10-QPeriod: Q1 FY2016

INTUITIVE SURGICAL INC Quarterly Report for Q1 Ended Mar 31, 2016

Filed April 19, 2016For Securities:ISRG

Summary

Intuitive Surgical Inc. (ISRG) demonstrated strong financial performance in the first quarter of 2016, with total revenue increasing by 12% year-over-year to $594.5 million. This growth was primarily fueled by a 14% increase in recurring revenue, which now constitutes 75% of total revenue, underscoring the company's successful business model centered on ongoing instrument, accessory, and service sales. Procedure volume saw a significant 17% increase, reaching approximately 176,000 procedures performed worldwide. This robust procedure growth, particularly in general surgery and urology, translated into a 16% rise in instrument and accessory revenue. The company also reported improved profitability, with gross profit increasing by 20% and operating income surging by 37% due to higher revenues, improved gross margins, and effective cost management. ISRG ended the quarter with a strong cash position of $3.8 billion, indicating sound financial health and flexibility.

Financial Highlights

45 data points
Beta

Revenue

$594.50M

68.1% Gross Margin

Net Income

$136.40M

22.9% Net Margin

EPS (Diluted)

$0.39

Total Assets

$5.31B

Cash & Equivalents

$980.50M

Free Cash Flow

$226.80M

Financial Statements
Beta
Revenue$594.50M
Cost of Revenue$189.50M
Gross Profit$405.00M
R&D Expenses$53.20M
SG&A Expenses$172.80M
Operating Expenses$226.00M
Operating Income$179.00M
Net Income$136.40M
EPS (Basic)$0.40
EPS (Diluted)$0.39
Shares Outstanding (Basic)339.30M
Shares Outstanding (Diluted)346.50M

Key Highlights

  • 1Total revenue grew 12% to $594.5 million in Q1 2016.
  • 2Recurring revenue (instruments, accessories, service) increased 14% to $446.6 million, representing 75% of total revenue.
  • 3Worldwide da Vinci procedures increased 17% year-over-year to approximately 176,000.
  • 4Instrument and accessory revenue rose 16% to $322.1 million, driven by procedure volume.
  • 5Gross profit increased 20% to $405.0 million, with gross margin improving to 68.1% from 63.3% in the prior year period.
  • 6Operating income surged 37% to $179.0 million, reflecting revenue growth and margin expansion.
  • 7The company maintained a strong liquidity position with $3.8 billion in cash, cash equivalents, and investments as of March 31, 2016.

Frequently Asked Questions

The primary driver of Intuitive Surgical's revenue growth in Q1 2016 was the increase in recurring revenue, which grew 14% year-over-year to $446.6 million, representing 75% of total revenue. This growth was supported by a 17% increase in worldwide da Vinci procedures, leading to higher sales of instruments, accessories, and services.

Intuitive Surgical demonstrated improved profitability in Q1 2016. Gross profit increased by 20% to $405.0 million, and the gross margin improved to 68.1% from 63.3% in Q1 2015. This was driven by higher revenues, product cost reductions, manufacturing efficiencies, and the absence of the medical device excise tax that was present in the prior year. Operating income also saw a significant increase of 37% to $179.0 million.

Intuitive Surgical maintained a very strong financial position as of March 31, 2016, with $3.8 billion in cash, cash equivalents, and investments. Cash flow from operations was robust at $208.5 million for the quarter. The company believes its current liquidity and ongoing cash generation from operations are sufficient to meet its future needs for growth and investment.

Intuitive Surgical is involved in various legal proceedings, including product liability lawsuits and shareholder class action lawsuits. While the company states that it does not believe the resolution of these matters will have a material adverse effect on its business, financial position, or future results of operations, it does accrue for estimated losses related to product liability claims. Investors should refer to Note 6 for detailed information on these contingencies.