10-QPeriod: Q3 FY2009

INTUITIVE SURGICAL INC Quarterly Report for Q3 Ended Sep 30, 2009

Filed October 21, 2009For Securities:ISRG

Summary

Intuitive Surgical, Inc. (ISRG) reported strong performance for the nine months ended September 30, 2009, demonstrating robust revenue growth driven by the continued adoption of its da Vinci Surgical System. Total revenue increased by 13.3% to $729.1 million, with a significant portion (55%) now coming from recurring revenue sources like instruments, accessories, and services, highlighting a growing installed base and customer stickiness. The company successfully launched its new da Vinci Si Surgical System, which contributed to higher average selling prices and also facilitated field upgrades from existing da Vinci S models. Despite facing macroeconomic headwinds affecting hospital capital equipment purchases, ISRG managed to increase its installed base of da Vinci systems to 1,308. The company also maintained a strong liquidity position, with cash, cash equivalents, and investments totaling over $1 billion, further bolstered by positive operating cash flow.

Financial Highlights

45 data points
Beta

Revenue

$280.10M

71.0% Gross Margin

Net Income

$64.60M

23.1% Net Margin

EPS (Diluted)

$0.18

Total Assets

$1.64B

Cash & Equivalents

$206.10M

Free Cash Flow

$96.30M

Financial Statements
Beta
Revenue$280.10M
Cost of Revenue$81.10M
Gross Profit$199.00M
R&D Expenses$24.60M
SG&A Expenses$69.90M
Operating Expenses$94.50M
Operating Income$104.50M
Net Income$64.60M
EPS (Basic)$0.19
EPS (Diluted)$0.18
Shares Outstanding (Basic)342.90M
Shares Outstanding (Diluted)352.80M

Key Highlights

  • 1Total revenue for the first nine months of 2009 grew to $729.1 million, up 13.3% from $643.4 million in the prior year.
  • 2Recurring revenue, comprising instruments, accessories, and service, represented 55% of total revenue for the nine months ended September 30, 2009, up from 47% in the same period last year.
  • 3The company sold 228 da Vinci Surgical Systems in the first nine months of 2009, a slight decrease from 250 in the prior year, but saw an increase in average selling price (ASP) due to the launch of the da Vinci Si system.
  • 4Procedure volume increased significantly, with procedures growing approximately 49% in the third quarter of 2009 compared to the prior year.
  • 5The installed base of da Vinci Surgical Systems grew to 1,308 as of September 30, 2009, compared to 1,111 at the end of 2008.
  • 6The company maintained a strong balance sheet with $1.02 billion in cash, cash equivalents, and investments as of September 30, 2009.
  • 7Net income for the first nine months of 2009 was $155.1 million, a slight increase from $153.6 million in the same period of 2008, with diluted EPS of $3.97.

Frequently Asked Questions

The primary driver of Intuitive Surgical's revenue growth is the increasing adoption of its da Vinci Surgical System across various surgical specialties. This is supported by a growing installed base of systems leading to increased recurring revenue from instruments, accessories, and service contracts, as well as strong procedure volume growth.

The da Vinci Si Surgical System, launched in early 2009, contributed to higher average selling prices for systems sold. It also enabled upgrades for existing da Vinci S users and was the primary model sold in the latter half of the year, supporting revenue growth and higher ASPs. Some revenue related to Si launch promotions was deferred and recognized over subsequent quarters.

Intuitive Surgical demonstrates strong financial health with over $1 billion in cash, cash equivalents, and investments as of September 30, 2009. The company generated substantial cash flow from operations ($269.4 million for the first nine months of 2009), indicating a solid liquidity position to fund its ongoing operations and strategic initiatives.

While acknowledging that the economic recession impacted hospital demand for capital equipment, Intuitive Surgical has continued to grow revenue and expand its installed base. The strong growth in recurring revenue, which is less tied to large capital expenditures, and the company's ability to drive procedure growth suggest resilience in its business model despite macroeconomic challenges.