomes of robotic assisted abdominal pelvic surgery in the journal of surgical endoscopy.
Brian King: This analysis included a review of 50 publications published through April 2021 include.
Brian King: Included over 4800 patients from randomized controlled studies and covered a variety of abdominal pelvic surgical procedures.
Brian King: <unk> anti reflux, gastrointestinal colorectal urologic hernia repair and gynecologic procedures.
Brian King: They published a meta-analysis of randomized control trials describing outcomes of robotic-assisted abdominal pelvic surgery in the journal Surgical Endoscopy. This analysis included a review of 50 publications published through April 2021. Involved over 4,800 patients from randomized control studies and covered a variety of abdominal pelvic surgical procedures, including antireflux, gastrointestinal, colorectal, urologic, hernia repair, and gynecologic procedures. The authors compared robotic-assisted outcomes with those from both open and laparoscopic procedures. When compared to the open approach, robotic assistive procedures had lower rates of post-operative complications, with a 32% lower risk of post-operative complications across all procedures, as well as less estimated blood loss with a mean difference of 286.8 milliliters.
Brian King: The authors compared robotic assisted outcomes with those from both open and laparoscopic procedures.
Brian King: When compared to the open approach robotic assisted procedures had lower rates of post operative complications with.
Brian King: With a 32% lower risk of post operative complications across all procedures.
Brian King: As well as less estimated blood loss with a mean difference of $286 eight milliliters.
Brian King: Furthermore, length of stay was on average 1.7 day shorter for robotic assisted procedures.
Brian King: Relative to the laparoscopic approach rates of conversion to open for the robotic assisted group was approximately half the rate of the laparoscopic approach length of stay was also shorter for robotic assisted procedures.
Interestingly. The authors also reported an analysis on the impact of surgeon experience comparing inexperienced versus experienced surgeons.
Brian King: And found that the experienced robotic assisted surgeons have a lower risk of intra operative complications with significantly less risk in the experienced group as compared with the laparoscopic group as well as a lower risk of conversion to open for the experienced surgeon relative to the laparoscopic group with comparable operative.
Brian King: Furthermore, the length of stay was, on average, 1.7 days shorter for robotic-assisted procedures. Relative to the laparoscopic approach, rates of conversion to open for the robotic assistive group were approximately half the rate of the laparoscopic approach. Length of stay was also shorter for robotic-assisted procedures. Interestingly, the authors also reported an analysis of the impact of surgeon experience comparing inexperienced versus experienced surgeons and found that experienced robotic-assisted surgeons had a lower risk of intraoperative complications with significantly less risk in the experienced group as compared with the laparoscopic group, as well as a lower risk of conversion to open for the experienced surgeon relative to the laparoscopic group. Comparable Operative Times Compared to Laparoscopy with Experienced Surgeons
Brian King: <unk> compared to laparoscopy with experienced surgeons.
Brian King: The authors concluded in part that their results suggest robotic surgery may shorten length of stay and rates of conversion to open when compared to laparoscopy.
Brian King: They experienced mitigating potential differences in operating time, while improving rates of inter operate intraoperative complications and conversions to open surgery.
Brian King: In March this year Doctor, Nicole and already from the University of Texas, southwestern along with colleagues from other hospitals and data support from the intuitive health economics outcomes research team reported.
Brian King: Reported outcomes, describing the use of robotic technology and emergency general surgery cases.
Brian King: Published in Jama surgery. This analysis use the P. I N C. AI health care database, a database that collects data from over 800 facilities to identify adult patients undergoing urgent or emergent cholecystectomy colectomy, England on virtue ventral hernia repairs between 2013 in 'twenty.
Brian King: The authors concluded, in part, that their results suggest robotic surgery may shorten length of stay and rates of conversion to open when compared to laparoscopic surgery, with experience mitigating potential differences in operating time while improving rates of intraoperative complications and conversions to open surgery. In March this year, Dr. Nicole Lenardi from the University of Texas Southwestern, along with colleagues from other hospitals and data support from the Intuitive Health Economics Outcomes Research, reported outcomes describing the use of robotic technology in emergency general surgery cases.
Brian King: 'twenty one.
Brian King: For reference emergent procedures were described as those required for life threatening or potentially disabling conditions.
Brian King: Urgent procedures, where those were immediate intervention was needed and prioritized as first available.
Brian King: Over $1 million urgent or emergent procedures were identified during the study period. The use of robotic assisted surgery for all procedures experienced a 3.5 fold increase in cholecystectomy, a six fold increase for colectomy and 38 fold increase in inguinal hernia repairs, notably.
Brian King: Published in JAMA Surgery, this analysis used the PINC AI Healthcare Database, a database that collects data from over 800 facilities, to identify adult patients undergoing urgent or emergent cholecystectomy, colectomy, inguinal, and ventral hernia repairs between 2013 and 2021. For reference, emergent procedures were described as those required for life-threatening or potentially disabling conditions, while urgent procedures were those where immediate intervention was needed and prioritized as first available.
Brian King: <unk> in the robotic assisted approach corresponded to decreases in the open approach for these procedures.
Brian King: As well as a decrease in laparoscopy for cholecystectomy and colectomy procedures.
Brian King: Furthermore, a propensity score matched analysis demonstrated a lower risk of conversion to open for the robotic assisted approach when compared to laparoscopy.
Brian King: Cholecystectomy procedures with a 45% lower risk of conversion.
Brian King: To me with a 63% lower risk inguinal hernia repair with a 79% lower risk and ventral hernia repair with a 70% lower risk of conversion.
Brian King: Over 1 million urgent or emergent procedures were identified. During the study period, the use of robotic-assisted surgery for all procedures experienced a 3.5-fold increase in cholecystectomy, a 6-fold increase in colectomy, and a 38-fold increase in inguinal hernia repair. Notably, increases in the robotic-assisted approach corresponded to decreases in the open approach for these procedures, as well as a decrease in laparoscopy for cholecystectomy and colectomy procedures. Furthermore, a propensity score matched analysis demonstrated a lower risk of conversion to open for the robotic-assisted approach when compared to laparoscopy. Colostectomy procedures with a 45% lower risk of conversion, colectomy with a 63% lower risk, inguinal hernia repair with a 79% lower risk, and ventral hernia repair with a 70% lower risk of conversion.
Brian King: The authors concluded quote.
Brian King: The application of robotic surgery and emergency General surgery has steadily increased in the past decade, which is especially useful in older patients with several comorbidities.
As observed in this cohort study compared with laparoscopic surgery.
Brian King: Robotic surgery appears to have resulted in lower rates of conversion to open surgery from 2013 to 2021.
Brian King: Robotic surgery also leads to a shorter or comparable post operative length of stay in the hospital.
Brian King: Nevertheless, open surgery remains a key component for most emergency general surgery.
As robotic surgery continues to increase and emergency general surgery barriers to implementation need to be addressed and optimized through coordinated efforts across stakeholders and quote.
Speaker Change: I will now turn to our financial outlook for 2024.
Speaker Change: Starting with procedures.
Speaker Change: On our last call, we forecasted full year 2020 for procedure growth within a range of 13% and 16%.
Brian King: The authors concluded, quote, The application of robotic surgery in emergency general surgery has steadily increased in the past decade, which is especially useful in older patients with several comorbidities. As observed in this cohort study, compared with laparoscopic surgery, robotic surgery appears to have resulted in lower rates of conversion to open surgery from 2013 to 2021. Robotic surgery also leads to a shorter or comparable post-operative length of stay in the hospital. However, nevertheless, open surgery remains a key component of most emergency general surgery.
Speaker Change: We are now increasing our forecast and expect full year 2020 for procedure growth of 14% to 17%.
Speaker Change: The low end of the range assumes further weakness in bariatrics procedures, along with challenges in China from increasing provincial robotic competition and delayed tenders impacting capital placements and therefore procedure growth.
Speaker Change: We also assume there is no benefit of patient backlog in the year.
Speaker Change: At the high end of the range, we assumed bariatrics continues at flat to slightly positive growth rates and factors in China don't have a significant impact on our business in.
Speaker Change: In addition, we assume any backlog of patients would decline throughout the year.
Brian King: As robotic surgery continues to increase in emergency general surgery, barriers to implementation need to be addressed and optimized through coordinated efforts across stakeholders, end quote. I will now turn to our financial outlook for 2024, starting with procedures.
Speaker Change: Turning to gross profit.
Speaker Change: We continue to expect our pro forma gross profit margin to be within 67% and 68% of net revenue.
Speaker Change: Pro forma gross profit margin in 2024 reflects the impact of growth in our newer products da Vinci five ion and SP.
Brian King: On our last call, we forecasted full year 2024 procedure growth within a range of 13% and 16%. We are now increasing our forecast and expect full year 2024 procedure growth of 14% to 17%. The low end of the range assumes further weakness in bariatric procedures along with challenges in China from increasing provincial robotic competition and delayed tenders impacting capital placements and, therefore, procedure growth. We also assume there is no benefit from patient backlog in the year.
Speaker Change: And the impact of capital investments that will come on to support the growth of our business.
Speaker Change: 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 mix.
Speaker Change: Turning to operating expenses, we are holding our guidance for pro forma operating expense growth to be between 11% and 15%.
Speaker Change: We continue to expect our noncash stock compensation expense to range between $680 million to $710 million in 2024.
Speaker Change: We are holding our guidance for other income, which is comprised mostly of interest income to total between $290 million and $320 million in 2024.
Brian King: At the high end of the range, we assume bariatrics continues at flat to slightly positive growth rates and factors in China don't have a significant impact on our business. In addition, we assume any backlog of patients would decline throughout the year.
Speaker Change: With regard to capital expenditures, we continue to estimate a range of $1 billion to $1 $2 billion, primarily for planned facility construction activities.
Speaker Change: With regard to income tax there is no change to our guidance of 2020 for pro forma income tax rate to be between 22% and 24% of pretax income.
Brian King: Turning to Gross Profit, we continue to expect our pro forma gross profit margin to be between 67% and 68% of net revenue. The pro forma gross profit margin in 2024 reflects the impact of growth in our newer products, DaVinci 5, ION, and SP, and the impact of capital investments that will come on to support the growth of our business. Our actual gross profit margin will vary quarter to quarter depending largely on product, regional, and trade-in mix, and the impact of new products.
Speaker Change: That concludes our prepared comments, we will now open the call to your questions.
Speaker Change: Thank you now if you have not already done. So you May press, one then zero on your telephone keypad for questions.
Speaker Change: We will go to the first question at this time and that's from Robbie Marcus with JP Morgan. Please go ahead.
Robbie Marcus: Oh, great and congrats on a very nice quarter.
Robbie Marcus: Gary I was hoping you could touch on you know what surprised me. The most was the procedure volume off of a really difficult quarter here, 16%, maybe walk us through your view of what's driving it obviously you gave color on on some of the procedures, but.
Brian King: Turning to operating expenses, we are holding our guidance for performer operating expense growth to be between 11% and 15%. We continue to expect our non-cash stock compensation expense to range between $680 million and $710 million in 2024. We are holding our guidance for other income, which is comprised mostly of interest income, to total between $290 million and $320 million in 2024. With regard to capital expenditures, we continue to estimate a range of $1 billion to $1.2 billion, primarily for planned facility construction activities.
Robbie Marcus: It's a really strong number and what gives you the confidence that it's sustainable with the raised guidance for the rest of the year.
Robbie Marcus: Yeah, I'm going to turn that first question over to Jamie Thanks, Mark as Jamie Why don't you go and then I'll add a few thoughts thereafter.
Jamie Smith: Yeah, why we saw particular strength regionally was in.
Jamie Smith: The U S and.
Jamie Smith: The U K in particular.
Jamie Smith: What you also see in O U S markets as Brian described is this continuing growth in procedures beyond geology.
Jamie Smith: First is focused on cancer procedures colorectal thoracic hysterectomy.
Jamie Smith: Some early stage growth and benign in our international markets.
Jamie Smith: So the combination of those things I think.
Jamie Smith: We're behind the performance in Q1, and as you kind of look at then the inputs from the teams as we get feedback from our customers I think than we.
Brian King: With regard to income tax, there is no change to our guidance for the 2024 pro forma income tax rate, to be between 22% and 24% of pre-tax income. That concludes our prepared comments. We will now open the call to your questions.
Jamie Smith: We kind of reflect that in the rest of the guidance. Obviously the guidance is only up a point at the low and the high end of the range. So it's something we're watching carefully.
Speaker Change: No I think you got it.
Speaker Change: Yeah.
Speaker Change: Maybe just as a quick follow up at the Sages conference now.
Operator: Thank you. Now, if you have not already done so, you may press 1 then 0 on your telephone keypad for questions. We'll go to the first question at this time, and that's from Robbie Marcus, JP Morgan. Please go ahead.
Speaker Change: The Doctor feedback is phenomenal on da Vinci five.
Speaker Change: From Iran, and the doctors, we spoke to I was hoping that you could just give us some early feedback on what you've heard across the field.
Robbie Marcus: Oh, great. And congrats on a very nice quarter. Gary, I was hoping you could touch on, you know, what surprised me the most was the procedure volume in a really difficult quarter here, 16%. Can you walk us through your view of what's driving it? Obviously, you gave color on some of the procedures, but, you know, it's a really strong number. And what gives you the confidence that it's sustainable with the RAISE guidance for the rest of the year?
Doctor's willingness and hospitals willingness to not just add new systems upgrade that for you.
Speaker Change: And just like the Darren Thanks, a lot.
Darren: Yes in terms of early feedback we're hearing.
Speaker Change: I think what.
Darren: What we were hoping for in terms of our design intent.
Speaker Change: They are appreciating the improvements to precision and imaging.
Speaker Change: Two workflow and the teams.
Speaker Change: On a human factors design and user interface.
Speaker Change: <unk> commentary on ergonomics and.
Speaker Change: Force feedback is something that is new and we will create opportunities to really understand that.
Gary S. Guthart: Yeah, I'm going to turn that first question over to Jamie. Thanks, Marcus. Jamie, why don't you go first, and then I'll add a few thoughts thereafter.
Clinical implications of force application during surgery, I think that will be exciting and powerful over overtime.
Jamie E. Samath: Yeah, where we saw particular strength regionally was in the U.S. and the U.K., in particular. What you also see in O.U.S. markets, as Brian described, is this continuing growth in procedures beyond urology. That first is focused on cancer procedures, colorectal, thoracic, hysterectomy, some early So the combination of those things, I think, was behind the performance in Q1, and as you kind of look at the inputs from the teams, as we get feedback from our customers, I think we kind of reflect that in the rest of the year guidance. Obviously, the guidance is only up by a point at the low and the high end of the range, so it's something we're watching carefully.
Speaker Change: I think it's really hard for us sitting where we are today to predict.
Speaker Change: The depth and timing.
Speaker Change: Replacement cycle.
Speaker Change: We're excited I think that folks are excited about what's the potential of the product that Fedex is great.
Speaker Change: A lot of clinical indications and.
Speaker Change: And we're going to have some supply constraints here as we as we worked through our launch.
Speaker Change: Hey, Jamie I don't know, if there's anything you'd like to add to that.
Jamie Smith: No I think you've got it Gary.
Jamie Smith: Thanks Robert.
Speaker Change: We will go to the next line Larry <unk> Wells Fargo. Please go ahead.
Speaker Change: Protecting the question Ravi.
Larry: Robbie congratulations on a nice quarter here.
Larry: Two on <unk> five for me, maybe starting with Gary.
Gary S. Guthart: Yeah, I think you've got it.
Robbie Marcus: Maybe just as a quick follow-up, I'm at the SAGES conference now and, you know, the doctor feedback on Da Vinci 5 is phenomenal from our end and the doctors we spoke to. I was hoping you could just give us some early feedback on what you've heard across the field, doctors' willingness, and hospitals' willingness to not just add new systems but upgrade the fleet, and just what you've been hearing. Thanks a lot.
Larry: Supply constraints when do you expect those to be resolved how long into 2025 with the limited launch last and what will trigger the full watch.
Larry: Okay.
Larry: Larry Theres there are three things that are going on for us.
Larry Biegelsen: One of them is optimizing the supply chain.
Larry: Get making sure that we have the quality that we want that will for sure go through all of 'twenty four and some part of the early part of 'twenty five.
Gary S. Guthart: Yeah, in terms of early feedback, you were hearing, I think, what we were hoping for in terms of our design intent. They're appreciating the improvements to precision and imaging, to workflow, and the team's efforts on human factors design and user interface. Strong Commentary on Ergonomics, The Depth and Timing of a Replacement Cycle
Larry: So that's that's one the second thing is we want to incorporate feedback from our customers we want to make sure that we're adjusting the things that we need to adjust to make sure that we're highly satisfied and then the last thing is we have additional feature content and hardware improvements and other things that are planned that our design teams are going to.
Gary S. Guthart: We're excited. I think that folks are excited about the potential of the product. That said, XI is great. XI has a lot of clinical indications.
Larry: Executing on whether it's software or other updates or some of the things. We can do in imaging that we want to do is we as we bring it through so it's kind of a three part.
Jamie E. Samath: And we're going to have some supply constraints here as we work through our launch. Jamie, I don't know if there's anything you'd like to add to that. No, I think you've got it, Gary.
Larry: Set of activities and we think it's pretty well planned out.
Larry: I wouldn't expect big changes from our plan and if there are changes in the future then we will be sure to talk about them.
Larry Biegelsen: We'll go to the next line. Larry Biegelsen, Wells Fargo. Please go ahead.
Larry: That's helpful. Gary you haven't been specific about new indications that da Vinci five could open but can you help us understand what the features of our da Vinci five that could allow physicians to do new procedures and thanks for taking the question.
Larry Biegelsen: Thank you for taking the question. I'll echo Robbie's congratulations on a nice quarter here. Just two on DVT-5 for me. Maybe starting with Gary, the supply constraints, you know, when do you expect those to be resolved? You know, how long into 2025 will the limited launch last, and what will trigger the phone loss?
Gary: Yeah, our first thought here and bringing the system the market has been too.
Gary: Allow surgeons to go deeper into the existing indications we have already so.
Gary: The indications for da Vinci, five largely mirror the Si index indications that we had already.
Gary S. Guthart: Yeah, thanks, Larry. There are three things that are going on for us. One of them is optimizing the supply chain. Getting sure that we have the quality that we want that will for sure go through all of 24 and into some part of the early part of 25. So that's one.
Gary: But we do think that it will invite new surgeons and care teams into robotic assisted surgery I think it allows us to deepen our relationship with that customer base and we're excited about it.
Gary S. Guthart: The second thing is that we want to incorporate feedback from our customers. We want to make sure that we're adjusting the things that we need to adjust to make sure that they're highly satisfied. And then the last thing is we have additional feature content and hardware improvements and other things that are planned that our design teams are going to execute on, whether it's software or other updates or some of the things we can do in imaging that we want to do as we bring it through. So it's kind of a three-part set of activities.
Gary: In terms of core capabilities da Vinci five has some really core things.
Gary: Better imaging that right now today, it's better and we will get better over time.
Gary: Precision and high performance and tracking performance allows for really subtle.
Gary: Fine.
Gary: Surgical motions and then we think that's really powerful and it's core to core capability faster.
Gary: <unk> faster workflow opens new opportunities for people too. So we do think there are additional clinical indications we can pursue.
Gary S. Guthart: And we think it's pretty well planned out. I wouldn't expect big changes from our plan. And if there are changes in the future, then we'll be sure to talk about them.
Gary: We are evaluating them, we have not finalized on everything yet and likely they will require conversations with FDA. So we're not prepared at this time to tell you what they might be but as we get a little closer and worked through it then we'll we'll describe it once we've settled on the approach.
Larry Biegelsen: That's helpful. And Gary, you haven't been specific about new indications that DaVinci 5 could open, but can you help us understand what the features are of DaVinci 5 that could allow physicians to do new procedures and why? Thanks for taking the question.
Gary: And we will go to the next line of Travis Speed Bank of America. Please go ahead.
Travis Steed: I wanted to ask a little bit more color on the strong <unk> placements in the capital environment, even though how does the D V five lunch in.
Gary S. Guthart: Yeah, our first thought here and in bringing the system to market was to allow surgeons to go deeper into the existing indications we have already. So, the indications for DaVinci 5 largely mirror the XI and X indications that we have already. But we do think that it will bring new surgeons and care teams into robotic-assisted surgery. I think it allows us to deepen our relationship with that customer base, and we're excited about it.
Travis Steed: It sounded like the method change on system placements in 'twenty two 'twenty three I think our 2024 I think before it was system placements could be lower in 'twenty four and now it's just choppy. So does that mean, there's a chance that system placements are up in 2024.
Speaker Change: Yeah, Jamie why don't I.
Gary S. Guthart: In terms of core capabilities, DaVinci 5 has some really core things, better imaging that right now, today, it's better and will get better over time, precision and high performance and tracking performance allows for really subtle and fine surgical motions, and we think that's really powerful in its core capability, faster workflow, opens new opportunities for people too, so we do think there are additional clinical indications we can pursue, we are evaluating them, we have not finalized on everything yet, and likely they will require conversations with FDA, so we're not prepared at this time to tell you what they might be, but as we get a little closer and work through it, then we'll describe it once we've settled our way.
Jamie Smith: Go ahead.
Speaker Change: No Jamie we're going to take it I apologize.
Speaker Change: I think the first dynamic is trade ins give.
Speaker Change: Given the limited supply in D V five.
Speaker Change: Those placements will be during the measured launch focused on incremental placements. So not a lot of trade activity coming from D. V. Five and if you look at what's left in the installed base for Us Janice Tsai. He's got about 350 systems globally of which 50 are in the U S. So we do expect.
Speaker Change: Trading volumes to be down quite a bit in 'twenty four.
Speaker Change: With respect to our overall system placements I know, we made the comments on the last call, but generally we don't guide system placements. So well, let you run that through your models given the.
Speaker Change: The update your procedure guidance.
Speaker Change: Certainly.
Travis Steed: And we will go to the next line, Travis Speed, Bank of America. Please go ahead.
Speaker Change: We've acknowledged that placements could be choppy wawa constrained on D V. Five in Q1, we didn't really see.
Travis Steed: I wanted to ask a little bit more color on the strong XI placements in the capital environment, even ahead of the DV5 launch, and it sounded like the message changed on system placements in 2023, I think, or 2024. I think before it was that system placements could be lower in 2024. And now it's just choppy.
Speaker Change: Any customers pushing back on I don't want an exercise we want to wait for TV five but since the launch which obviously was only in March we've had our connect conference. We had sages this week of <unk>.
Speaker Change: Difficult number of surgeons and executives has now seen TV <unk> put their hands on it and so we're acknowledging that customers may choose to way, we don't have enough evidence of indication yet to see which way that will go.
Gary S. Guthart: So does that mean there's a chance that system placements will be up in 2024? See you later. Bye-bye.
Speaker Change: Great.
Maybe Gary if you could spend some time just kind of a bigger picture question on D V five and the capabilities. It brings to training being able to practice some of the edge cases, helping with Procter <unk> I'm just curious how you see the impact on robotic surgeon adoption and driving better outcomes from some of the <unk> training capabilities, that's going to roll out and how long some of this stuff actually.
Jamie E. Samath: No, Jamie, go ahead and take it. I apologize.
Jamie E. Samath: Yeah, I think the first dynamic is trade-ins. Given the limit of supply in DB5, those placements will be, during the measured launch, focused on incremental placements, so not a lot of trade activity coming from DV5. And if you look at what's left in the installed base for our third-generation SI, you've got about 350 systems globally, of which 50 are in the US.
Speaker Change: He's going to take.
Gary: In terms of raw capability, I think that it will help kill care teams acquired skills more quickly and it also helps them in the case.
Jamie E. Samath: So we do expect trading volumes to be down quite a bit in 24. With respect to overall system placements, I know we made comments on the last call, but generally, we don't guide system placements. So we'll let you run that through your models given the updated procedure guidance. But certainly, we've acknowledged that placements could be choppy while we're constrained on DV5. In Q1, we didn't really see any customers pushing back on, "I don't want an XI, we want to wait for DV5.
As you can kind of think of that as context sensitive help.
Gary: Nice.
Gary: Is kind of aware of where it is and what it's doing and Ken.
Gary: Share that information with the care team, so that as they're doing things, whether it's changing tools are setting it up.
Gary: It provides.
Gary: Real time help to help guide them through it and I think that's a really good thing it just makes it easier to use.
Gary: Our.
Gary: Intuitive hub has integration technologies that start with da Vinci, five and we will get better over time as we release software updates and hardware updates and so that starts to close an analytical loop for our customers from what they're seeing in the case too.
Jamie E. Samath: But since the launch, which obviously was only in March, we've had our Connect conference, we've had SAGES this week, a significant number of surgeons and executives have now seen DV5 and put their hands on it, so we're acknowledging that customers may choose to wait. We don't have enough evidence or indication yet to see which way that will go.
Gary: Video review to video analytics.
Gary: To feeding back information to their to their phones and their laptops and whatever their their means are consuming that data. It was and so that gives them an analytical loop, which should also help.
Gary S. Guthart: Great. And maybe, Gary, if you could spend some time on just kind of a bigger picture question on DV5 and the capabilities it brings to training, you know, being able to practice some of the edge cases, and helping with proctoring. I'm just curious how you see the impact of robotic surgery adoption and driving better outcomes from some of those DV5 training capabilities that are going to roll out and how long some of this stuff is actually going to take.
Gary: And we will also continue to evolve our simulation training and some of our.
Gary: Other packages, our online learning that will help them as well. So I think all of this is going to take a little bit of time, but I think the design concept I think our designers did a beautiful job I think the design concept of integrating these ideas, making it easy for care teams for surgeons to follow that journey should help us final point I'll make.
Gary S. Guthart: In terms of raw capability, I think that it will help care teams acquire skills more quickly, and it also helps them in the case. You can kind of think of that as contact-sensitive help. The device is kind of aware of where it is and what it's doing and can... We share that information with the care team so that as they're doing things, whether it's changing tools or setting it up, it provides real-time help to help guide them through it. And I think that's a really good thing.
Gary: Is that in our labs and enduring.
Gary: Early experience with da Vinci five it looks like forced reflection helps a novice to new to robotics, new robotic assisted surgery require their skills faster.
Gary: So it should invite more surgeons in and ease their journey.
Gary: It remains to be proven it it's not it's not done and done, but we think it's encouraging and so stay tuned I think keep asking that question is do they just start to come out will be pleased to share with you.
Gary S. Guthart: It just makes it easier to use. Our intuitive hub has integration technologies that start with DaVinci Five and will get better over time as we release software updates and hardware updates. And so that starts to close an analytical loop for our customers from what they're seeing in the case to video review, to video analytics, to feeding back information to their phones and their laptops and whatever their means of consuming that data is.
Gary: Great to see him congrats.
Speaker Change: Okay, and we'll go to the next slide.
Speaker Change: Rick Wise Stifel. Please go ahead.
Rick Wise: Good afternoon, Hi, Gary.
Rick Wise: Maybe.
Rick Wise: It would be helpful to hear a little more detail.
Rick Wise: Your thoughts on a couple of points.
Gary S. Guthart: And so that gives them an analytical loop, which should also help. And we'll also continue to evolve our simulation training, and some of our other packages are online learning that will help them as well. So I think all of this is gonna take a little bit of time, but I think the design concept, I think our designers did a beautiful job. I think the design concept of integrating these ideas, making it easy for care teams, and for surgeons to follow that journey will help us.
Rick Wise: Some of the headwinds bariatrics flat year over year I wasn't sure completely what I was hearing about trends is it getting worse still.
Rick Wise: There is the rate of pressure easing.
Rick Wise: I appreciate you talking about the guidance you talked about.
Rick Wise: Our range.
Rick Wise: Given the range of outcomes, but I try to make sure I understood. What you were seeing.
Speaker Change: Yeah, Let me share my perspective, Rick Thanks for the question and then Brian I'll kick it to you to talk about the range.
Gary S. Guthart: The final point I'll make is that in our labs and during our early experience with DaVinci 5, it looks like force reflection helps novices, new to robotics, new to robotic-assisted surgery, acquire their skills faster. So it should invite more surgeons in and ease their journey. It remains to be proven, it's not done and dusted, but we think it's encouraging. And so stay tuned. I think keep asking that question, and as the data starts to come out, we'll be pleased to share. Great, can't wait to see you in Chicago.
Speaker Change: I think what we can tell you is what we see and what we've seen is continued deceleration such that it's flat year over year.
Speaker Change: There are a lot of opinions out in the field and we can all talk to them I think they were healthy as nobody really knows yet we're gonna have to look through it together and as a result, it is going to be dynamic.
Speaker Change: We do know that bariatrics surgery is is well tolerated and it's a good option and then we also know that people are interested in the pharmaceuticals.
Speaker Change: And that the pharmaceutical circles work as long as you take them for a subset of the population and then stop working if you don't.
unknown: Great, can't wait to see you, and congrats.
Rick Wise: Okay, and we'll go to the next line. Rick Wise, Stiefel. Please go ahead.
Speaker Change: That means for future surgery, I think there's a range of opinions and.
Rick Wise: Good afternoon. Hi Gary.
Speaker Change: Would not hang.
Gary S. Guthart: Maybe it would be helpful to hear in a little more detail your thoughts on a couple of points that may be some of the headwinds. Bariatrics is flat year over year. I wasn't sure completely what I was hearing about trends. Is it getting worse still? I appreciate that, when talking about the guidance, you talked about a range, you know, given the range of outcomes, but I want to make sure I understood what you were saying.
Speaker Change: A lot of confidence on any of them just yet and that's why we have a range and Brian perhaps you can just touch on.
Brian King: How you see bariatric surgery affecting the range just reiterate that if you would.
Brian King: Sure.
Brian King: And just to reiterate again.
The low end of the range assumes that there is further weakness and bariatrics bariatric procedures right. So at the low end of the range further weakness in bariatrics procedures at the high end of the range, we assume that Barry <unk> continues at flat to slightly positive growth rates and I think again to Gary's point it will be dynamic and we're just gonna have to see how it plays.
Gary S. Guthart: Yeah, let me share my perspective. Rick, thanks for the question. And then, Brian, I'll kick it to you to talk about the range.
Speaker Change: Throw out here.
Okay great.
Gary S. Guthart: You know, I think what we can tell you is what we see, and what we've seen is continued deceleration such that it's flat year over year. There are a lot of opinions out in the field, and we can all talk to them. I think the reality is that nobody really knows yet. We're going to have to live through it together.
And let me.
Speaker Change: Turning to.
Speaker Change: Some of the new and incremental features you talked about Gary.
Gary: I'm sure all of US on the call have been talking to doctors that'd be hearing a variety of additional features some sound quite compelling.
Speaker Change: Can you give us any flavor I think first of all I'd be happy to hear from you what some of them could be but.
Brian King: And as a result, it's going to be dynamic. We do know that bariatric surgery is well tolerated, and it's a good option. And we also know that people are interested in pharmaceuticals and that pharmaceuticals work as long as you take them for a subset of the population and then stop working if you don't. What that means for future surgery, I think there's a range of opinions. I would not hang a lot of confidence on any of them just yet, and that's why we have a range. And Brian, perhaps you could just touch on how you see bariatric surgery affecting that range. Just reiterate that, if you would.
Speaker Change: How quickly given what you know today.
Speaker Change: When could we see those features.
Speaker Change: Again, I would assume would enhance the value or are we going to see them. This year second half or is it more likely that's something for next year as you would get supply chain where are you.
Speaker Change: You want it to be thank you.
Speaker Change: Yes, I think that as we add capabilities in time, we have some imaging things that we want to do we have some things in terms of.
Brian King: And just to reiterate again, the low end of the range assumes that there's further weakness in bariatric procedures, right? So at the low end of the range, there's further weakness in bariatric procedures. At the high end of the range, we assume that bariatrics continues to grow at flat to slightly positive growth rates. And I think, again, to Gary's point, it will be dynamic, and we're just going to have to see how it plays out throughout the year.
Speaker Change: Software upgrades and analytics power and some things we're going to do in terms of integration.
Speaker Change: That's much more likely to be 25, and later than 'twenty for a lot of 24 will be making sure that we and our suppliers feel great about what we've got in and then adapting to any immediate feedback that we see.
And we will go to the next line Adam mater.
Rick Wise: Okay, great. And let me turn to some of the new and incremental features you talked about, Gary. I'm sure all of us on the call have been talking to doctors. I've been hearing a variety of additional features. Some sound quite compelling. Can you give us any flavor? I mean, first, I'll be happy to hear from you what some of them could be.
Sandler: Sandler. Please go ahead.
Good afternoon, and thank you for taking the questions and congrats on the nice quarter.
I wanted to start by asking about the force feedback instruments I was hoping Gary you could share a little bit.
Adam Sandler: More color on the feedback that you're getting from clinicians thus far into launch.
Gary S. Guthart: But how quickly, given what you know today, when could we see those features that, again, I would assume would enhance the value? Are we going to see them this year, in the second half? Or is it more likely that's something for next year as you get the supply chain where you want it to be? Thank you.
Adam Sandler: And then if I understand correctly you have six force feedback instruments that are used.
Adam Sandler: Cross different.
Adam Sandler: Common procedures.
Adam Sandler: Look to expand the portfolio of that technology going forward and if so what might that look like and then I had a follow up thank you.
Speaker Change: Sure, we're getting a variety of feedback on the instruments themselves. Just a reminder for everyone that they have.
Gary S. Guthart: Yeah, I think as we add capabilities over time, we have some imaging things that we want to do. We have some things in terms of software upgrades and analytics power, and some things we want to do in terms of integration. That's much more likely to be 25 and later than 24.
Speaker Change: Have a very sensitive sensors that are built into the distal end in the body and of the instruments that are.
<unk> and <unk> and they report back.
Speaker Change: Contact forces with tissue, which.
Speaker Change: At a sensitive way, which has been a goal for us and for surgery for a long time. So it's a hard technology, we've been really excited to bring it to market.
Gary S. Guthart: A lot of 24 will be making sure that we and our suppliers feel great about what we've got and then adapting to any immediate feedback that And we will go to the next line, Adam Maeder, Piper Sandler, please go ahead. Good afternoon. Thank you for taking the questions and congratulations on a nice quarter. I wanted to start by asking about force feedback.
Speaker Change: We will hear everything from Hey, I'm getting great results with da Vinci X and XI today that has very limited version of haptics. It really doesn't have an body sensing it does have a little something but it's not.
Speaker Change: It's not sensing in a technical sense.
Adam Maeder: And we will go to the next line. Adam Maeder, Piper Sandler. Please go ahead.
Speaker Change: And that's true they're getting great results. So it's a new sense that said.
Gary S. Guthart: Sure. We're getting a variety of feedback on the instruments themselves. Just a reminder for everyone, they have very sensitive sensors that are built into the distal end of the instruments that are Contact Forces with Tissue in a Sensitive Way, which has been a goal for us and for surgery for a long time. So it's a new technology. We've been really excited to bring it to market. We will hear everything from, hey, I'm getting great results with da Vinci X and XI today.
Speaker Change: People are quite interested to explore where it will take them and what's interesting is that when you're using a <unk> sensing instrument. It's sensing whether you turn on force reflection into the surgeon's hands or not so the surgeon can feel they can turn it on or they can turn it off but still measure so that they have the feeling.
Speaker Change: Experience of an extra <unk> Si.
Speaker Change: And what they find when they turn it on and off is that the.
Speaker Change: The amount of force that they apply during surgery to tissue decreases when force.
Gary S. Guthart: It has a very limited version of haptics. It really doesn't have in-body sensing. It does have a little something, but it's not sensing in a technical sense. And that's true.
Speaker Change: Reflection into the hands is on.
Speaker Change: And so the big question is.
Speaker Change: What's the clinical value of that what will be the implications for for patient outcomes by procedure and by technique and Thats, what theyre going to go explore and we will help them do that exploration.
Gary S. Guthart: They're getting great results, so it's a new sense. That said, people are quite interested to explore where it will take them. And what's interesting is that when you're using a force-sensing instrument, it's sensing whether you turn on force reflection in the surgeon's hands or not. So the surgeon can feel it. They can turn it on, or they can turn it off but still measure so that they have the feeling experience of an X or an XI. And what they find when they turn it on and off is that the amount of force that they apply during surgery to tissue... decreases when force reflection into the hands is on.
Speaker Change: So now we're talking about the future of what could happen I suspect I believe this is a personal opinion, there will be types of procedures and types of patients where.
Speaker Change: Having lower for us.
Speaker Change: The tissue during the surgery is going to be clinically meaningful and we have to go prove that so I think it was quite interesting.
Speaker Change: The technology is sophisticated we are with our manufacturing partners learning how to make these at scale with good yield and robust.
Speaker Change: It's a worthy endeavor, but it is not easy and we're going to focus on it and make sure that we get what we want we want to make sure we have robust and high yield products, we want to extend their lives to help the economics of our customers and our economics. So that is our first focus.
Gary S. Guthart: And so the big question is, what's the clinical value of that? What will be the implications for patient outcomes by procedure and by technique? And that's what they're going to go explore, and we will help them do that exploration. So now we're talking about the future, what could happen. I suspect, I believe this is a personal opinion. There will be types of procedures and types of patients where having lower force applied to tissue during the surgery is going to be clinically meaningful, and we have to go prove that.
As to the six instruments I'm going to look to Jamie as to whether the six number is right I think it is certainly overtime, we have the opportunity to extend it to other instruments, but that first set of six are the ones that we thought were right six is the right number Jamie.
Jamie Smith: And it's a combination of grasp is and needle drivers and those instruments are used in very common tasks, those section with traction and and suturing.
Gary S. Guthart: So I think it's quite interesting. The technology is sophisticated. We are, with our manufacturing partners, learning how to make these at scale with good yield and robustness. It's a worthy endeavor, but it is not easy, and we're going to focus on it to make sure that we get what we want. We want to make sure we have robust and high-yield products, and we want to extend their lives to help the economy of our customers and our economy.
Jamie Smith: Thanks, Adam.
Speaker Change: All right. We'll go to the next line on drew Ranieri Morgan Stanley. Please go ahead.
Andrew Christopher Ranieri: Taking the questions maybe just on SP for a moment, but the indication expansion in Europe can you talk about that a bit more Gary.
Andrew Christopher Ranieri: I was hearing from a surge in the day that the Crs a conference in November in Rome could be pretty important for just getting broader adoption.
Gary S. Guthart: So that is our first focus. As to the six instruments, I'm going to look to Jamie as to whether the sixth number is right. I think it is. Certainly, over time, we have the opportunity to extend it to other instruments. But that first set of six are the ones that we thought were right. Six is the right number, Jamie? Yes, and it's a combination of...
Andrew Christopher Ranieri: From European Surgeons, but does that inform how you could approach the U S market with a broader indication and then I just have a follow up.
Speaker Change: Yeah, Yeah, I'm actually here in Europe have been for the last couple of weeks talking to.
Speaker Change: SP surgeons here.
Speaker Change: I think the early.
Uptake in early excitement is quite palpable.
Jamie E. Samath: It is, and it's a combination of graspers and needle drivers, and those instruments are used in very common tasks such as dissection, retraction, and suturing.
Speaker Change: We've had brought indications as you know in Korea, and now Japan, we've seen.
Speaker Change: Nice uptake and adoption and and good study good clinical study.
Andrew Christopher Ranieri: Alright, we'll go to the next line. Andrew Ranieri, Morgan Stanley, let's go ahead.
Speaker Change: I think that.
Speaker Change: The surgeons here are building on that they're they're learning from and adapting what they see in the rest of the world.
Gary S. Guthart: Let's take the questions maybe just on SP for a moment with the indication expansion in Europe. Can you talk about that a bit more, Gary? And I was hearing from a surgeon today that the CRSA conference in November in Rome could be pretty important for just getting broader adoption from European surgeons. But does that inform how you could approach the U.S. market with a broader indication? And then I just had a follow-up question.
Speaker Change: And getting and getting excited about it so I'm encouraged.
Speaker Change: How deep that goes it's still early days here in Europe, we will we will see.
We're starting to see fairly long case studies.
Speaker Change: And things like colorectal surgery coming out of Asia and in other places we have submitted as Jamie had mentioned.
Gary S. Guthart: Yeah, yeah, I'm actually here in Europe. I have been for the last couple of weeks talking to S.P. Surgeons here. I think the early uptake and early excitement is quite palpable. Where we've had broad indications, as you know, in Korea and now Japan, we've seen a nice uptake in adoption and good clinical study. And I think that the surgeons here are building on that. They're learning from and adapting what they see in the rest of the world and getting excited about it. So I'm encouraged. How deep that goes, it's still early days here in Europe, we will see.
Speaker Change: For an additional indication in the United States, we have another one coming we have trials ongoing.
Speaker Change: So we have some natural experiments to see what occurs.
Speaker Change: We know that the experiment in Korea has worked out well we are in process in Japan and now we're in the early experience for broad indications in Europe.
Speaker Change: That should help us generate data and <unk>.
Speaker Change: Accelerate.
Speaker Change: All indications over time in the U S and I.
Andrew Christopher Ranieri: But we're starting to see fairly long case studies in things like colorectal surgery coming out of Asia and other places. We have submitted, as Jamie mentioned, for an additional indication in the United States. We have another one coming soon.
Speaker Change: I have to say I think.
It remains a build for S P, but I'm encouraged by the Bill.
Speaker Change: Thank you.
Speaker Change: And maybe this is more for Jamie, but Jamie could you talk about the commentary about lower pricing in China for the quarter, just talk about that a little bit more and maybe put that into context on if this is temporary if theres permit if its permanent or more to come at just the overall competitive situation in China would be great. Thank you.
Gary S. Guthart: We have IDE trials ongoing, so we have some natural experiments to see what happens. We know the experiment in Korea has worked out well. We're in the process in Japan, and now we're in early experience for broad indications in Europe. That should help us generate data and accelerate additional indications over time in the U.S. And I have to say, I think it remains a build for SP, but I'm encouraged by the build.
Jamie Smith: Yes, it's primarily a function of the competitive environment. We've described with the domestic players.
Jamie E. Samath: Thank you. And maybe this is more for Jamie. But, Jamie, could you talk about the commentary about lower pricing in China for the quarter? Just talk about that a little bit more and maybe put that into context on if this is temporary, if it's permanent, or more to come, and just the overall competitive situation in China? It would be great. Thank you. Yeah, it's primarily a function.
Jamie Smith: What we actually have now.
Jamie Smith: Given last year, we qualified a domestically manufactured ex Si.
Jamie Smith: Some segmentation between the domestically manufactured product and an important product.
Jamie Smith: Domestic product gives us the opportunity to.
Jamie Smith: Participate in tenders that require a locally produced system.
Jamie E. Samath: Yeah, it's primarily a function of the competitive environment we've described with the domestic robotic players. What we actually have now, given last year we qualified a domestically manufactured XI, is actually some segmentation between the domestically manufactured product and the imported product. And the domestic product gives us the opportunity to both participate in tenders that require a locally produced system but also allows us to segment on price. But the primary impact on Chinese pricing is really competition. And you kind of see that theme broadly with other medtech players in terms of the impact of VBP. It doesn't apply in this case, but the macro theme of pricing pressure does.
Jamie Smith: But also allows us to segment on price.
Jamie Smith: But the primary impact on China pricing is on China pricing is really competition.
Jamie Smith: You kind of see that theme broadly with other med tech players in terms of the impact of VB. It.
Jamie Smith: Apply in this case, but kind of the macro theme.
Jamie Smith: Pricing pressure does.
Jamie Smith: And we will go to the next line.
Speaker Change: And that would be met mix at Barclays. Please go ahead.
Speaker Change: Hey, thanks, so much for taking the questions and congrats.
Barclays: Really strong quarter against tough comps.
So a couple of follow ups, if I could on a couple of things you mentioned Gary in your last answer around around force feedback and sort of the.
Clinical impacts of optimizing and reducing the forest used during surgery.
Matthew Stephan Miksic: And we will go to the next line, and that will be Matt Miksic, Barclays. Please go ahead.
Barclays: Which is kind of buzzing around here at sages quite a bit this year and the sessions and.
Matthew Stephan Miksic: Hey, thanks so much for taking the questions, and congrats on a really strong quarter against HUBCOMS. So, a couple of follow-ups, if I could, on a couple of things that you mentioned, Gary, in your last answer around force feedback and sort of the clinical impacts of optimizing or reducing the force used during surgery, which is kind of buzzing around here at SAGE quite a bit this year in the sessions. And I'm wondering, you know; I always appreciate the data that you talk about during the prepared remarks and recent clinical data.
Barclays: I'm wondering.
Speaker Change: Appreciate always the data that you talked about during the prepared remarks, and recent clinical data I'm wondering.
Speaker Change: How far out are we going to see.
Speaker Change: Clinical reference like that too to studies around the use of force feedback.
Speaker Change: Versus not.
Speaker Change: And also maybe efficiencies driven by a lot of the docs, you're talking about a smoother operating arms and being able to get through cases faster.
Matthew Stephan Miksic: I'm wondering, you know, how far out we are going to see, you know, clinical reference like that to studies around, you know, the use of force feedback versus not, and also maybe, you know, efficiencies driven by a lot of the docs you're talking about, you know, smoother operating arms and being able to get through cases faster. You know, is that a year out? Are we six months out? Are we two years out for DV5 research like that? And, again, I appreciate you taking the questions. Yeah, it's a good question.
Speaker Change: Year out are we six months or two years out for D V, but research like that.
Speaker Change: Again appreciate you taking the question.
Speaker Change: Yes. Good question. Thank you.
Speaker Change: Hi, this is approximate not not specifics so take it with some error bars, but.
Speaker Change: I think what youre going to see enforced feedback.
Speaker Change: The study is going to be a progression you'll see.
Speaker Change: Narrow series single institution studies come out first that that are kind of directional they talk about what they're seeing in their own and then you'll see.
Gary S. Guthart: Yeah, it's a good question. Thank you.
Gary S. Guthart: This is approximate, not specific, so take it with some error bars, but you know, I think what you're going to see in forced feedback. And then over the next period after that, over the next couple of years, you'll see multiple center trials that are comparing it in a little more structured way. So I think you can predict the path of the journey, but I think this is something that you're gonna see from narrower input to start to broader input in the next year. Prospective studies that start to report results over the next year after that.
A little bit in that.
Speaker Change: It should be the kind of thing that comes out in the next 12 months.
And then over the next.
Speaker Change: Period after that over the next couple of years, you'll see.
Speaker Change: Multiple center.
Speaker Change: Ah trials that are that are comparing it a little more structured way. So I think you can predict the path of the journey, but I think this is something that youre going to see from.
Speaker Change: Narrower input to start to broader input in the next year or two.
Speaker Change: Prospective studies that start to report over the next year after that so I think it's a it's a build.
Gary S. Guthart: So I think it's a build. But I think it's gonna be a powerful build in the end. I think with regard to efficiencies, we're hearing anecdotal reports already that the surgeon autonomy features that are in DaVinci Five, the ability for them to control their own field and to control the equipment, ancillary equipment in the room, have been really positive, and they're reporting efficiencies already. I think real-world evidence is gonna be powerful on the efficiency side.
Speaker Change:
Speaker Change: But I think it can be a powerful build in the end I think with regard to efficiencies. We're hearing anecdotal reports already that the surgeon autonomy features that are individually five the ability for them to control their own field and to control the equipment ancillary equipment in the room has been really positive and the reporting efficiencies already.
Speaker Change: I think real world evidence is going to be powerful on the efficiency side I think that's the kind of thing that people can benchmark their own cases, where also our data collection capabilities.
Gary S. Guthart: I think that's the kind of thing that people can benchmark in their own case. We also have data collection capabilities between Intuitive Hub and the MyIntuitive app that allow them to measure that very quickly. So I think you'll see the real evidence of that build, and it will be in the coming months and quarters, and that'll be exciting.
Speaker Change: Tween intuitive hub and.
Speaker Change: The my intuitive app allow them to measure that very quickly. So I think you'll see the real world evidence to that building and it will be.
Speaker Change: In the coming months and quarters and that'll be exciting for us.
Speaker Change: That's great. Thank you.
Speaker Change: And we will go to the next line.
Speaker Change: Let's go to the line Brandon Vazquez William Blair. Please go ahead.
Brandon Vazquez: Thanks for taking the question I want to focus on ion real quick you had a nice rebound in the quarter thereafter, some supply last quarter. Just curious do you see a little bit of catch up there or not and then even as these numbers are getting bigger you're still putting up some really strong growth. So curious where youre seeing the most growth there new accounts or existing.
Brandon Vazquez: And we will go to the next line. Let's go to the line, Brandon Vazquez, William Blair, please go ahead.
Brandon Vazquez: Thanks for taking the question. I want to focus on ION real quick.
Jamie E. Samath: You had a nice rebound in the quarter after some supply last quarter. Just curious, do you see a little bit of catch-up there or not? And then even as these numbers are getting bigger, you're still putting up some really strong growth. So curious where you're seeing the most growth there, new accounts or existing utilization, and how sustainable you think it is.
Brandon Vazquez: Utilization and how sustainable you think it is.
Brandon Vazquez: Jamie why don't you take that one yeah.
Jamie Smith: Yeah, I'd say it was a partial recovery in the core.
Jamie Smith: Haven't completely resolved both cast the supply and the vision probe, we still have a little bit of backlog in terms of number of systems.
Jamie Smith: This pending kind of stabilization of that of that supply with respect to where all replacing those systems is actually a blend between existing accounts and new accounts, we still have a number of opportunities.
Jamie E. Samath: Jamie, why don't you take that one? Yeah, I
Jamie E. Samath: Yeah, I'd say it was a partial recovery in the quarter. We haven't completely resolved both the catheter supply and the vision probe. We still have a little bit of a backlog in terms of the number of systems that's pending, kind of stabilization of that supply. With respect to where are we placing those systems, it's actually a blend between existing accounts and new accounts. We still have a number of opportunities, what are called greenfield accounts. So both are a focus for the sales team.
Jamie Smith: I call Greenfield accounts.
Jamie Smith: So both are a focus for the sales team.
Speaker Change: Okay, and one quick follow up maybe on the.
Speaker Change: On the surgical side, the 1% utilization growth I appreciate it off of a tough comp and we're kind of normalizing, but I think we kind of we usually use utilization growth is a indication for system placements and then it implies a certain procedure growth as well just talk to us a little bit about what you kind of think a bill.
Speaker Change: Hello historical average utilization growth in the quarter might need for those key moving pieces in the next couple of quarters. Thanks.
Gary S. Guthart: Okay, and one quick follow-up maybe on the surgical side. You know, the 1% utilization growth, I appreciate off of a tough comp, and we're kind of normalizing. But I think we kind of, we usually use utilization growth as an indication for system placements. And then, you know, it implies a certain procedure growth as well. Just talk to us a little bit about what you think a below-historical average utilization growth in the quarter might mean for those key moving pieces in the next couple of quarters. Thanks.
Speaker Change: Yeah.
Speaker Change: Sorry go ahead Gary.
I'll jump in and then Jamie Thank you.
Speaker Change: Think that in the prepared remarks, we had said.
You had a nice capital placement ear, and we had a bolus of post COVID-19 come back into Q1.
Speaker Change: I think the.
Speaker Change: The uncertainty part of this is really just going to be what the with the inpatient volumes look like in the next quarters of 2024 in other words, just the the patient census, as it comes through but Youre right I think that it's an indicator of capacity so.
Gary S. Guthart: Yeah, I'll start.
Gary S. Guthart: I'll jump in and then Jamie will take it. I think that in the prepared remarks, we had said you had a nice capital placement year and we had a bolus of post COVID come back into Q1. I think the uncertainty part of this is really just going to be what the impatient volumes look like in the next quarters of 2024. In other words, just the patient census as it comes through.
Speaker Change: Depending on what that patient census book looks like that'll determine the high end or the low end of utilization growth in terms of some procedures people want to put on those systems sorry. Jamie go ahead, you might discuss the modeling there.
Jamie Smith: I would just say that if you if you look at.
Jamie Smith: Q1 utilization over an extended period looked at where the CAGR is versus the year over year comparison, you see that start to be in a more normal range of 3% to 4% I do think that in the year ago quarter, you had a number of institutions that.
Gary S. Guthart: But you're right. I think that it's an indicator of capacity. So depending on what that patient census looks like, that'll determine the high end and the low end of utilization growth in terms of how many procedures people want to put on this. Sorry, Jamie, go ahead. You might discuss the modeling. I would just say.
Jamie Smith: Actually setting themselves up to two sprint with respect to their ability to treat patients and so I do think that was <unk>.
Jamie E. Samath: I would just say that if you look at Q1 utilization over an extended period, look at what the CAGR is versus the year-over-year comparison, you see that it starts to be in a more normal range of 3% to 4%. I do think that in the year-ago quarter, you had a number of institutions that actually set themselves up to do sprints with respect to their ability to treat patients, and so I do think that was elevated, and at that level of utilization growth of 13%, it wasn't particularly sustainable.
Jamie Smith: And at that level of utilization growth.
Jamie Smith: In <unk>, it wasn't particularly sustainable.
Jamie Smith: So as I look forward to the rest of the year I would expect some levels of utilization growth for let's say a closer to our long term averages theres still some patient backlog backlog benefit in the year ago Cool is even in Q2 and Q3, so it's not perfectly match, but I think.
Jamie E. Samath: And so as I look forward to the rest of the year, I'd expect some levels of utilization growth that, let's say, are closer to our long-term averages. There's still some patient backlog benefit in the year-ago quarters, even in Q2 and Q3. And we will go to the next question from the line of Jayson Bedford, Raymond James.
Jamie Smith: There's room for new normalization over time.
Jamie Smith: And we will go to the next question is from the line of Jason Bedford Raymond James. Please go ahead.
Jayson Tyler Bedford: Hi, good afternoon. Thanks for taking the question just maybe a high on in China, obviously, a large opportunity there.
Jayson Tyler Bedford: Just a couple of questions and I apologize if I missed this but does ion fall within the existing robotics quota and then for ion you mentioned clearance is the first step can you just talk through the other steps to commercialization and associated timing of those steps.
Jayson Tyler Bedford: Let's go ahead. Uh, good afternoon. Thanks for taking the question. Just maybe, uh, I...
Jayson Tyler Bedford: And we will go to the next question from the line of Jayson Bedford, Raymond James. Okay, let's go ahead.
Jamie E. Samath: Yeah, we have some work to do to put ION at a point where it's actually available to sell. So that will take us some time. We're not expecting to have commercialization really until the back half of 2024. And China is a market where, like many cases, when we launch a new product in a market, we do that gradually as we kind of build our infrastructure in terms of training capabilities and engage with customers. So I'd say back at 24 is when you start to see the potential for ION placements in China.
Speaker Change: Yeah, we have some wood.
Speaker Change: We have some work to eye on.
Speaker Change: Whereas actually available to sale to sell so that would take us some time.
Speaker Change: We're not expecting to have commercialization really until the back half of 2024.
Speaker Change: And China is a market where.
Speaker Change: Like many cases, when we launch a new product in a market, we do that progressively as we kind of build our infrastructure in terms of.
Speaker Change: <unk> capabilities.
We're engaged with customers.
Speaker Change: So I'd say back half of 'twenty four is when you start to see the potential for ion placements in China.
Jamie E. Samath: On the issue of whether it is competing for the same quarter, Jamie? Oh, sorry. Yeah.
Speaker Change: On the issue of is it competing for the same quarter, Jamie Oh, sorry, yeah.
Jamie E. Samath: Oh, sorry. Yeah, our understanding is that it is not in the quota given the price.
Speaker Change: Our understanding is it is not in the quota given the price.
Jamie E. Samath: And, Jayson, if you have one more follow-up, that'll wrap it up for us. No, that's fine, thanks.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: And Jason if you have one more follow up that'll wrap it up for US no. That's fine. Thank you.
Gary S. Guthart: Okay, that was our last question. In closing, we continue to believe there is a substantial and durable opportunity to fundamentally improve surgery and acute intervention. Our teams continue to work closely with hospitals, physicians, and care providers in pursuit of what our customers have termed the quadruple aim: Better, More Predictable Patient Outcomes, Better Experiences for Patients, Better Experiences for the Care Teams, and ultimately, a Lower Total Cost of Care. We believe value creation in surgery and acute care is fundamentally human.
Speaker Change: Okay that was our last question in closing we continue to believe there's a substantial and durable opportunity to fundamentally improve surgery and acute interventions.
Speaker Change: Our teams continue to work closely with hospitals physicians and care teams in pursuit of what our customers have termed the quadruple aim.
Speaker Change: Better more predictable patient outcomes better experiences for patients better experiences for their care teams and ultimately a lower total cost of care.
Speaker Change: We believe value creation in surgery and acute care is foundational in human.
Gary S. Guthart: It flows from respect for and understanding of patients and care teams, their needs, and their environment. 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. Thank you for your support on this extraordinary journey. We look forward to talking with you again in three months. And thank you everyone for joining today's conference call. That does indeed conclude your conference call. You may now disconnect.
Flows from respect for and understanding of patients and care teams their needs and their environment.
Speaker Change: At intuitive, we envision the 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.
Speaker Change: Thank you for your support on this extraordinary journey, we look forward to talking with you again in three months.
Speaker Change: And thank you everyone for joining today's conference call that does indeed conclude your conference call. You may now disconnect have a good day.
Operator: And thank you, everyone, for joining today's conference call. That does indeed conclude your conference call. You may now disconnect. Have a good day.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: We're sorry your conferences ending now please hang up.
Operator: We're sorry, your conference is ending now. Please hang up.