Intuitive Surgical Inc (ISRG) Q3 2024 Earnings Call Highlights: Strong Revenue and Procedure ...

Revenue: $2 billion, an increase of 17% from last year. Procedure Growth: 18% growth in da Vinci procedures. Installed Base Growth: 15% growth in da Vinci systems. System Utilization: 3% increase in overall da Vinci system utilization. System Placements: 379 da Vinci systems placed, including 110 da Vinci 5 systems and 21 SP systems.

Gross Margin: 69.1% pro forma gross margin. Net Income: Pro forma net income of $669 million or $1.84 per share. Cash and Investments: $8.3 billion at the end of Q3. Operating Expenses: Increased 13% year-over-year. Ion Procedures: 73% growth to approximately 25,000 procedures.

SP Procedure Growth: 70% growth with strong multi-specialty growth. Warning! GuruFocus has detected 7 Warning Signs with ISRG. Release Date: October 17, 2024 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Positive Points Intuitive Surgical Inc (NASDAQ:ISRG) reported a strong third quarter with 18% growth in da Vinci procedures, driven by general surgery in the US and contributions from Japan, Germany, France, and the UK. The company placed 379 da Vinci systems in the quarter, including 110 da Vinci 5 systems, indicating solid capital placements in key markets such as the US, Japan, and India.

Revenue grew by 17% year-over-year, supported by da Vinci procedure growth, expansion of the installed base, and growth in the Ion business. Intuitive Surgical Inc (NASDAQ:ISRG) has been successful in expanding its global reach, with a five-year compound annual growth rate of 21% in Europe and 25% in Asia for procedures. The company has made significant advancements in digital tools, with nearly 3,000 da Vinci virtual reality simulators installed and over 14,000 active surgeon users of the My Intuitive app. Negative Points Intuitive Surgical Inc (NASDAQ:ISRG) faces ongoing capital pressure in Europe and China, impacting system placements due to government budget constraints and domestic competition. The company is experiencing mixed market conditions in Asia, with procedure growth in South Korea below historical trends due to ongoing physician strikes.

Despite strong growth, the company anticipates a decline in gross margins next year due to increased depreciation expenses from recent capital investments. The Ion platform, while showing strong growth, is still in the early stages of adoption outside the US, with initial placements just beginning in Europe and China. Intuitive Surgical Inc (NASDAQ:ISRG) is facing challenges in the Chinese market due to domestic robotic competition and provincial preferences for local competitors. Story continues Q & A Highlights Q: Can you provide more details on the da Vinci 5 ramp-up and any planned software updates before the mid-2025 broad launch? A: David Rosa, President, mentioned that software updates will continue as scheduled, with additional features expected by the broad launch. Supply for da Vinci 5 will increase modestly quarter over quarter.

Jamie Samath, CFO, added that early feedback from surgeons highlights efficiency gains, which could lead to higher throughput on the platform. Q: What is the status of international approvals and supply for da Vinci 5, particularly in Korea, Japan, and Europe? A: David Rosa confirmed that they have the supply to support demand in Korea. The timing for Japan remains uncertain, and they expect CE Mark approval in Europe by the end of 2025. Q: How are new procedures like appendectomy and foregut being addressed from a clinical and commercial standpoint? A: Jamie Samath noted that foregut and hepatobiliary procedures have been growing and are accretive to the US average. Appendectomy is in the early stages but shows accretive growth, with an FDA indication in the US.

Q: What are the expectations for margin progression with new products like da Vinci 5 and the mix evolving? A: Jamie Samath stated that while they aim for top-tier margins, they do not expect operating margins above 40%. Gross margins may be slightly lower next year due to increased depreciation from new facilities, but they aim to reach 70% in the midterm. Q: Can you discuss the Ion platform's launch and adoption curve in the US and international markets? A: Gary Guthart, CEO, explained that Ion has crossed the chasm in the US, focusing on high utilization and satisfaction. Internationally, they are in the early stages, with initial steps in Europe and China. Q: How is the increased percentage of systems under usage agreements affecting the P&L? A: Jamie Samath explained that usage-based arrangements are popular as they allow customers to access additional capacity without consuming capital budgets.

These arrangements are slightly accretive to purchases due to embedded interest rates. Q: What is the impact of dual console availability on da Vinci 5 adoption, particularly in larger hospitals? A: David Rosa noted that dual console availability is prioritized for single system deals, and they are working with a broad set of customers to meet their needs. Gary Guthart added that they do not expect significant changes in forecast models due to dual console availability. Q: How is the capital environment, particularly in Europe and China, affecting hospital budgets and capital spending? A: Jamie Samath described the US capital environment as stable, while Europe faces pressure due to government budget constraints. Gary Guthart highlighted ongoing stress in China's healthcare market due to value-based pricing and domestic competition.

For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus. View comments