Q2 2025 Intuitive Surgical Inc Earnings Call
Hello, everyone, and welcome to the intuitive second quarter 2025 earnings release. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session to participate. You will need to press star 1, 1 on your telephone. You will then hear a message. Advising. Your hand is raised to withdraw your question. Simply press star 1 1 again, please note this event is being recorded. Now is my pleasure to turn the call over to Dan Connolly head of investor relations. Please go ahead sir.
Dan Connolly: Good afternoon and welcome to intuitive second quarter earnings conference call.
With me today we have Dave, Rosa, our CEO and Jamie samath our CFO.
Dan Connolly: Before we begin, I would like to inform you that comments mentioned on today's call may be deemed to contain forward-looking statements.
Dan Connolly: Actual results May differ materially from those expressed or implied as a result of certain risks and uncertainties.
Dan Connolly: these risks and uncertainties are described in our Securities and Exchange Commission filings, including our most recent 10K filed on January, 31st 2025 and form 10 Q filed on April 23rd 2025
Our SEC filings can be found through our website or at the sec's website.
Dan Connolly: Investors are cautioned not to place, undue Reliance on such for forward-looking statements.
Dan Connolly: 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.
Today's press release and supplementary financial data tables have been posted to our website
Dan Connolly: Today's format will consist of providing you with highlights of our second quarter results as described in our press release announced earlier today.
Followed by a question and answer session.
Dan Connolly: Today, we'll review business and operational highlights.
Dan Connolly: Jamie will provide a review of our financial results and procedure highlights.
Dan Connolly: And finally, we will host a question and answer session.
Dan Connolly: With that, I will turn it over to Dave.
Dave: Good afternoon and thank you for joining us today.
before we proceed, I'd like to take a moment to recognize and thank Gary goodhart
Dave: As you know, after more than 15 years as intuitive CEO, Gary transitioned to Executive chair of the board. Earlier this month,
Speaker Change: it's been a privilege to work alongside Gary for nearly 30 years.
Speaker Change: We joined within a month of each other as engineers at what was a tiny california-based company in 1996.
Where a small group of us developed the first Da Vinci prototype.
Speaker Change: Since then, we have worked together with many extraordinary colleagues to build the company that is today. A global Enterprise employing more than 16,000 people supporting over 11,000 robotic systems across 74 countries with over 17 million procedures performed.
On behalf of the patients surgeons and Care teams. We support our employees and so many other stakeholders. We thank Gary for his leadership at intuitive and his contributions to advancing minimally invasive care.
Speaker Change: I am grateful for the strong Foundation he's created and honored to serve as intuitives. Next CEO.
Speaker Change: I'm excited to leave the company forward, as we continue to advance the quintuple Lane and deliver value for our stakeholders.
Speaker Change: Moving to the business, our financial metrics were strong in the in the second quarter with solid procedure growth and capital placements despite ongoing macro challenges in certain International markets.
Speaker Change: Our teams achieved significant Milestones across our ecosystem of products and services while navigating Dynamic market conditions globally.
Speaker Change: our product operations, teams continue to build capacity, and deliver for our customers, while optimizing production costs within our existing manufacturing and supply chain footprint,
Speaker Change: our research and development efforts continue to build momentum in the quarter.
Our newest platform Da Vinci 5 is in Broad launched in the United States and received clearances in Europe and Japan where we will begin measured launches.
Speaker Change: We are pleased with customer feedback and Adoption of our newer platforms and remain committed. To supporting high-quality minimally invasive care with a comprehensive and impactful product portfolio.
Reviewing procedure performance.
Speaker Change: Da, Vinci procedure growth in the quarter was 17%.
Speaker Change: The 9 general surgery led us procedure growth with a strong contribution from after hours procedures.
Speaker Change: While the international growth was led by non Urology procedures.
Speaker Change: Regional performance highlights included strength in India, Korea and distribution markets.
Speaker Change: Jamie will provide further details on procedure Dynamics, later in the call.
Speaker Change: Turning to Capital, we place 395 Da, Vinci systems, including 180 Da, Vinci, 5 systems and 23 SP systems.
Speaker Change: Capital placements were strong in the US while macro challenges in Japan. China and Europe continued.
We also placed 54 Ion systems in the quarter.
Speaker Change: System utilization defined as procedures per installed clinical system per quarter grew 2% year-over-year for our multi-port platforms.
And accelerated to 30% and 8% for SP Andy on respectively.
Moving to our finances Revenue, growth of 21%, reflects solid procedure performance in capital placements.
Speaker Change: And a benefit from higher purchase mix.
Speaker Change: Product margins and operating expenses were slightly favorable to our expectations.
Journey to our multi-port business.
Speaker Change: Da Vinci 5 has been an important addition to our robotic surgical system portfolio with more than 100,000 procedures performed to date.
And what had been a measured us launch?
Speaker Change: We are pleased to offer Da Vinci 5 broadly in the United States.
Commercialization in Europe and Japan will be measured as we work through additional clearances to fully enable The Da Vinci 5 ecosystem.
We also added to our Advanced Energy instrument portfolio with 510k clearance, for vessel sealer, curved
Speaker Change: Giving surgeons greater precision and narrow anatomical spaces.
Speaker Change: Additionally, we received a procedure clearance for tracheo bronchoplasty.
A surgical treatment for a collapsed trachea and Main bronchi during normal breathing.
With respect to our digital ecosystem, customers continue to collect and publish data, about force feedback, and other aspects of Da Vinci 5 through their use of case, insights, Dan will highlight some of this data later in the call.
Speaker Change: Since launching dual console capability with da Vinci si in 2009?
Speaker Change: Digital collaboration tools for our customers.
Speaker Change: We believe these tele collaboration capabilities can advance clinician training enhance, patient care and optimize care delivery.
Intuitive telepresence with our latest Hub, software will enable customers to use on-demand scheduling connecting easily with a known group of peers, similar to the favorites screen on your phone.
Speaker Change: Last week at the Society of robotic surgery conference Dr. Doug Stoddard director of surgery and Robotics at CHRISTUS Health.
Speaker Change: And Dr. Andrea pakula medical director of robotic surgery at Adventist Health performed. A telesurgery demonstration between Atlanta and Strasburg on an advanced tissue model using Da Vinci 5 including force feedback.
Speaker Change: By the long-term opportunity for telesurgery is potentially significant.
Speaker Change: We recognize that achieving safe, consistent, adoption, or require robust. Cyber security and privacy infrastructure.
Speaker Change: New workflows and hospitals.
Speaker Change: Revised medical and legal policies. In appropriate business economics.
Speaker Change: As with our approach to Innovation broadly, our work here is focused on applying our experience and expertise to deliver safe meaningful grounded solutions. That address real world Healthcare challenges.
Turning to SP procedure growth was strong at 88%. Year-over-year with growth accelerating in Korea.
Speaker Change: We are still early in our European launch and are pleased with progress today.
Speaker Change: Our SP team achieved several Milestones, including receiving clearance for our 50th endoscope along with 510k clearance, for transanal local, excision and reception adding to a suite of transabdominal colorectal procedures.
Speaker Change: Our priorities for SP in the near term included additional indications in the US.
Speaker Change: Expansion in international markets, enhancing core capability, and improving product costs.
Moving to ion procedures, grew 52% to approximately 35,000 in the quarter.
We recently sold our first systems in Australia and Korea and performed. Our first commercial procedures,
Our priorities for ION in the near term are supporting utilization growth in the US expansion. In international markets, enhancing overall procedure workflow and improving product costs
Speaker Change: Over recent years, we have highlighted our investments in and focus on delivering for our customers across all aspects of our ecosystem at industrial scale.
Speaker Change: Customers around the globe rely on intuitive for high-quality products and services at Rock Solid Supply continuity to ensure they can serve their patients safely, reliably and effectively at volumes approaching 3 million patients per year globally.
Speaker Change: As has been the case throughout our 30-year history, we will continue to innovate our cross. Our instrument portfolio as illustrated by the introduction of our force feedback and extended use instrumentation.
Speaker Change: Our work here is Guided by commitment to the quintuple Lane, including patient, safety product quality and reliability and informed by data from millions of procedures.
We are aware that third parties have sought to offer products or services to healthcare providers. That would modify some of our instruments to extend their use
Speaker Change: As customers consider remanufactured, instruments from third-party suppliers.
We expect key areas such as safety, performance quality, reliability, Supply, continuity, and pricing will be carefully evaluated and compared.
Speaker Change: Our strong belief is that high-quality instruments with consistent performance broad, Operational Support, and predictable Supply chains provide the greatest value to our customers.
Speaker Change: In closing, we are committed to our 2025 priorities.
Speaker Change: First focusing on the full launch of Da Vinci, 5 its Regional clearances and follow-on feature releases.
Speaker Change: Second will pursue increased adoption for our Focus procedures by country through training commercial activities and Market, access efforts.
Speaker Change: Third will 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.
Speaker Change: Our core businesses have momentum and our teams are focused on the significant long-term opportunity to improve the quantal, Wayne through our connected ecosystem.
Speaker Change: We are well positioned to operationally and financially to execute against our priorities.
I'll now turn the time over to Jamie who will take you through our finances in Greater detail.
Jamie: Good afternoon. I will Begin by highlighting our second core performance on a non-gaap or performer basis.
Jamie: A gap results later in my remarks, a Reconciliation between our proformer and GAP results is available on our website.
Jamie: Our second quarter Financial results were strong.
Jamie: Revenue growth was 21%.
Jamie: Proformer operating margin was 39% and performer earnings per share increased 23%.
Jamie: Our underlying core metrics were solid and as follows.
Da Vinci procedures. Grew 17%.
Jamie: Our in store base of Da Vinci systems, increased 14% to almost 10 and a half thousand systems globally.
Jamie: And average system utilization Rose by 2%.
Jamie: Taking Da Vinci and ion together total. Procedure growth was 18%.
Jamie: Strength in Q2 Financial results, reflected a higher mix of systems purchased by customers as compared to last quarter and last year and leverage a fixed costs.
Jamie: In the US Da Vinci procedures, grew 14% driven by continued strength in benign general surgery with a notable growth in Colony and appendectomy reflecting in part. Our partnership with customers to support growth in after hours procedures.
Jamie: When considering the environment in the US, we recognize the potential impacts of fiscal policy to Medicaid, recipients.
Jamie: There are approximately 70 to 80 million Americans covered through this program for which uncertainty remains about whether some patients may lose coverage. How that plays through Health Systems and what the ultimate impact might be
At this point, I would highlight the following.
Jamie: First currently intuitive relative penetration is lower for patients covered by Medicaid as compared to all other types of coverage.
Second Medicaid patients, tend to be a younger demographic as compared to the overall population and third to the extent that intuitive can demonstrate an advantage clinically and economically. We believe we are in a position of relative strength.
Outside the US Da Vinci procedures, grew 23%, with strong contributions from India, Korea and distributor markets.
clinical performance, in India has been driven by expansion of the installed base at Greenfield accounts and adoption by surgeons across a broad set of surgical specialties,
Jamie: Strengthening career. Procedure growth partly, reflected a weaker comparison period given the impact of physician strikes last year.
Jamie: We also continue to see strong adoption and use of SP in career across a broad set of procedures.
Jamie: In China, procedure growth slightly exceeded the global average and continues to reflect the impact of a constrained and a competitive Capital environment.
Jamie: Overall outside the US, we observed robust growth of color, erectile benign, general surgery, thoracic kidney and HPP procedures.
Jamie: The breadth of us. Procedure growth, reflects our focus in supporting customer adoption Beyond Urology and is an ongoing opportunity for intuitive to reach more patients.
Jamie: Turning to Capital Performance. We placed 395 systems in quarter 2, a 16% increase from the 341 systems placed in the same quarter last year.
Jamie: Following our progression into US broad launch of Da. Vinci 5 during Q2 we placed 180 Da Vinci 5 systems bringing the install base to 689 systems
We saw 83 trading transactions in Q2 up from 21 a year ago, primarily driven by us. Customers upgrading 2 Da Vinci 5.
Jamie: While there are a number of customers expressing interest in upgrading 2 Da Vinci 5. We expect trade-ins to occur over multiple years as customers assess, its clinical and financial benefits.
Jamie: In the US, we place 216 systems up from 149 last year.
Outside the US, we placed 179 systems compared to 192 last year.
Jamie: Oh us placements. Included 73 systems in Europe 15 in Japan and 13 in China.
Jamie: Compared to 7141 and 14 respectively last year.
Jamie: Compared to 70 systems last year.
Jamie: Recent strength has been driven by growth in Brazil Eastern, Europe, and Southeast Asia reflecting expansion into customers establishing their first robotic programs.
Jamie: Our Capital Performance outside. The US continues to be impacted by ongoing financial and budgetary pressures in Japan, China and Europe.
Jamie: These pressures reflect government, budget challenges and uncertainties over the trade environment.
Jamie: During the quarter NHS England issued its 10-year plan to improve Healthcare outcomes and Associated priorities.
Jamie: We are encouraged to see a commitment to expanding access to robotic surgery as 1 of the key elements of the plan.
Jamie: however, we do not expect any positive impact this year, from incremental NHS investments in robotics,
Speaker Change: Toll revenue for the quarter was 2.44 billion. Representing 21% growth over the prior year.
Speaker Change: On a constant currency basis. Revenue growth was also 21%.
Speaker Change: Systems Revenue, increased 28% reflecting lower lease rates increased placement and a higher mix of Da Vinci 5 systems which drove higher average selling prices.
Speaker Change: Recurring, Revenue also, grew 21%, and accounted for 85% of total revenue.
Speaker Change: Leasing represented 49% of Q2 placements lower than 54%. Last year, primarily driven by a higher mix of placements with Distributors most of whom do not qualify to lease systems.
Speaker Change: While leasing rates may vary from quarter to quarter, we continue to expect a trend toward leasing to increase overtime, driven primarily by a higher mix of leasing by us customers.
Speaker Change: The average selling price for systems is 1.5 million compared to 1.444% partially offset by a higher mix of trade in transactions.
Speaker Change: Instrument and accessory Revenue purposes are approximately 1800 relatively consistent with the prior year.
Speaker Change: On a year-over-year basis. We saw downward pressure from lower bereet procedures and higher choices. Ectomy, procedures, offset by customer ordering patterns, higher SP procedures, and da Vinci. 5 specific Ina,
Speaker Change: Second core, SP procedures, grew 88%, driven by 112% growth in Korea, and strong growth in Europe and Japan.
Speaker Change: We placed 23 SP systems in Q2 compared to 21 systems last year.
Speaker Change: these included 6 in the US 6 in Korea, and 5 in Taiwan,
Speaker Change: SP utilization Rose, 30% with Korea and Japan, continuing with highly efficient High usage, SP programs.
Speaker Change: Utilization is also steadily increasing in Europe and the US.
Speaker Change: We are progressing through the early phase of a measured roll out of our SP stapler, which we believe is a key enabler for SP adoption in colorectal and thoracic procedures.
Now turning to ion.
We performed approximately 35,000 ion procedures in Q2 a 52% increase over the prior year.
Speaker Change: We placed 54 Ion systems compared to 74 in Q2 of 2024.
7 of these systems were placed in markets outside the US.
Speaker Change: The install base of Ion systems expanded to 95 systems and average system. Utilization increased 8% from the year ago period.
Speaker Change: Turning now to the rest of the p&l.
Speaker Change: Performer gross margin for the quarter was 67.9% down from 70% in Q2 of last year.
Speaker Change: The year-over-year decline reflects higher facilities costs, including depreciation related to new manufacturing capacity.
Speaker Change: A greater mix of lower margin, ion and da Vinci. 5 revenue and higher service costs related to Da Vinci 5.
In addition, Q2 results also reflected in an impact of approximately 60 basis points from tariffs.
Speaker Change: Clearly, the trade environment continues to be dynamic.
Speaker Change: We are currently estimating the impact of tariffs for the year to be approximately 100 basis points, plus or minus 20 basis points lower than the estimate. We provided on last, quarter's earnings call primarily reflecting the reduction of bilateral, tariff rates relating to us China trade,
Speaker Change: Imports from China to us, they're a tariff rate of 30%.
Speaker Change: Imports. Into China are sub assemblies and finished goods from the US are subject to a 10% tariff.
Speaker Change: Imports into the US from all other countries. Bear a 10% tariff rate and the imports from Mexico and Canada that comply with usmca continue to be exempt from tariffs.
Speaker Change: as a reminder, we expect the impact of tariffs to increase each quarter this year as tariff, expense rolls, through inventory, into Costa sales,
Speaker Change: Given the uncertainty surrounding what tariff rates will ultimately be enacted. It is possible future, tariff rates. Could have a significant incremental impact on our cost of sales.
Speaker Change: During the quarter, we opened a new 187,000 square foot manufacturing facility in Bulgaria with a land to expand further as needed.
Speaker Change: This site will initially be focused on our portfolio of more mature endoscope products.
Speaker Change: Over time, we expect a further, increase our manufacturing footprint in Germany and Mexico, given our midterm needs for additional capacity, to support Revenue growth and our strategy to operate at industrial scale.
Second quarter proformer operating expenses increased 9% year-over-year driven by higher headcount and increased facility costs including depreciation partially offset by lower legal expenses.
Speaker Change: We added approximately 300 employees during the quarter, approximately half of whom were in manufacturing roles in support of customer demand.
Speaker Change: Performer, other income was 93 million for the quarter up from 91 million in the prior quarter, reflecting higher interest income.
Speaker Change: Our performer effective tax rate for Q2 was 22.7% in line with our expectations.
Speaker Change: We are at the early stages of evaluating recent us tax reform and at this point, we do not anticipate a material impact to our 2025 tax rate.
Speaker Change: We are still evaluating potential impacts for 2026.
Speaker Change: Perform a net income for the second quarter was 798 million compared with 641 Million last year.
Speaker Change: Performer earnings per share, increased 23% year-over-year to 2.9 cents per share.
Speaker Change: Now, turning to our Gap results.
Speaker Change: Gap income for the quarter, was 658 million or 181 per share compared to 527 million or 146 per share in Q2 of last year.
The differences between our proformer and GAP. Results are outlined in Quantified on our website.
We ended the quarter with 9 and a half billion in cash and Investments up from 9.1 billion last quarter.
Speaker Change: The sequential increase was driven by operating cash flow partially offset by stock repurchases of 181 million, and 155 million in capital expenditures.
During the quarter. We repurchased 350,000 shares at an average price of 518 per share.
Speaker Change: with that, I'll turn it over to Dan to discuss, recent clinical Publications and our outlook for 2025
Thank you, Jamie.
Speaker Change: Turning to the clinical side for our business. I'd like to share with you data from recent studies that we found notable.
Speaker Change: In addition to the specific data highlighted on this call, we encourage you to consider the wide body of evidence detailing. These topics and published scientific studies over the years.
Speaker Change: This past June in the Journal of the American Medical Association or JMA Dr. Fong from Jiang Jiang Hospital Fudan University on behalf of the investigator team.
Reported 3 year results. From a randomized, trial comparing robotic and laparoscopic surgery for middle and low rectal cancer.
Speaker Change: Known as the real study, this study examined. Local Regional recurrence rates with more than 580 subjects in each of the robotic assisted arms and laparoscopic arms.
Speaker Change: recall, secondary short-term outcomes from this study were published in the Lancet, gastroenterology and hematology in November, 2022 and described on our earnings call in January 2023,
Speaker Change: That publication reported robotic. Assisted surgery resulted in a better oncological quality of reception, less surgical trauma and better post-operative recovery when compared to the laparoscopic approach.
Is the 3-year.
Speaker Change: The authors reported that the robotic assisted group, demonstrated a 55% lower risk of local Regional recurrence at 3 years compared to laparoscopy.
The authors concluded quote compared with conventional laparoscopic surgery, robotic surgery, significantly improved long-term oncological outcomes in patients with middle or low rectal cancer.
Speaker Change: With additional real world, clinical data and modern improved training programs for surgeons.
Speaker Change: Robotic surgery could be the preferred choice for patients with middle or low rectal. Cancer end quote.
Speaker Change: With the launch of The Da Vinci 5 platform. We are starting to see evidence emerged that describes the value.
Speaker Change: That new features such as force feedback, technology and case insights may bring to minimally invasive surgery.
Speaker Change: At this month's Society of robotic surgery, annual meeting Dr. Isla rashidi from Multicare Health System in Tacoma, Washington presented data from her single surgeon experience.
Speaker Change: Dr. Rashidi, analyzed relationships between clinical outcomes and objective performance, indicators, or OPI.
Speaker Change: Such as the force measured during surgery using force feedback instruments.
Speaker Change: To conduct the study Dr. Rashidi and colleagues use opi's generated by case insights, an AI enabled solution that combines surgical video with data from The Da Vinci platform.
Speaker Change: Their analysis of 28 low anterior resection, cases, revealed that certain patient factors and opi's were associated with the outcomes in these polar procedures.
Speaker Change: Specifically higher forces, especially during the dissection phase of surgery and prior surgery were associated with increased length of stay.
Speaker Change: The strongest predictor of length of stay was the percent of force time above 6.5 Newtons.
Speaker Change: Dr. Rashidi and team concluded in part, quote
This early dv5 experience demonstrates that patient factors and opi's are associated with clinical outcomes and robotic assisted low anterior resection.
Speaker Change: Advancements in the Technologies integrated with robotic platforms. Can assist surgeons by identifying factors that predict complications and aiding the optimization of techniques for specific patients, ultimately supporting safer gentler and more precise surgery.
Speaker Change: End quote.
Speaker Change: While these results are early, we are encouraged to see results that are consistent with the core hypotheses of the value that force feedback technology in case insights may bring to minimally invasive surgery.
Speaker Change: We continue to expect clinical evidence to build over the coming, quarters and years.
Speaker Change: I will now turn to our updated Financial guidance for 2025 starting with da Vinci procedures.
Speaker Change: On our last call, we forecast full year 2025 Da Vinci procedure growth within a range of 15% and 17%.
Speaker Change: We are updating our 2025 Da Vinci procedure growth guidance to be within a range of 15.5% and 17%.
Speaker Change: Consistent with last quarter. The low end of the range assumes growth in China is impacted by trade, environmental and competitive Dynamics.
Speaker Change: Governments in key. Oh us markets. Continue to constrain Hospital, capex budgets, which limits the expansion of capacity in the field.
Speaker Change: And buriat procedures continue to decline at rates, similar to recent trends.
Speaker Change: the high end of the range assumes China procedure growth improves relative to 2024
Speaker Change: The capex environment improves in key us markets.
Speaker Change: And beri procedure declines moderate.
Speaker Change: The high end of the range also assumes that da Vinci procedures are not impacted by the current trade environment.
Turning to gross profit. On our last call, we forecast pro-forma, gross, profit, margin and 2025 to be within a range of 65% and 66.5% of Revenue.
Speaker Change: Which reflected significant incremental depreciation? As we bring on new facilities? The combination from growth, in newer contribution from growth in newer products and the expected impact of tariffs.
Speaker Change: As Jamie described earlier, we currently expect that recently implemented tariffs globally to increase our 2025 cost of sales by approximately 1% of Revenue plus or minus 20 basis points.
Speaker Change: At 67% of Revenue.
In regards to operating expenses, we continue to expect pro-forma operating expense growth to be between 10% and 14%.
Speaker Change: Which includes increased appreciation from new facilities, and Investments, to drive our growth objectives.
Speaker Change: We continue to expect our non-cash. Stock compensation expense to range between 770 million and 790 million.
Speaker Change: We now expect other income, which is comprised mostly of interest income to Total between 370 million and 390 million.
Speaker Change: With regards to Capital expenditures. We now estimate a range of 650 million to 725 million primarily for Planned facility construction activities.
Speaker Change: With regard to income tax, we continue to estimate our 2025, proforma income tax rate to be between 22% and 23% of pre-tax income.
Speaker Change: That concludes our prepared comments as we open the line for questions. We ask that you please limit yourself to 1 or 2 questions.
Thank you. And that's a reminder to get in the queue. Simply press star, 1 1, 1 on your telephone, and wait for your name to be announced.
as a reminder, limit yourself to 1 question and Ricky, if necessary, please stand by while we compile the Q&A roster,
Speaker Change: Our first question is from Travis Steed with Bank of America Securities. Please proceed.
Speaker Change: Hey, thank you. Just a quick question in regards I guess maybe I'll start with a margin question. That was kind of 1 of the the highest margins you've had in a long time even with the Tariff headwind. I don't know how much this is the new facility coming on in q1 or or what? Just, just trying to think about how uh, what drove the margin upside this quarter and and kind of what sustainable on the margin side.
Speaker Change: Hey Travis, this is Jamie. Uh, yeah, I just say we had a strong Revenue growth quarter at 21% part of that was the increase, um, purchase mix. Which obviously the, the purchase lease makes can vary from court to court. Um, we did under spend on Opex, just a little bit that grew 9% year-over-year and so, um, part of what fell through then was just the revenue be, uh, leveraged through the entire p&l, uh, produced that, that operating margin result. I would, I would not characterize that as the, um, the new normal because obviously you've got some benefit from again, the purchase mix and spending just growing 9%.
Speaker Change: Understood. I guess I'll go ahead and get the, uh, the 1 rep processing, question out of the way too is, is I guess the question would be 1. Is there any more you could add to, to what you said in the prepared remarks? Is there? Something you can kind of do yourself or? Uh, could you also potentially extend useful life on your own instrumentation, uh, as well? Just kind of thinking about like longer term? Uh, how you kind of protect the the business.
Speaker Change: Yeah no hey Travis. It's Dave, you know, I think as I said in my prepared remarks, um, customers care about the quintuple aim is they established a robotic programs. They want to deliver high-quality care, great outcomes for their patients and we know they want to do it, um, with the right value to
Speaker Change: And so as customers consider remanufactured instruments uh from third parties providers, it's been my experience that oftentimes hospitals will use value committees to assess these types of, um, Supply chains.
Speaker Change: Those value committees, often consists of a, a variety of stakeholders from the hospital. It may be. Oh leadership, it could be medical personnel, risk management supply chain, uh, care team, folks, like surgeons and nurses and maybe others.
Speaker Change: And so, these value committees have established processes that they look through and assess a whole bunch of variables. Like we talked about safety reliability performance,
Speaker Change: uh, continuity of Supply ongoing support
Speaker Change: will all be weighed against the expected savings. And so, that's where, you know, our our strong belief is that high-quality instruments the performance that we have demonstrated over time. The Operational Support that uh, we engage uh, through our teams and a very predictable supply chain will provide the greatest value.
Speaker Change: As you as you look forward I think Innovation plays a strong role here. And so you've seen us, you know, increase the breadth of our portfolio over time, you've seen us extend instrument uses introduced force feedback here recently with da Vinci 5.
Speaker Change: We've worked really hard on instrument reliability and supporting uh the safety and performance of robotic surgery of our portfolio. Uh, importantly through the from the first use and through the last use.
Speaker Change: And so, we're going to continue to invest and innovate to differentiate across our portfolio.
Speaker Change: And and that will bring I think best-in-class performance and Innovation and and pursuit of quintuple Lane. And we're also going to strive to uh lower cost and provide the best value for our customers. And so they're, you know, this journey with me. Manufactured instruments will have many phases and we will innovate in a variety of different ways and and, uh, provide the best value for our customers.
Dave: Really helpful. Thanks Dave. I appreciate the question.
Speaker Change: Welcome.
Speaker Change: Thank you. Our next question is from David Roman with Goldman Sachs, please proceed.
David, your line is open.
David Roman: Uh thank you and good afternoon. Appreciate your your you're taking the question, may, maybe Jamie I could start as a follow-up to your comments, regarding some of the policy changes that are evolving. I think on the last quarter call, you had talked to you, you and Gary had talked about the dynamic with the potential for risk around us Hospital, capex spending. But at the same time, we're intuitive could be part of the solution.
David Roman: Tonight, you talked about the dynamic around the unfortunate potential loss of coverage for Medicaid patients. And what that might do to the business, he maybe give us an update on your latest thinking on the, on the capital side and and how you're approaching those conversations, as you think about aiding hospitals and their objectives to advance patient care. And then I had a follow-up on the, uh, force feedback study.
David Roman: On.
David Roman: Medicaid, specifically, I think we were genuinely say is too early to make any comments with respect to how us hospitals are responding to that, at least based on our engagements with with customers, we recognize that to the extent that hospitals experience lower emissions because patients lose coverage, or they have less reimbursement. Then, of course, that just creates uh, incremental Financial challenges for hospitals that they may need to respond to in terms of how they manage Capital budgets or or even operational budgets. So we're we're just acknowledging that and providing that some some context with respect to our relative penetration relative to Medicaid. Um I I do think that we have
David Roman: Um a growing number of engagements, we have with customers, particularly in the US relative to what we call customer Hospital. Analytics where we can look at their data from a clinical and economic perspective. And and often time we see that da Vinci can be actually part of the solution when where there is an economic challenge in the form of the things. We've talked about lowering length of stay, lower complication rates, saving, precious, resources, Etc. And so we'll look to engage customers if an asset that's needed over time. Uh, in terms of the overall Capital environment, I I just say if we look at system, placements of 395.
David Roman: Um, we'd characterize that as uh, solid performance and in the range of our expectations. But you actually have to double click in terms of the kind of Market breakdown of that performance placements in the US, grew 45%, um, reflecting the move into broad launch, uh, for Da Vinci, 5 in Q2, um, and strengthen interest in in Da, Vinci 5. And then we talked about Japan which was down, 26 systems year-over-year, Europe, and China essentially flat. And that's mostly to do with uh, government budget, deficits and conserving, uh government spending including impacts on on Healthcare. Um and so I think I think we feel good about the US and recognize some challenges at internationally in our us customers, we do have some
David Roman: It's at xar to the portfolio, which can be attractive to us, customers where their cost sensitive.
Uh, very helpful, appreciate all the detail and, and maybe just to follow up on, on the force feedback launch. Can you give us kind of an update on where you are with, with customer evaluations, uh, as well as the capacity expansion and the extent to which that may already be to impacting, the Ina per procedure number and, and, and how we should think about the progression of the roll out there.
David Roman: Yeah, David maybe I'll take the first part and I think Jamie will jump in towards the end. Um, just on the supply force feedback instruments. We do expect that to be constrained through first quarter of next year. And I'd say more broadly, um, you know, please with adoption. Thus far, the early feedback's been encouraging, particularly with case, insights. Think you heard us describe, you know, we insurgents were building evidence um, and continue to, you know, we'll share that over time. And again, that evidence is mainly looking to demonstrate the force feedback can improve outcomes and then separately, um, maybe Quicken the learning curve for surgeons adopting robotics, uh, for the first time
Uh, I'm sorry, remind me the second part of your question.
David Roman: To see the extent to which, um, force feedback. You know, may have impacted looks like Ina outgrew. Procedure procedure volumes, this quarter, whether that's having a positive impact even in its early launch. And when we might start to see it sounds like the first quarter of 26 is the dynamic with capacity. But when we might start to see a more significant impact from, uh, force feedback on on, on that Ina per procedure. Number. Yeah. In, in the prepared remarks, it, it was 1 of the um, contributing factors to um, kind of upward momentum on Ina per procedure, although it was a small, the smallest component. And the way I characterized it was Da Vinci 5, um, Ina specific, uh, contributions. That's the combination of force feedback and the tube sets that go along with, uh, in integrate into fla. So 1 of the smaller factors and obviously that becomes a opportunity for us to the extent that we can demonstrate value. And when we get to, to full Supply
Speaker Change: Great, thank you very much.
Speaker Change: Thank you. 1 moment for our next question, please.
And is from Robert Marcus, with JP Morgan please proceed.
Robert Marcus: Oh, great. Uh, congratulations on a, a very nice quarter and uh, Dave, uh, congratulations as, uh, I believe it's your first call as, uh, CEO. Uh,
Speaker Change: 2 for me. Um, maybe first just to kind of pick up a a thread and and um
Speaker Change: 1 of David's questions on da Vinci 5 and productivity and I was wondering I I know it's still early in the launch but you now have a couple quarters on some of these robots, um, in the US and, you know, are you seeing any improvements in productivity? Uh, it could obviously be really helpful as we think about the upgrade cycle and the ability to do more procedures, generate more revenue and treat more patients. Um, so first, uh, I'd love to hear what you're seeing in terms of improved productivity on uh, Da Vinci 5 versus XI. Thanks.
what I would say is, um,
Speaker Change: It's um 1 area where we look to build evidence to support the value proposition and we described to you in the past a number of the anecdotal uh uh inputs that we uh, we get from surgeons. Some of them have been been presented on stage. We've seen some analysis in various Publications, but uh, we'd like to get to a, a state where that is robust evidence and is part of how we engage with customers, and that will take us some time to build that to build that collateral. Uh, I would say that,
Speaker Change: Screens. And so all of those things are contributing in the integrating to some of the uh efficiency gains that Jim Jamie described. And we have seen, you know we we are tracking at individual institutions and individual surgeons and you see, you know, on on short cases to very to a longer cases uh savings that can exceed 20% and so
Speaker Change: As more and more data comes to life there, we will start seeing uh, how that impacts utilization. And I think here are, are 1 goal, would be to enable, uh, teams Hospital teams to add another case during the day. And so, uh, as we continue our journey here with DB5, um, we look forward to collecting and analyzing and and Publishing more data.
David Roman: Great. Maybe uh a quick follow-up uh for you. Jamie I saw you repurchase shares in the quarter. It's the first time in a while. Uh just wanted to hear the thought process and your latest thoughts on Capital deployment. Um
And um, just how how you think about that? Thanks a lot. Yeah. Uh, Capital allocations, remain consistent and I'll probably sound like a a broken record. Its first to organically invest in the business and you've seen us do that with R&D and capex. More recently uh second is we look for uh smaller tuck in Acquisitions where we can find technology, that's differentiated all can help.
Accelerating the business and then, uh, we return Capital to shareholders when we have opportunistic, um, times to to, to do that. And so um what you saw us, recognizing the quarter is just the volatility that's in in the environment in part because the the trade environment. Um, and so we we uh, exercised that opportunistically, we um, we review what we do with capital, allocation, each quarter with our board. And so we have a relatively formalized process by which we evaluate what we do.
David Roman: Thanks a lot.
David Roman: Thank you.
Speaker Change: Our next question is from Larry bigsun with Wells, Fargo. Please proceed.
Speaker Change: Uh, good afternoon. Thanks for taking the question. Um, congrats uh, to Dave on the new, the new, uh, role. Hey, Jamie. I think for Jamie 2 on systems. I'm going to try to get them both in here. Um, how, how should we think about system? Placements? Outside, the US going forward, you know, giving the recent CE Mark in Japan approval. Um is there any reason we wouldn't see system placements, start to grow again like we did uh when you launched DB5 in the US. And and secondly now that the full DB5 launch just started in the US, how should we think about the weight of increase uh in trade in going forward in any color on kind of the the financial implications uh of the trade-ins. Thanks for taking the questions.
Speaker Change: Yeah, with respect to clearance of DB5 in Europe and Japan as our history has been we're planning for a measured roll out. Um and there's work to do there. We we have to obviously build uh training Pathways proctoring capabilities and uh actually engage customers in terms of the relative value of Da Vinci 5 uh in particular given its its higher price. And and of course you have to wait for clearance before you can directly engage customers in that way. Um, I, I would say that force feedback instruments for Europe is not yet cleared. And actually, we don't expect that before the end of next year, so there may be some European customers that want to wait for that capability. Um, I I would expect that as we've seen in, in the US there will be early adopter kinds of companies that, uh, customers that will be interested in uh, getting access to Da Vinci 5 because of the effect of their program and
Speaker Change: The the, um, desires of their of their surgeons, but I would consider it to be a measured roll out through through the second half as we um, like to do that the right way with building the infrastructure that drives long-term success.
Speaker Change: Thanks so much.
Speaker Change: Thank you. 1 moment for our next question, please.
Speaker Change: And is from the line of Rick Wise with stifel please proceed.
Uh, good afternoon, Dave? Hi Jamie. Um,
Speaker Change: Dave, um, at uh, the SRS meeting we heard about the potential for robotics. Uh, uh, utilization in other spaces Beyond current core focuses for the industry like endovascular, broadly, um uh, uh, afc's Etc. Uh, I was just wondering as as things evolve and, as DB5 rolls out, you know, it's it's it's early to say what's next. But, uh, how are you thinking about, uh, what's next broadly? Uh, in terms of, uh, uh, uh, new locations, New Opportunities,
Speaker Change: Yeah. Hey Rick um, you know you had mentioned asc's and Ambulatory Care and outpatient environments. And so you know, that was a focus at SRS. And if I uh, step back from that and and say what do customers need within an ASC to provide high-quality care
Speaker Change: A piece of that puzzle is consistent and reliable technology. And so that surgeons, uh, who come from the main hospital and have some of their practice at an ASC are able to efficiently, uh, do procedures, you know, at a volume and with outcomes, uh, that are appropriate. And that's where, you know, I am excited about the technology in our portfolio that we have today and I like some of the opportunity as Jamie was talking about trade-ins, you know, customers can put the newest technology like DB5 into their, uh, main institutions and focused on some of the inpatient procedures. And then often times, take the capital that they already own via XI orx and move that into ASC environments. And so, you know, 1 way to help meet customers needs but, uh, as again as we're looking at how to solve,
Speaker Change: Customers uh, problems and their goals about quintuple aim. I think increasingly we're seeing some attention around the outpatient environments and aoc's and and feel good about the products that we have there.
Speaker Change: Uh, great. And um, just as a, a second question, Dave, um I I'm very conscious that uh you all have said repeatedly that the da Vinci 5 will continue evolve, you've touched on a couple of of the aspects. But uh I was lucky enough to hear as you know, from your colleague imman Jetty, who's leaving, me leading the uh DB5 roll out that with a full launch of the system which are broad launch. I think where your words uh, that there would be additional features additional software a different additional capabilities and I was hoping you could expand on that and maybe help us understand the implications for adoption for utilization. And maybe does this help Jamie the ASP or margins as as the rollout continues. Thank you very much.
Speaker Change: So you know the 1 of the things about robotic systems as a whole, is there a platform Technologies and you start in 1 place with a a product that is launched at the beginning of last year?
Speaker Change: And I think you can draw a good analogy to XI when it was first launched.
Launched. And then, look, a decade later at the features and capabilities that were added along the way and the exact same Journey will happen with DB5. And so, yes, Amin had talked about some of the things that were upcoming. And, you know, there there are many 1 in particular that we talked about before. Is, you know, we have the ability to integrate now 3D models in a different way than we used to, with XI. And so, that is part of the compute, uh, increase in terms of the compute power increase. We're now able to do things graphically and through integration and imaging that we, uh, we're not able to do before.
And coming coming years. We'll keep you informed about the features and capabilities and instruments that will continue to be added uh to the platform and uh excited about where it's going to take us.
Speaker Change: Rick. We have a um, a road map of features to come over time. Some of them are committed. And some of them are are obviously ideas that will explore and make conclusions. On I I say most of those um features to come. We won't directly charge for but of course, they then enhance the surgeon experience and the uh, the overall capability of the system. So in that sense, then for customers that are looking at the price and maybe pausing on whether to make the incremental investment, as you increase, actually the capability of features out of the system, then it makes the the likelihood of a sale for a customer that was was waiting higher. There are some digital capabilities that we're considering charging for and that's going to be a function of incremental value and can we demonstrate that to the customer?
Thank you. Alright, I think we've got time for 1 more question. Thank you so much, 1 moment, please.
Speaker Change: And this, uh, question comes from Adam Meer with Piper Sandler. Please proceed.
Adam Meer: Hi, good afternoon. Thank you for squeezing me in and congrats on a nice quarter. I'll keep it to just 1 question. I I did want to ask about the curve Bessel sealer, which recently got FDA approval, you know, I've been seeing some buzz on LinkedIn and other um you know sites.
Speaker Change: To just help us kind of better understand any potential impact from that device and the marketplace, like, what is the benefit of the technology, which procedures will utilize that device and is there anything to call up from a pricing standpoint? Is it relates to Ina procedure? Thank you.
Yeah, we're we're excited about that device. Um, its primary value prop is that it's quite a bit of Slimmer profile than the existing vessel sealers that we have. It has a ceiling indication for 7. Mm vessels. Which is which is important the um tip of the instrument actually allows for better tissue manipulation. Um, and so, of course, then it's best to to those procedures that have narrow spaces in which the surgeon works. So that's thoracic, colorectal height or hernia as examples. Uh, the way I would think about it is that um it sets us up for the possibility. The probability that we can um uh penetrate those procedures with Advanced Energy more fully than we would with the existing portfolio and we'd also look, as a value hypothesis, that we'd also see higher, stick rates from surgeons and so it doesn't open up new procedures for us.
Speaker Change: Um, it does have a a, a minor impact to uh, relative Ina per procedure, given the value prop. But it's really for us about, um, having a greater degree of penetration of success in those procedures that need a a narrow space for energy.
Speaker Change: Thanks Jamie.
Speaker Change: Okay, that was our last question. Thank you for the questions.
Speaker Change: 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 turned the quoll.
Speaker Change: Better and more predictable, patient outcomes. Better experiences for patients better experiences for their care teams lower total cost of care. And finally increase access to care.
Speaker Change: We believe value creation, and surgery and acute care is foundationally. Human it flows from respect for and understanding of patience, and Care teams and their needs in their environment.
Speaker Change: 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
Speaker Change: Thank you for your support. On this extraordinary Journey. We look forward to talking with you again in 3 months.
Speaker Change: And thank you, everyone. This concludes our program. You may know women now disconnect have a great day, everyone.