Q1 2025 Intuitive Surgical Inc Earnings Call
Speaker Change: Thank you for standing by and welcome to the Intuitive Surgical Inc's first quarter 2025 earnings release.
Speaker Change: At this time, all participants are in listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 11 on your telephone. If your question has been answered, and you'd like to remove yourself from the cue, simply press star 11 again. And you'll need to press star 11 again.
Speaker Change: As a reminder, today's program is being recorded and now I'd like to introduce your host for today's program Dan Connolly, head of investor relations at Intuitive Surgical Please go ahead, sir Thank you very much for your time, and I'll see you in the next one.
Speaker Change: Good afternoon and welcome to Intuitive's first quarter earnings conference call. With me today we have Gary Guthart, our CEO , David Rosa, our president, Jamie Samath, our CFO .
Speaker Change: Before we begin, I would like to inform you that comments mentioned on today's call maybe deemed to contain forward-looking statements.
Speaker Change: These risks and uncertainties are described in detail in our Securities and Exchange Commission and Violings, including our most recent form, 10K followed on January 31st, 2025.
and Form 10Q, filed on October 18, 2024.
Speaker Change: RSEC filings can be found through our website or at the SEC's website.
Speaker Change: Investors are cautioned not to place undue reliance on such four looking statements [inaudible]
Speaker Change: Please note that this conference call will be available for audio replay on our website at intuitive.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, followed by a question and answer session.
Gary will introduce the call and provide a business overview.
Dave will present the quarters business, operational and clinical highlights.
Speaker Change: Jamie will provide a review of our financial results and procedure highlights.
Speaker Change: Then I will discuss our updated financial outlook for 2025 and finally we will host a question and answer session.
With that, I will turn the call over to Gary.
Speaker Change: Thank you for joining us on the call today. Our business performed well in the first quarter of the year with positions using our products at the high end of our expectations driven by strong procedure growth and core general surgery in the United States and strong procedures outside the United States.
Speaker Change: New System Placements in the quarter were solid with particular strength in the U.S.
Speaker Change: We're pleased with performance of each of our platforms, with continued adoption of D.V. 5 in multi-port, solid results in ion and acceleration in procedures using our single port platform.
Speaker Change: Given that dynamic changes in trade policy, I'd like to describe our principles for navigating the current environment rather than detailing any particular scenario
Speaker Change: Our first priority is to assure supply of our products to our customers globally.
Speaker Change: We have spent years becoming a trusted provider of great products and services and our first commitment is to maintaining the status for those who depend upon us.
Speaker Change: We believe that high quality, minimally invasive care at industrial scale will remain a global need, regardless of trade policy and our long-term opportunity remains robust.
Speaker Change: We will continue to manage the business for the long term and invest towards improvement in the quintuple aim [inaudible]
Thank you.
Speaker Change: given potential changes in our costs and our customers' costs across their enterprise.
Speaker Change: We do not plan reflexive changes to our pricing in that dynamic near-term environment.
Speaker Change: Our second priority will be to optimize our production costs and rebalance product flows within our existing manufacturing and supply chain footprint as policies begin to stabilize.
Speaker Change: Finally, we'll adjust our supply chain strategy and assess adjustments to our pricing when we see the signs of a durable planning environment for trade.
Speaker Change: I'll now turn the call over to Dave to take you through our product services and operating highlights. Dave
Thank you, Gary. Intuitive Surgical was founded in 1995.
Speaker Change: In this, our 30th year of operations, our global DaVinci installed base in Q1 2025 exceeded 10,000 systems.
Speaker Change: and over 50,000 surgeons across 70 countries perform procedures in the quarter.
Speaker Change: Thank you to our customers, our employees, and all our stakeholders for your ongoing collaboration and commitment as we continue to advance minimally invasive care.
Speaker Change: Starting with procedures, DaVinci Procedure Growth in the quarter was 17%. Ariazep's strength included general surgery in the US, and regional performance in India, Korea, distribution markets, and the UK.
Speaker Change: in the US after hours procedure growth accelerated to 36% year over year.
Jamie will describe procedure dynamics later in the call.
Speaker Change: Turning to Capitol, we placed 367 DaVinci systems in the quarter, including 147 DaVinci 5 systems and 19 SP systems.
We also installed 49 ION systems in the quarter.
Speaker Change: Capital placements were strong in the U.S. with mixed performance outside of the U.S. reflecting stresses in Germany, the U.K., and Japan.
Speaker Change: System Utilization defined as procedures for installed clinical system per quarter through 2% year-over-year for multi-port platforms.
26% for SP and 5% for ION.
Speaker Change: Solid Procedure Growth and Capital Performance supported strong revenue growth of 19% in the quarter.
Speaker Change: Product margins were within our expectations, reflecting increased depreciation from new facilities and a higher mix of newer platforms.
Operating expenses were within our expectations.
Speaker Change: Jamie will take you through our finances in greater detail later in the call.
Speaker Change: In Q1, a rollout of DaVinci 5 progressed within our expectations, with 147 systems placed, and over 32,000 procedures performed across a broad set of specialties.
Speaker Change: We installed our first fully integrated system this month, which now features software to enable the integrated hub and simulator along with a host of other enhancements.
Speaker Change: Several additional features, including real-time surgical video review, real-time 3D model review, and visual 4-speed baggages will be enabled upon 5-10k clearance later this year.
Speaker Change: We continue to ramp our manufacturing operations and supply chain capabilities to support broad launch of Diffincify mid-year.
Speaker Change: Broadlaunch means that systems incorporate the latest, fully integrated hardware and software, and we are able to meet customer demand, including trade-ins and dual consoles.
Speaker Change: As we discussed previously, we remain in the regulatory process in Japan and expect clearance in Europe near the end of 2025.
Speaker Change: Force Feedback is one of the core features of Dimitri V. We are starting to see early single institution studies evaluating the impact of force feedback on clinical outcomes and proficiency.
Speaker Change: And an abstract presented at the North American Robotic Eurology Symposium, a team led by Dr. Michael Stifleman, Chair of Eurology at Hackensack University Medical Center
Steed, Return of Ballot Function, and a small cohort of patients.
Speaker Change: Return of ballot function in less than 24 hours is an important metric for certain operations.
Speaker Change: Of the 28 patients included, 16 patients underwent transparent neopartial nephrectomy or radical nephrectomy, where force feedback technology was used, compared with 12 patients undergoing the same procedure with standard DaVinci XI instruments. [inaudible]
Speaker Change: The authors reported a significantly higher rate of recovery of bowel function within 24 hours with 83% of the four-speedback cohort compared to 25% in the non-four-speedback cohort.
The authors concluded that force-feedback instruments and robotic assisted kidney surgery
Speaker Change: or associated with the faster bowel function recovery, suggesting potential reductions in colonic trauma.
Speaker Change: They note, as robotic assisted surgery advances, integrating force feedback into routine practice this could enhance precision and improve recovery across disciplines.
regarding time to proficiency.
Speaker Change: A second study led by a team including Dr. Andrew Hung, Associate Professor of Eurology and Computational Biomedicine at Cedar Sinai Medical Center in Los Angeles.
Speaker Change: Evaluated the impact of force feedback technology on the suturing performance of 29 novice surgeons in a randomized pre-clinical study.
Speaker Change: The studies show that force-feedback technology has a potential to improve novice surgeon performance
Speaker Change: by significantly reducing tissue trauma and errors during suturing, hand time to complete suturing.
Thank you very much.
Speaker Change: These results are consistent with the core value hypotheses of force feedback technology and we expect more of these types of studies to publish in 2025 and beyond. Force feedback instruments are in limited supply and we expect broad availability near the end of 2025.
Speaker Change: Use of case insights with DaVinci 5 is growing nicely, with case insights delivered on over 22,000 procedures to date.
Speaker Change: These datasets include video, kinematic energy, and forced data, and are delivered in the context of surgical procedure steps enabling surgeons to easily navigate the procedure video and identify meaningful operational and clinical insights.
Speaker Change: These insights will form the basis of key performance indicators and help both novice and expert surgeons identify objective measures that underpend surgical performance.
Speaker Change: As we said before, the long-term opportunity for computational tools is both significant and difficult, validations at scale will take time and are worthy pursuit.
Moving to Ion
Procedures group 58% to approximately 31,000 in the quarter
Speaker Change: In April , we received clearance of our eye-on platform in Australia, and in China, we received our first provincial charge code.
Speaker Change: In this early phase of launch in China, we are focused on the collection of clinical data to support our broader commercialization strategy.
Speaker Change: Our priorities for eye-on in the near term are supporting utilization growth in the US.
Expansion in International Markets and Improving Product Cost
Speaker Change: Turning to SP, Procedure Growth accelerated in the quarter to 94 percent, with solid growth in the US, and OUS procedures more than doubling compared to the year ago period driven by Korea, Japan, and early adoption in Europe . [inaudible]
Speaker Change: In the quarter, we received US 510K clearance for a DaVinci ESP Sure Form 45 stapler which will support the use of SP and thoracic and colorectal indications.
Speaker Change: Our commercialization efforts and these indications will be measured as we look to establish first access sites and develop key opinion leaders in the coming quarters.
In closing, we are committed to our 2025 priorities.
Speaker Change: First, focusing on the full launch of DaVinci 5, its regional clearances and follow on feature releases.
Speaker Change: Second, we'll pursue increased adoption for a focused procedures by country through training, commercial activities and market access efforts.
Speaker Change: Third, we'll drive continued progress in building industrial scale, product quality, and manufacturing optimization, and finally we'll focus on excellence and availability of our digital tools.
While periods of rapid change can create inefficiencies
Speaker Change: As we have debt to a dynamic environment, we are well positioned operationally and financially to execute against our priorities [inaudible]
Speaker Change: I'll now turn the time over to Jamie who will take you through our finances and procedure highlights in greater detail
Jamie Samath: Good afternoon. I will describe the highlights of our performance on a non-GAAP or performer basis and will also summarize our Gap Performance later in my prepared remark. Thank you very much.
Jamie Samath: A reconciliation between our pro-former and gap results is posted on our website.
given that the current global trade environment is relatively dynamic.
Before we dive into Q1 Results, let me address Tarris.
Jamie Samath: To provide some context, the footprint of our manufacturing operations is as follows
Jamie Samath: In 2024, Intuitive manufactured 98% of our robotic systems in the United States.
Jamie Samath: 70% of our endoscopes in Europe and approximately 80% of our instruments and accessories in Mexico.
Jamie Samath: We source raw materials and other components that go into these finished products from suppliers around the world.
Jamie Samath: The net result of our manufacturing footprint and global customer demand is that Intuitive is both a significant US manufacturer and has become a significant net US exporter.
Jamie Samath: In terms of the impacts of tariffs too intuitive, broadly, in order of magnitude, I would characterize tariffs into the following three buckets.
Jamie Samath: First, those tariffs relating to U.S.-China trade. We import into China's sub-assemblers for domestic XI production and completely finished XIs, both of which are expected to incur Chinese tariffs at 125%.
Jamie Samath: We also import components from Chinese-based suppliers into the US to be incorporated into the manufacturer of our products, which incur US tariffs of 145%.
Jamie Samath: In addition, our China JV manufactured certain products for our ion platform that are subject to US tariffs when imported for US procedure demand.
Jamie Samath: Second, imports into the US-approcured components from OUS-based suppliers and imports of endoscopes from our factories in Europe , are subject to the 10% baseline tariffs and then increased tariff rate after the current 90-day pause period has elapsed.
Jamie Samath: Third, while most of our products manufactured in Mexico have certified under the requirements of USMCA and therefore not subject to current US import tariffs, a small portion do not currently meet the requirements and therefore incur 25% tariffs upon import to the US.
Jamie Samath: Based on the impacts just described, reflecting those tariffs that have been implemented, and those that have been announced with both a stated percentage and implementation date.
Jamie Samath: and assuming such tariffs remain in place, we currently expect the impact to our income statement for 2025 to be additional cost of sales of approximately 1.7% of revenue plus or minus 30 basis points.
Jamie Samath: The impact of tariffs will vary with the volume of capital sales in China, the mix of procured components from OUS suppliers, and the proportion of products manufactured in Mexico that are certified under U.S. M.C.A.
Jamie Samath: Given that tariff costs are capitalized into inventory and then recognizing cost of sales as products are sold, we would expect the impact of tariff to increase each quarter over the remainder of the year.
Jamie Samath: As a result, we are updating our estimate for pro-former gross margin to be within a range of 65% and 66.5% of revenue.
Jamie Samath: This range does not reflect any potential additional tariffs or any potential inflationary impact on labor cost or the cost of procured components.
Jamie Samath: To the extent that tariffs and their derivative impact has a durable impact on our cost of sales and or demand for our products, we will consider implementation over time of a range of mitigating operational actions.
Jamie Samath: However, we do not expect any such measures to have a significant beneficial impact in 2025.
Turning to Q1, core matrix was strong.
Jamie Samath: Da Vinci Procedure Grow, Da Vinci Procedure grew 17%, the install base of Da Vinci Systems grew 15%, an average system utilization grew 2%.
Jamie Samath: Procedure Growth in Q1 was adversely impacted by a lower number of business days compared to the year ago period. On a day adjusted basis, Q1 Procedure Growth was 18.5%.
Jamie Samath: U.S. procedures grew 13% driven by growth in benign general surgery with relative strength in colonoscisectomy, foregut, and appendectomy procedures.
Jamie Samath: Consistent with recent trends, bariatric procedures in the US, declined in the mid-single digit range.
Jamie Samath: OUS Procedures Group 24% Driven by Strength in India, Korea, Distributed Markets, and the UK.
Jamie Samath: Procedure Growth in Korea improves sequentially. Some portion of that higher growth may be a catch-up in procedures from prior periods as a result of the ongoing precision strike.
Jamie Samath: Procedure Growth in China, improved from the prior quarter and was a little above the global average driven primarily by urologic procedures.
and Gary Guthart.
Jamie Samath: Looking at OUS performance in aggregate, we see strong procedure growth in colorectal, hysterectomy, benign general surgery, and thoracic cagrids.
Jamie Samath: Reviewing Capital Performance, we placed 367 systems in the first quarter, 17% higher than the 313 systems we placed in the same period last year.
Jamie Samath: First quarter placements included 147 DaVinci 5 systems, taking the total install base to 509 systems.
Jamie Samath: There were 67 trade-in transactions in Q1 compared to 29 trade-ins last year driven by some U.S. customers upgrading to DaVinci 5.
Jamie Samath: It is important to note that we expect trade-ins to occur progressively over multiples of years as we build the
Jamie Samath: In the US, we placed 204 systems in Q1, up from 148 systems last year, reflecting positive customer response to DaVinci 5.
Jamie Samath: Outside the US, we placed 163 systems in the first quarter, down from 165 systems placed in quarter one of last year.
Jamie Samath: In the first quarter of this year, we placed ATX systems in Europe 16 in China and 10 in Japan compared with 84 in Europe , 10 in China and 20 in Japan in Q1 of last year.
Jamie Samath: OUS placement performance reflects financial pressures and health care spending constraints in several key markets.
Jamie Samath: including Japan, Germany and the UK. Customers with existing DaVinci capacity have opportunities to increase utilization which we actively support.
Jamie Samath: The environment in China continues to reflect the ongoing impact of domestic competition and policy-driven pressure on pricing.
Jamie Samath: With respect to the previously mentioned tariffs of 125% on imports of XI systems and XI subassemblies into China, these tariffs have a material impact to the product cost of XI systems in China and may adversely impact our ability to win future tenders.
Jamie Samath: Given the trade environment, financial pressures faced by hospitals and risks to the macro, we may see customers globally reprioritize capital budgets or extend timelines to invest in robotic programs.
[inaudible]
Jamie Samath: The first quarter revenue was $2.25 billion and 19% increase over last year. On a constant currency basis, revenue growth was 20%.
Jamie Samath: Systems revenue grew 25% year over year, driven by a 17% increase in DaVinci system placements and a higher system ASP, reflecting a higher mix of DaVinci 5 placements.
Jamie Samath: Returning revenue grew 19% in Q1, representing 85% of total revenue.
Thank you. Thank you.
Additional Remnew Statistics and Trends are as follows.
Jamie Samath: While leasing may fluctuate quarter to quarter, we continue to expect the rate of leasing to increase over time.
Jamie Samath: Q1 system average selling prices for $1.62 million as compared to $1.39 million last year, primarily driven by a higher
Jamie Samath: We recognize $39 million or least by our revenue in the first quarter compared with $29 million last year.
Jamie Samath: DaVinci, Instrument, and Accessory Revenue per procedure was approximately $1,780 flat to last year reflecting two offsetting dynamics.
Jamie Samath: First, we see INA per procedure come down due to procedure mix given a lower mix of bariatric procedures and a higher mix of colicisectomy.
Jamie Samath: Second, we see an offsetting positive mix effect from a higher mix of procedures on our SP platform and in some later accessory and force feedback instrument revenue coming from DaVinci Fire procedures.
Thank you. Thank you.
Jamie Samath: Turning to iron, there were approximately 31,000 iron procedures in the first quarter, an increase of 58% as compared to last year.
Jamie Samath: In Q1, we placed 49 iron systems compared to 70 in Q1 of 2024.
4 over the 49 systems were placed in OUS markets [inaudible]
Jamie Samath: We estimate the penetration of lung biopsy in the US is approaching the halfway point.
Jamie Samath: and that looking ahead, an increasing proportion of our focus will be helping customers convert trans thoracic needle aspiration biosis to iron while driving increases in utilization of the existing capacity.
Jamie Samath: Where we have a clearance for ION in our US markets, we are in the early phase of adoption, where our current focus is on building local evidence and engaging societies and health care systems to support adoption of our products for the benefit of patients.
We expect this to be a multi-year effort [inaudible]
Jamie Samath: First quarter SP procedures grew 94% driven by strong growth in Korea and early stage multi-specialty growth in Europe and Japan.
Jamie Samath: We placed 19 SP systems in Q1 compared to 24 systems last year.
Jamie Samath: First quarter placements included seven in Europe , six in Korea, and five in the US.
Jamie Samath: average system utilization for our SP platform, through 26% in Q1. In absolute terms, SP utilization is the highest of any of our platforms in Korea and Japan.
Jamie Samath: Utilization in Europe is increasing steadily and we expect utilization in the US to increase as we expand indications.
Moving on to the rest of the P&L
Jamie Samath: Proforma gross margin for the first quarter of 2025 was 66.4% compared with 67.6% for the first quarter of 2024.
Jamie Samath: The year-over-year decline in pro-former gross margin, primarily reflects higher facilities costs, including depreciation as we bring on additional manufacturing capacity, and a higher mix of Ion and DaVinci 5 revenue that carry lower gross margins.
Jamie Samath: Our Q1 results did not reflect any significant impact from Tarris.
Jamie Samath: During the quarter, we open two new facilities at our Sunnyvale, California headquarters that expand our U.S. manufacturing and R&D footprint significantly.
Jamie Samath: A 912,000 square foot facility that will contain Da Vinci systems manufacturing and R&D teams and a 315,000 square foot facility containing our ion manufacturing and R&D team
Jamie Samath: Along with our recently opened factory in Peacery Corners, Georgia, the Manufactures X and XI systems, these facilities provide a space to grow over the mid-term.
Jamie Samath: Looking ahead to the rest of the year, we continue to expect to open new manufacturing facilities in Germany and Bulgaria and expand instrument manufacturing capacity in Mexico.
Jamie Samath: In addition to supporting our growth plans, we believe over time, these new manufacturing facilities give a supply availability, quality and cost advantages from scale and factory automation.
Thank you. Thank you.
Jamie Samath: The first core performer operating expenses increased 12% compared with last year, driven by increased headcount, higher facilities related costs, and increased legal fees.
Jamie Samath: During the quarter, we increased hate counts sequentially by just over 500 employees of which approximately half were in manufacturing roles to support revenue growth.
Jamie Samath: Given long-term opportunities to drive the Clintoppel-Aim and to grow revenue, our result to invest in R&D and innovation remain unchanged.
Jamie Samath: Performer Other Income was $91 million for Q1, up from $88 million in the prior quarter, primarily driven by higher interest income.
Jamie Samath: Our performer effective tax rate for the first quarter was 22.3% in line with our expectations.
Jamie Samath: First quarter, 2025, Performing the Income was $662 million for $1.81 per share compared with $541 million for $1.50 per share for the first quarter of last year [inaudible]
I would now summarize how a gap results.
Jamie Samath: Gapnet income was $698 million or $1.92 per share for the first quarter of 2025 compared with Gapnet income of $545 million or $1.51 per share for the first quarter of 2024
Jamie Samath: The adjustments between performer and cabinet income are outlined and quantified on our website.
Jamie Samath: We ended the call with cash and investments of $9.1 billion compared with $8.8 billion at the end of last year. The sequential increase in cash and investments reflected cash generated from operating activities.
Speaker Change: And with that, I would like to turn it over to Dan to discuss how I updated how looked.
Dan Connolly: Thank you, Jamie. I will now turn to our financial outlook for 2025.
Dan Connolly: Starting with procedures. On our last call, we forecast full year 2025 procedure growth within a range of 13% and 16%
Dan Connolly: We are now increasing our forecast and expect full-year 2025 procedure growth within a range of 15% to 17%.
Dan Connolly: The low end of the range assumes growth in China is impacted by trade, environmental and competitive dynamics.
Dan Connolly: Governments in key U.S. markets continue to constrain hospital capex budgets, which limits the expansion of capacity in the field, and very accurate procedures continue to decline at rates similar to recent trends.
Dan Connolly: The high end of the range assumes China Procedure Growth improves relative to 2024, the
Dan Connolly: The high end of the range also assumes that procedures are not impacted by the current trade environment.
Thank you very much.
Attorney to Gross Profit
Dan Connolly: On our last call, we forecast pro forma gross profit margin in 2025 to be within a range of 67% and 68% of revenue.
Dan Connolly: which reflected significant incremental depreciation as we bring on new facilities, the impact of growth in newer products, and the impact of the stronger US dollar.
Dan Connolly: As Jamie described earlier, we currently expect the impact of recently implemented and announced tariffs globally to impact our cost of sales by approximately 1.7% of revenue plus or minus 30 basis points.
Thank you.
Dan Connolly: As a result, we are updating our estimate for pro forma gross margin to be within a range of 65% and 66.5% of revenue.
Dan Connolly: In regards to operating expenses, we now expect pro forma operating expense growth to be between 10% and 14%
Dan Connolly: The projected operating expense growth reflects increased appreciation from new facilities and investments to drive our growth objectives.
Dan Connolly: We now expect our non-cash stock compensation expense to range between $770 million and $790 million in 2025.
Dan Connolly: We continue to expect other income which is comprised mostly of interest income to total between 370 million and 400 million in 2025.
Dan Connolly: With regard to capital expenditures, we now estimate a range of 650 million to 750 million, primarily for Planet Facility Construction Activities.
Thank you. Thank you.
Dan Connolly: With regard to income tax, we continue to estimate our 2025 pro forma income tax rate to be between 22% and 23% of pre-tax income.
Dan Connolly: That concludes our prepared comments. We will now open a call to your questions
Thank you. Thank you.
Dan Connolly: Certainly, and as a reminder, ladies and gentlemen, if you do have a question at this time, please press star 11 on your telephone and our first question comes from the line of Travis Steed, from Bank of America's Securities. Your question, please.
Speaker Change: Hey, thanks for taking a question. First I'll ask a question on tariffs. 170 bases point impact in 25. Just curious how to think about that on an annualized basis, anyway to kind of break out.
Speaker Change: How much of that's China versus Mexico and how to think about the cadence over 2025, how much of that impacts and kind of Q4 and Q3 this year.
Speaker Change: Yeah, Travis, in terms of the breakout for this year, roughly half-ish of the impact is U.S.-China trade both directions.
Speaker Change: Imports into the US, ex-China, Mexico, Canada, of raw materials and um...
Speaker Change: components from OUS based suppliers and imports of endoscopes from our factories.
Speaker Change: in Europe . It kind of gives you a sense of what's driving the 1.7% of revenue. As we said and prepared remarks.
Speaker Change: Each quarter through the year, so the exit rate in Q-4 is going to be higher than the 1.7%
Speaker Change: There is some variability there with respect to, for example, where Chinese capital sales fall. So we're not going to be precise on the quarterly profile.
Speaker Change: Beyond 25, I think, from our perspective at this point, we'd like to see where Tara's stable. Stabilize, we'd like to obviously assess what moves can we make over time with the world assess.
Speaker Change: So we'll get into what the impact may be in 26, I think when we get through that process we'll get into what we're going to do.
Speaker Change: Okay, and then follow up on the Capitol environment. It sounds like you've kind of called that of the risk but you're not seeing it yet. Just trying to think about how this compares to like 2022 and when you saw it in the funnel versus kind of what you're seeing in the Capitol environment, you know, at this point.
Speaker Change: I'd say through Q1, if you look at the US, what we've seen is strong customer response to
Speaker Change: I think the capital environment has been relatively strong for us. Customers there are using our leasing and use based arrangements so that allows them to some extent to avoid kind of their formal capital budgets, gives them some flexibility to expand their programs.
Speaker Change: In US markets as we described and prepared remarks, you see some markets where they're getting constrained by government budgets, that's either to do with kind of the elimination of post-COVID funding or reflects.
Speaker Change: Governments, reprising funding to other areas, for example, in Europe you see some funding that moves towards military spending.
Speaker Change: So some some pressures there I think our focus in in a situation like that is to first help customers increase utilization where they have the existing capacity and can have greater throughput through their assets and we have genesis resources and other teams that can help them do that.
Speaker Change: We also have a growing set of economic capabilities, tools that we can help customers understand what the returns of those programs are, that's a growing part of our toolkit internationally.
Speaker Change: and then we look to expand what we've seen in the US with respect to use of leasing and uses based arrangements which are earlier stages.
for adoption with our customers there.
Speaker Change: In terms of what customers have said to us, we've had questions about tariffs and the environment. I don't think that's shown up yet in terms of core capital demand, but I think we're flagging that that could have an impact and certainly to the extent that our customers hospital rules.
Speaker Change: The increased pricing as a derivative effect of tariffs, then I increased pressure for them.
Great, thanks a lot.
Thank you very much.
Speaker Change: Thank you, and our next question comes from the line of Larry Beedelsen from Wells Fargo. Your question, please.
Larry Peterson: Good afternoon, thanks for taking the question, Jamie, follow-up on Tara Epps.
Speaker Change: Did I hear you say that you're including the European reciprocal tariffs, which I think are 20% in 90 days assumed in that 1.7%
Speaker Change: and Jamie, how should we think about your ability to mitigate the tariff? Just maybe flesh that out a little bit more for us and how quickly you might be able to do that and one follow up.
Jamie Samath: Yes, we are assuming in the 1.7% estimate for 25 that the retaliatory terrorist go into effect once the 90-day pause period has elapsed. Obviously we'll see how that plays out, but we've reflected that in the 1.7%
Jamie Samath: The manufacturing operations in our supply chain, to the extent that there are low hanging fruit that isn't disruptive to our partners and our employees, then...
Of course we'll pursue those.
Jamie Samath: But I think our first move is to let things stabilize and evaluate then what's possible. We'll do that concurrently across the year and we will consider things like...
Jamie Samath: Do you have to invest to mitigate what's the time to receive the benefit, what's the economic return of that and there are complexities in some of the things that you might do from an operational perspective and so we don't want to move too quickly given how dynamically the environment is. [inaudible]
Jamie Samath: that's helpful. And just for my follow up, Jamie, on DaVinci 5, it looks like, um,
Speaker Change: Division V placements as a percent of US placements actually was lower in Q1 from Q4. Hopefully I'm not doing the math wrong. Why would Division V placements in the US as a percent decline in Q4 and how should we think about the ramp going forward. Thank you.
Speaker Change: I believe Brandon correct me, I believe DB5 placements as a percent of toll in the US was hiring Q1 and Q4.
Speaker Change: But if I look at Q1 Capital Performance, Supply for Divi, DaVinci 5 was where we expected it to be, and with the respect of placement performance for all of the models including DaVinci 5, I'd characterize it as normal seasonality, no concern for us.
All right, thanks so much.
Thank you.
Speaker Change: Thank you, and our next question comes from the line of Robbie Marcus from JP Morgan, your question please.
Robbie Marcus: Rare to see such a big raise after just one quarter. You touched on it in the prepared remarks but maybe you could spend a little more time walking through what gave you the confidence to raise this early in the year.
and Gary Guthart. Thank you. Thank you.
Robbie Marcus: Yeah, I'll just leave it there and I have a follow-up question. Thanks [inaudible]
Speaker Change: Yeah, we routinely have a process where we obviously like many companies construct a forecast that reflects customer input. We look at obviously our plans and that guidance is a function of that routine process.
They adjusted Q1 before. [inaudible]
Speaker Change: Procedure Performance, 18.5%, I think that gives us a little bit of momentum into the rest of the year. Obviously we're watching the macro carefully.
If you look at the...
Speaker Change: Low end of the range of 15% that would say the rest of the year would have to be 14% procedure growth and so I think we have a decent range for kind of our bombs up process.
Speaker Change: Just some anecdotes. Back from the road and Dave's been out in front of the customer too. I think we're perceived as part of the solution, not part of the problem. I think that customers continue to adopt. I think they see the economic benefits and the patient and outcome benefits. I think that's so.
So far, so good.
Larry Peterson: Great, and sorry to harp on it, but tariffs are a big focus, unfortunately, and everybody's world right now. You know, just to follow up on Larry's question, it feels like you're taking a worst case approach here, where you're putting all the negatives and...
Larry Peterson: How meaningful can they be and when do you think we might be able to see some assets if you do choose to do that? Thanks. I just say on the philosophy, on the tariff guide...
Larry Peterson: from our perspective, we're playing it straight down the middle, is tariffs that are in effect, all that have been announced.
Larry Peterson: We felt like that was the most responsible way to go with respect to what we guided.
Larry Peterson: in terms of potential mitigating operational activities for which we said we didn't expect a beneficial impact in 2025. Maybe I'll let Dave touch on what some of those might be.
Yeah sure, happy to [inaudible]
Hey Robbie, Um,
Speaker Change: Some of the some of the mitigations that we're considering and some on our side if you look at our supply chain.
Speaker Change: They are, Jamie mentioned a little bit of it, but it's really two frames of reference that you ought to use. One is thinking about the parts that are coming into our factories, the ones that we assemble, and then the other frame of reference are the parts that are leaving our factories.
Speaker Change: and so as we look about how do we optimize within those two frames of reference?
Speaker Change: on the parts coming into our factories. Our teams have been working to get to industrial scale for years now. And so some of the processes that exist within this framework within Inside of Intuitive really center around
Speaker Change: assessing risk in all of our supply chain. We procure thousands of parts for our systems and instruments and so our team to look through there, assess the risk and then ensure appropriate mitigations are in place and mitigations there can include dual sourcing, they can include
Speaker Change: Strategic Reserves. And so that's for a robust process that runs on a daily basis, here for parts coming in. If you look about our parts, our components and our products going to customers.
Here, we've done a lot of work to qualify. Bye.
Speaker Change: Some of our products under USMCA, we've optimized inventory around the globe as some of these tariffs ahead of some of these tariffs taking place.
Speaker Change: And then, if you look in the midterm, we can use our existing manufacturing footprint that we have around the globe.
Speaker Change: and optimize what products are manufactured in what area?
Speaker Change: to help optimize some of the supply for our customers. And then in the long term,
We can build.
Speaker Change: Our overall manufacturing footprint against the trade environment that ultimately stabilizes, so that's going to be a long-term way in which we help mitigate.
Will Within Our [inaudible]
Supply James, [inaudible]
Great. Appreciate it. Thank you very much.
Speaker Change: Thank you, and our next question comes from the line of Requires from Steve Ful, your question please.
Good afternoon, everybody.
Speaker Change: I thought maybe just to change the focus briefly, OUS growth was particularly robust at 24%. Maybe you can talk about the drivers there, the sustainability of the drivers, the key markets, and just...
Speaker Change: You know, what you've assumed in coming up with your, your new forecast as well [inaudible]
Speaker Change: We saw solid procedure growth in the US at 13% and obviously they adjusted this a little higher than that.
I do think that we are seeing.
Speaker Change: The adoption of DaVinci 5 in the US. I think customer response has been quite positive. You're generally seeing a higher...
Speaker Change: Who's asking? Oh, you're I'm sorry. I'm sorry. I'm sorry, Rick. Are you gonna have to ask your question? [inaudible]
Speaker Change: Just the Jamie, just talking about the OUS growth, the international growth, at 24%. Man, it was particularly strong, I thought, and just drivers there and key drivers and sustainability of those drivers, you know, into the rest of the year and beyond.
Speaker Change: I'm sorry, Rick, you're talking about the 24% procedure growth for OUS. Exactly. Yeah, so you see some maybe earlier stage markets for us doing quite well in the smaller market Taiwan.
Speaker Change: Those are starting to go a really nice race. I think we see our scenes making real progress with respect to
Speaker Change: engagements with KLRs, KLR, key opinion leaders with the surgical society, he's an adoption across a broader set of procedures. I think that's going well, same in Taiwan we've benefited from some an increment of reimbursements.
in Taiwan.
Speaker Change: across Europe , UC, relatively solid growth that progresses each quarter, UK kind of leads that growth, and in the UK they're seeing a real value with respect to resource consumption savings.
addressing waiting lists in the UK.
Speaker Change: Placing capital in distributor markets, a little bit of a higher rate over the last several quarters and we're seeing that create capacity for
Speaker Change: So I think that those elements all look good for us. I think that the watch out for us is to the extent that in Germany, Japan, UK.
on-going capacity constraints for capital. [inaudible]
Speaker Change: You look at our long-term OUS procedure growth. It's been in the 20s for a long period of time. We're at early stages of adoption. I think we feel quite good about how our teams are performing there. There are particular markets where you have unique dynamics like China. [inaudible]
Thank you.
Gotcha. It's just a follow-up. You, you.
Speaker Change: that increased customer interest in two areas. And it went by too quick. I had missed what you said about after hours, surgery, growth. I just didn't get the number of that.
after our surgery and you were seeing the hired...
Speaker Change: area. Can you update us on these two areas and where are you in sort of pursuing them? What's next? And again, maybe just talk about the growth outlook if you would. Thank you.
Speaker Change: Sir, Hey, Rick, so the two areas that you mentioned after I was in cardiac on the after hour side, this really is being driven by
Speaker Change: Customers who want to provide equal access to high quality and minimally invasive surgery to those [inaudible]
Speaker Change: patients who are so-called after hours and having it be the same as the patients who are entering the hospital during the day and so that has been the primary sort of motivation behind it.
Speaker Change: and the ability for our customers to access capital, for our teams to train the after-hours care teams are just parts, our components to the equation that
Speaker Change: Enable customers to access systems to have the right trained teams to support the surgeons who are delivering.
Speaker Change: that care after hours. And so, you know, these would be patients who are generally coming in with some sort of emergent treatment.
Speaker Change: Those teams who are treating those patients, they offer some kind, generally some laparoscopy and minimally invasive surgery, oftentimes a lot of open surgery. And so the ability to have DaVinci as an option there is meaningful to the outcomes of those programs.
on the cardiac side.
Speaker Change: The way that I kind of think about it is for many years, the interventional side of cardiac intervention, so structural heart and other components from interventional cardiologist have been on the rise and you've seen them offer great outcomes to patients.
Speaker Change: and we've gone to the point now where I think there's also a set of patients where high quality minimally invasive surgery is a great and the best option for them.
Speaker Change: And so we're at the point now where we think the technology with DB5 and other parts of our ecosystem
Speaker Change: Our work with societies, our work with academic institutions and with surgeons who have been doing this around the world.
Speaker Change: It's the right time for this investment. It's been growing year-over-year off of a small base and so the need is there. There's patient benefit that is there and so we'll line up these investments and continue our journey here for cardiac.
Thanks Dave.
Speaker Change: Thank you, and our next question comes from the line of Adam Maeder from Piper Sandler. Your question, please.
Adam Eder: I get afternoon. Thank you for taking the questions. I'll keep it to one multi-part question on forced feedback technology. So, I guess, you know, the first question is, can you just maybe give us a little bit more color around the percentage of BV5 cases that are using forced sensing instruments today?
Speaker Change: Remind us the portfolio. How many instruments have this technology? How can that evolve going forward? And then lastly, I saw that there was a post-market study. I think it was 200 patients posted to ClinicalTrials.gov.
Speaker Change: and Valuating Force feedback instruments. So just maybe flash out the clinical strategy going forward to validate this exciting technology. Thank you.
Speaker Change: Sure, so on the force feedback, on the number of instruments that currently have the capability to enable that we have six different instruments.
Speaker Change: that were chosen for what they do inside the procedure. And so we're looking at components of the procedure that we think would best benefit from force feedback technology, so that's how those instruments were chosen. [inaudible]
Speaker Change: In terms of how many today, how many cases are you using force feedback? I don't have the number in front of me. There are many thousands of cases that are being done with force feedback, but I don't know the exact number.
Speaker Change: When you look forward, I think what you're going to see is like any technology that's being studied, you'll see these early single institution studies that we referenced. And that's where a single surgeon or a group of surgeons can study their results and look at it.
Speaker Change: Intuitive and perhaps other investigators will put together larger studies that will include more patients that could be the one at clinicaltrials.gov that you're referencing. But it's a steady progression of data starting from the small and getting to the larger and more statistically.
Speaker Change: Relevant Studies, and that's one we'll be able to see, you know, what force feedback means at scale.
Speaker Change: Two comments I'd make here. One is so far we're seeing the hypothesis that drove the inclusion of forced sense instruments and forced feedback technology. Starts to for younger surgeons.
Speaker Change: and the right force at the right time during the procedure as being linked to outcome. As you said, those are hypotheses that will be tested over time, but we're going to start seeing those studies progress. On the point of prevalence, how much is being used? Just remember a couple of things. One is...
Speaker Change: Four sensing and non-four sensing instruments can be used on TV5. So, Gen 4 instruments can also be used on TV5.
Speaker Change: and we're supply constraint on forced sensing instruments, so we're not able to meet demand yet. Now we're working hard on that, both from lives in the instrumentation and in the...
Speaker Change: in the manufacturing capacity, so that's coming. But right now the answer to what fraction are being used, that's a artificial limitation imposed by our manufacturing constraint.
. . . . .
Next question please. Certainly, and our next question comes from the line.
Speaker Change: of Ryan Zimmerman from BTIG, your question, please. Thanks for taking the question. I'll stick to one in the interest of time.
Speaker Change: There's been a lot of discussion on Medicaid cuts and the impact of patients.
Speaker Change: I don't know, David, if you've quantified this or you're willing to put it out there, but I'm going to ask anyway, which is, you know, if you were to characterize the payermicks, particularly within the Medicaid population, you know, what you could or could not be exposed to and what potentially that impact would be, you know, as [inaudible]
Speaker Change: You know, the government kind of considers this as an option. I appreciate your thoughts, sir.
I just say it's a, um,
Speaker Change: Healthy Miks between private and Medicare, depending on the marketplace. I think I'd say it's too early for us to give any specific comments. We obviously have discussions with customers. I think much of that is...
Speaker Change: Speculation as to how it may play out, but I think it's too early for us to comment, Frank.
Speaker Change: Yeah, this one on Medicaid and particular impact on Medicaid, right?
Speaker Change: versus Medicare. Yeah, that's correct, Gary. Yeah, I guess, you know, if it were to be amended, you know, you know, what kind of impact would utilization potentially have, particularly for robotics.
Speaker Change: The team's done a little bit of a back in the envelope. I think it's too soon to speculate what that might be. It's not a dominant part of the mix. It's in our procedure mix Medicaid, but it is not dominant. What that looks like too soon to say.
Thank you
Speaker Change: Thank you, and our next question comes from the line of David Roman from Goldman Sachs, your question please.
David Roman: Thank you, and good afternoon. I want to just to continue along the thread of potential Medicaid cuts.
David Roman: to hospitals and maybe Gary, you could expand a little bit on the comment you made earlier.
David Roman: about Intuitive being potentially part of the solution and not part of the problem in contrast to kind of the comments that Jamie made or in conjunction with the comments Jamie made about a potentially worsening hospital with CAPEX environment and some of the factors we need to consider given the external environment.
David Roman: Yeah, thank you for that. I think it's a great question. So why don't I think we're a part of the solution and just back from the road. I think for a well-run program, total cost to treat per patient episode is outstanding, as good as any...
David Roman: In any approach, an often better, certainly better than open and often better than.
David Roman: then lab. So I think if hospitals look out at this and say, look, we're going to provide care. This issue, I'm just if one thing they could do is stop giving care. Well, that's a train wreck.
David Roman: So their mission is to provide care. If they have a wall run program, they both get better outcomes higher position and surgeon satisfaction and patient satisfaction and lowest total cost to treat in their hands.
David Roman: So, of course there's a whole bunch of different procedures and a whole bunch of different hospitals, but an aggregate, that's a true statement So they want to do it and if they do it they do better economically, but you have this issue of stress on capital particularly in some of US markets [inaudible]
David Roman: So the operating person is saying, this is going great. I'm getting really nice returns, but the capital person is being incented by other means.
David Roman: And so Jamie had said in the prepared remarks and he was right, the first thing to do is help them with utilization. And we will. That's what our Genesis teams do. We're happy to help them with analytical tools so they really understand their total cost to treat and what the profitability of those programs are.
David Roman: At the same time, if ultimately they need additional capital, that's part of the conversation with the other side of the insurance house which is the one that controls the capital budget.
They're in wide some of the stress.
David Roman: So early on, it's go help them with utilization. Sometimes we can help them with workflow management and also move machines around new systems where they need to. You've seen us do that in our history back in the day. But in general, I think in many of these economies and many of these countries
David Roman: High quality mental invasive care as provided by the Vinci systems and the like has been fantastic for them. They want to do more or less.
David Roman: Okay, we are at our last question. Thank you for the questions. In closing, we continue to believe there's a substantial and durable opportunity to fundamentally improve surgery and acute interventions.
David Roman: Our teams continue to work closely with hospitals, positions, and care teams, and pursuit of what our customers have termed when tuple ain't.
Better, more predictable patient outcome. [inaudible]
Better Experiences for Patients
that are experiences for their careteens. [inaudible]
David Roman: lower total cost of care, and finally increased access to care.
David Roman: We believe value creation, surgery and acute care is foundationally human. It flows from respect for and understanding of patients and careteens their needs in their environment. [inaudible]
David Roman: 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
David Roman: Thank you for your support on this extraordinary journey. We look forward to talking with you again in three months.
Thank you.
David Roman: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.