10-QPeriod: Q3 FY2016

INTUITIVE SURGICAL INC Quarterly Report for Q3 Ended Sep 30, 2016

Filed October 19, 2016For Securities:ISRG

Summary

Intuitive Surgical Inc. (ISRG) reported robust financial performance for the nine months ended September 30, 2016, demonstrating significant growth in both revenue and profitability. Total revenue increased by 14% year-over-year to $1,947.5 million, driven by a substantial 16% rise in product revenue and an 11% increase in service revenue, highlighting strong demand for its da Vinci Surgical Systems and related consumables. The company's operational efficiency is evident in its expanding gross profit margins, which improved to 70% from 66% in the prior year's comparable period, reflecting manufacturing efficiencies and favorable product mix. Net income saw a healthy increase of 33% to $531.9 million. The company's balance sheet remains strong, with cash, cash equivalents, and investments growing to $4.6 billion, providing ample liquidity for future investments and operations. Continued procedure growth, particularly in general surgery and urology, underscores the ongoing adoption and value proposition of Intuitive Surgical's robotic-assisted surgical solutions.

Financial Highlights

45 data points
Beta

Revenue

$682.90M

71.3% Gross Margin

Net Income

$211.00M

30.9% Net Margin

EPS (Diluted)

$0.59

Total Assets

$6.17B

Cash & Equivalents

$1.02B

Free Cash Flow

$268.80M

Financial Statements
Beta
Revenue$682.90M
Cost of Revenue$195.90M
Gross Profit$487.00M
R&D Expenses$62.60M
SG&A Expenses$168.00M
Operating Expenses$230.60M
Operating Income$256.40M
Net Income$211.00M
EPS (Basic)$0.61
EPS (Diluted)$0.59
Shares Outstanding (Basic)348.30M
Shares Outstanding (Diluted)357.30M

Key Highlights

  • 1Total revenue for the nine months ended September 30, 2016, increased by 14% to $1.95 billion, compared to $1.71 billion for the same period in 2015.
  • 2Net income grew by 33% to $531.9 million for the first nine months of 2016, compared to $398.8 million in the prior year.
  • 3Gross profit margin improved to 70% for the nine months ended September 30, 2016, up from 66% in the comparable period of 2015.
  • 4The installed base of da Vinci Surgical Systems grew to approximately 3,803 systems as of September 30, 2016, a 9% increase year-over-year.
  • 5Instrument and accessory revenue, a key component of recurring revenue, increased by 16% to $1.01 billion for the nine months ended September 30, 2016.
  • 6Cash, cash equivalents, and investments significantly increased to $4.6 billion as of September 30, 2016, from $3.3 billion at the end of 2015.
  • 7Operating income saw a substantial increase of 37% to $680.8 million for the first nine months of 2016.

Frequently Asked Questions

Revenue growth was primarily driven by increases in both product revenue (up 16%) and service revenue (up 11%) for the nine months ended September 30, 2016. Specifically, instrument and accessory revenue, a key part of recurring revenue, saw a significant increase of 16%, indicating strong procedure volume growth.

Profitability improved considerably. Gross profit increased by 22% and the gross profit margin expanded to 70% from 66% year-over-year. Net income rose by 33% to $531.9 million, reflecting strong top-line growth and improved operational efficiencies.

Intuitive Surgical maintains a strong financial position with robust liquidity. Cash, cash equivalents, and investments grew to $4.6 billion as of September 30, 2016, up from $3.3 billion at the end of 2015. This healthy cash position provides ample financial flexibility for operations and future investments.

The company is involved in various legal proceedings, including product liability lawsuits and shareholder derivative actions. While the company states it does not believe the resolution of these matters will have a material adverse effect, ongoing litigation, especially product liability claims, represents an area for investor monitoring. The company has recorded charges for the estimated cost of settling certain product liability claims.