10-QPeriod: Q1 FY2011

INTUITIVE SURGICAL INC Quarterly Report for Q1 Ended Mar 31, 2011

Filed April 20, 2011For Securities:ISRG

Summary

Intuitive Surgical Inc. (ISRG) reported strong performance for the quarter ending March 31, 2011, demonstrating significant year-over-year growth in both revenue and net income. Total revenue increased by 18% to $388.1 million, driven by robust growth in product revenue, particularly from instruments and accessories, and a solid increase in service revenue. The company continues to expand its installed base of da Vinci Surgical Systems, selling 120 systems in the quarter, up from 104 in the prior year period. Profitability also improved, with net income rising 22% to $104.1 million. This growth was supported by expanding gross margins and effective management of operating expenses. The company's strong cash position was further bolstered by operating activities and financing, ending the quarter with $1.76 billion in cash, cash equivalents, and investments. Management remains optimistic about continued procedure adoption and future growth, despite some ongoing legal proceedings and the potential impact of global economic conditions and natural disasters.

Financial Highlights

45 data points
Beta

Revenue

$388.10M

71.8% Gross Margin

Net Income

$104.10M

26.8% Net Margin

EPS (Diluted)

$0.29

Total Assets

$2.57B

Cash & Equivalents

$449.80M

Free Cash Flow

$105.40M

Financial Statements
Beta
Revenue$388.10M
Cost of Revenue$109.30M
Gross Profit$278.80M
R&D Expenses$31.40M
SG&A Expenses$99.10M
Operating Expenses$130.50M
Operating Income$148.30M
Net Income$104.10M
EPS (Basic)$0.30
EPS (Diluted)$0.29
Shares Outstanding (Basic)351.90M
Shares Outstanding (Diluted)361.80M

Key Highlights

  • 1Total revenue increased 18% year-over-year to $388.1 million.
  • 2Net income grew 22% year-over-year to $104.1 million, with diluted EPS at $2.59.
  • 3120 da Vinci Surgical Systems were sold in the quarter, an increase from 104 in the prior year period.
  • 4Recurring revenue (instruments, accessories, and service) increased 28% to $221.0 million, representing 57% of total revenue.
  • 5The installed base of da Vinci Surgical Systems grew to 1,840 units.
  • 6Operating income increased 14% to $148.3 million.
  • 7The company ended the quarter with a strong cash and investments balance of $1.76 billion.

Frequently Asked Questions

The primary driver of Intuitive Surgical's revenue growth is the increasing adoption of da Vinci Surgical Systems and the associated procedures. This translates into higher sales of systems, instruments, accessories, and services, with recurring revenue (instruments, accessories, and service) becoming an increasingly significant portion of total revenue.

Operating expenses, including Selling, General, and Administrative (SG&A) and Research & Development (R&D), increased in absolute terms due to organizational growth to support business expansion and higher stock-based compensation. However, as a percentage of total revenue, these expenses remained relatively stable, indicating effective management of costs relative to revenue growth.

Intuitive Surgical maintains a strong financial position with $1.76 billion in cash, cash equivalents, and investments as of March 31, 2011. The company generated positive cash flow from operations, which, combined with its existing cash reserves, provides ample liquidity to fund future growth and operations.

The filing mentions two ongoing lawsuits: a purported class action lawsuit alleging violations of federal securities laws and purported shareholder derivative lawsuits. The company believes it has meritorious defenses and does not expect a material adverse effect on its business. Additionally, the company is aware of the potential impact of natural disasters, such as the recent earthquake in Japan, on its operations and sales in affected regions.