Intuitive Surgical Inc Q4 2024 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Larry Biegelsen - Wells Fargo Securities, LLC - Analyst : Good afternoon. Thanks for taking the question and congrats on a really strong finish to the year. One for Gary, one for Jamie. So Gary, historically, you said procedures drive placements in the second half of '24. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 23, 2025 / 9:30PM, ISRG.OQ - Q4 2024 Intuitive Surgical Inc Earnings Call US system placements grew over 35%. Utilization was about 2%. Is this a leading indicator of more procedures? Or will we have a digestion period to restore normal utilization? And I have one follow-up.

Question: Larry Biegelsen - Wells Fargo Securities, LLC - Analyst : Thanks, Gary. And Jamie, on the Q3 call, you said the gross margin will be a little lower in 2025 versus 2024. I think the 67% to 68% guidance was probably a little bit lower than expected. Can you quantify the drivers from the 69.1% this year in 2024 to the 67% to 68%. And how to think about the path back to your goal of 70%? Thank you.

Question: Robbie Marcus - JPMorgan Chase & Co - Analyst : Okay. Thanks. And I'll echo congratulations on a fantastic fourth quarter. Two from me. First, maybe for Gary, you gave a lot of detail on the call about a midyear full launch and trade in cycle. Would love to just get your qualitative comments around how you're thinking about the mix of da Vinci 5 versus Xi going forward? The necessity or the speed of which an upgrade cycle can start? And how you're thinking about Xi versus da Vinci 5 placements in terms of mix going forward outside the US once approval start rolling in? It all has implications for the model. So I'd love to get your thoughts on that.

Question: Robbie Marcus - JPMorgan Chase & Co - Analyst : Great. Maybe just one quick follow up. Gary, you always give us a general state of the union on the health of the capital equipment environment around the world. US, OUS, and I'm particularly thinking of China where you had a really strong placement quarter and fourth quarter. So any thoughts there would be great as we head into 2025. Thanks.

Question: Travis Steed - BofA Securities, Inc. - Analyst : Gary, I wanted to ask a bigger picture question. You're crossing over $1 billion a year in R&D now and even after launching dV5. So maybe help us understand the R&D investment opportunity over the medium term and potentially moving into new green spaces. Is that going to be more through than the luminal platform? Or are there still chunky categories like cardio that could be minimal to robotics? Or is it more about geographic expansion side of care? Just to giant understand the true opportunity left out there to capture. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 23, 2025 / 9:30PM, ISRG.OQ - Q4 2024 Intuitive Surgical Inc Earnings Call

Question: Travis Steed - BofA Securities, Inc. - Analyst : Helpful. Thanks. And then, Jamie, maybe just a shorter-term OpEx question on the 10% to 15% growth, the high and low end, how much of that's R&D versus SG&A? And any color there on how that can shape up and what drives the high and low end? And potentially, since you did mention tariffs. Just kind of curious how to size that or a potential way to mitigate that, if you can? Just wanted to follow up on Larry's margin question. Thank you.

Question: Rick Wise - Stifel Financial Corp. - Analyst : Thanks. Good afternoon. Gary, in your very thoughtful comments during the JPMorgan conference, I think you talked about new digital features that you should make today again said hardware and software digital feature is coming. I was hoping and if you're not ready to give us truly specifics on all these. But maybe help us understand what areas this -- in what way this might enhance da Vinci 5? Will it open up new procedures? Will it be about productivity? Will it enable you to use the da Vinci 5 in a different setting? How does this expand the vision or the possibilities of da Vinci 5 in the near term? And then I'll have a follow-up, if I could.

Question: Rick Wise - Stifel Financial Corp. - Analyst : Great. And if I could follow-up briefly with Jamie. Jamie, obviously, Ion, SP both had terrific years last year. What accelerates -- what drives the next phase of growth there? And specifically, what level of sales or what has to happen and is it a year or five away? When are these two excellent products no longer a margin drag? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 23, 2025 / 9:30PM, ISRG.OQ - Q4 2024 Intuitive Surgical Inc Earnings Call

Question: David Roman - Goldman Sachs - Analyst : Thank you and good afternoon, everybody. I wanted just to start with a comment you made in the prepared remarks regarding competition and selling cycles. Is this something that you're observing today as you talk to customers outside the US or even in the US? Or are you just calling out a theoretical impact of what might happen as new entrants come to market? And then I have one follow-up.

Question: David Roman - Goldman Sachs - Analyst : That's helpful. And maybe just a segue on that one. As you think about the opportunity in instruments and accessories, either on a per procedure basis or a total addressable market basis, can you help us think through which parts of the surgical ecosystem you've captured today? And maybe give us some sense of where that might be going over time? We understand that's the fourth sensing piece of the launch with dV5 and how that might impact basically an upgraded instrument and corresponding ASP within that INA line. But as you look at kind of other parts of the surgical ecosystem that you could capture to further entrench yourself, can you help us understand what those might be and maybe size some of them? And how you think about that when your marketing and strategic planning teams?

Question: Patrick Wood - Morgan Stanley - Analyst : Beautiful. Thank you so much. A bit of a weird conceptual one. I'm just curious about. But if you think of the efficiencies from your installed base senses. So over time, as you're placing more and more systems and in individual areas and regions, the installed base entities going up. Like is there really a margin implication for that from more efficiencies in selling into the customer base, servicing the systems? Can you see that in some areas or regions or markets where you've got a lot of density versus those where you have slightly less scale? I'm just conceptually trying to understand the effect of that over the long term. Thanks.

Question: Patrick Wood - Morgan Stanley - Analyst : It was more around the service and the efficiency of driving into those existing accounts rather than the mix between the two.

Question: Patrick Wood - Morgan Stanley - Analyst : That's the way. Thank you so much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 23, 2025 / 9:30PM, ISRG.OQ - Q4 2024 Intuitive Surgical Inc Earnings Call