10-QPeriod: Q2 FY2018

INTUITIVE SURGICAL INC Quarterly Report for Q2 Ended Jun 30, 2018

Filed July 20, 2018For Securities:ISRG

Summary

Intuitive Surgical Inc. reported a strong second quarter for 2018, with total revenue increasing 20% year-over-year to $909.3 million. This growth was fueled by a 25% increase in systems revenue and a 20% rise in instrument and accessory revenue, driven by a 18% increase in da Vinci procedures globally. The company shipped 220 da Vinci Surgical Systems, a significant increase from the prior year, and expanded its installed base to 4,666 systems. While gross profit margin remained stable, operating income saw a modest 7% increase due to a significant $42.5 million litigation charge related to a securities class action settlement. Despite this charge, the company demonstrated robust operational execution with substantial growth in key revenue segments and a healthy increase in cash, cash equivalents, and investments, reaching $4.3 billion. The company also advanced its product pipeline with U.S. FDA clearance for the da Vinci SP Surgical System, indicating a continued focus on innovation and market expansion.

Financial Highlights

46 data points
Beta

Revenue

$909.30M

69.5% Gross Margin

Net Income

$255.30M

28.1% Net Margin

EPS (Diluted)

$0.72

Total Assets

$6.85B

Cash & Equivalents

$1.20B

Free Cash Flow

$231.50M

Financial Statements
Beta
Revenue$909.30M
Cost of Revenue$277.00M
Gross Profit$632.30M
R&D Expenses$95.10M
SG&A Expenses$259.80M
Operating Expenses$354.90M
Operating Income$277.40M
Net Income$255.30M
EPS (Basic)$0.75
EPS (Diluted)$0.72
Shares Outstanding (Basic)340.50M
Shares Outstanding (Diluted)355.50M

Key Highlights

  • 1Total revenue grew 20% to $909.3 million in Q2 2018, driven by strong performance in systems and instruments/accessories.
  • 2Da Vinci procedure volume increased by 18% year-over-year, highlighting growing adoption of minimally invasive surgery.
  • 3System shipments rose significantly to 220 units, with the installed base growing 12% to 4,666 systems.
  • 4The company reported $4.3 billion in cash, cash equivalents, and investments as of June 30, 2018, reflecting strong cash generation.
  • 5Operating income increased 7% to $277.4 million, though impacted by a $42.5 million litigation settlement charge.
  • 6The da Vinci SP Surgical System received U.S. FDA clearance, signaling continued product innovation and expansion into new surgical approaches.
  • 7The adoption of ASC 606, Revenue from Contracts with Customers, was completed, with restated prior periods, impacting revenue recognition for contracts.

Frequently Asked Questions

Intuitive Surgical adopted ASC 606, Revenue from Contracts with Customers, using the full retrospective method, which required restating prior reporting periods. While the adoption did not materially impact the total revenue recognized in the periods presented, it led to changes in how revenue is recognized, particularly for bundled product and service arrangements, and resulted in the capitalization of certain sales commissions as contract acquisition assets.

The company recorded a pre-tax charge of $42.5 million in the second quarter of 2018 related to an agreement in principle to settle a securities class action lawsuit. This charge impacted operating income and selling, general, and administrative expenses for the period. The company also incurred charges related to product liability litigation, though these were lower compared to the prior year.

The company saw a substantial increase in system shipments in the second quarter of 2018, indicating strong demand. With an expanding installed base and continued growth in da Vinci procedures, particularly in general surgery and urology, the company anticipates continued revenue growth. New product introductions like the da Vinci SP Surgical System are also expected to contribute to future growth.

Intuitive Surgical maintained a strong liquidity position, with $4.3 billion in cash, cash equivalents, and investments as of June 30, 2018. This was primarily fueled by cash generated from operations. The company also repatriated approximately $1.4 billion of foreign earnings in Q2 2018 following the Tax Cuts and Jobs Act, without significant incremental tax impact, further enhancing its financial flexibility.