10-QPeriod: Q1 FY2020

INTUITIVE SURGICAL INC Quarterly Report for Q1 Ended Mar 31, 2020

Filed April 17, 2020For Securities:ISRG

Summary

Intuitive Surgical Inc. (ISRG) reported its first quarter 2020 results, a period significantly impacted by the emerging COVID-19 pandemic. Despite early growth in China and other regions in January and February, the latter half of March saw a sharp decline in procedures, particularly in the U.S., due to widespread deferral of elective surgeries. Total revenue saw a 13% increase year-over-year to $1.1 billion, driven by growth in instruments, accessories, systems, and services. However, gross profit margin slightly decreased to 67.1% from 68.8% in the prior year, impacted by increased costs. The company maintains a strong liquidity position with $5.9 billion in cash, cash equivalents, and investments as of March 31, 2020. The company's outlook for the second quarter and beyond is highly uncertain due to the pandemic's ongoing effects. Procedure volume and system placements are expected to decline significantly. Intuitive Surgical has withdrawn its full-year 2020 guidance. While the company has a robust pipeline of new products and a strong installed base, the immediate future will be shaped by the trajectory of the pandemic and its impact on global healthcare systems and economies.

Financial Highlights

47 data points
Beta

Revenue

$1.10B

67.1% Gross Margin

Net Income

$313.50M

28.5% Net Margin

EPS (Diluted)

$2.62

Total Assets

$9.89B

Cash & Equivalents

$1.24B

Free Cash Flow

$352.80M

Financial Statements
Beta
Revenue$1.10B
Cost of Revenue$361.30M
Gross Profit$738.20M
R&D Expenses$147.10M
SG&A Expenses$308.10M
Operating Expenses$455.20M
Operating Income$283.00M
Net Income$313.50M
EPS (Basic)$2.69
EPS (Diluted)$2.62
Shares Outstanding (Basic)349.20M
Shares Outstanding (Diluted)359.40M

Key Highlights

  • 1Total revenue increased by 13% to $1.1 billion for the three months ended March 31, 2020, compared to $974 million in the prior year.
  • 2Da Vinci procedures increased by 10% to approximately 309,000 for the quarter, but saw a significant decline in the latter half of March due to COVID-19.
  • 3U.S. procedures experienced a sharp decline of approximately 65% in the last half of March 2020.
  • 4Instruments and accessories revenue grew 12% to $618 million, and systems revenue increased 14% to $283 million.
  • 5Gross profit as a percentage of revenue decreased slightly to 67.1% from 68.8% year-over-year.
  • 6The company ended the quarter with $5.9 billion in cash, cash equivalents, and investments, indicating strong liquidity.
  • 7Full-year 2020 financial and procedure guidance has been withdrawn due to the uncertainty surrounding the COVID-19 pandemic.

Frequently Asked Questions

The COVID-19 pandemic significantly impacted Intuitive Surgical's results, particularly in the latter half of the first quarter. While early performance in China showed some recovery, the U.S. and parts of Europe experienced substantial declines in da Vinci procedures (down ~65% in the U.S. in late March) as hospitals deferred elective surgeries and diverted resources. This led to a significant impact on procedure volume and system placements in the final weeks of the quarter.

The company's outlook is highly uncertain. Due to the continued strain on hospital resources and the deferral of elective procedures, Intuitive Surgical expects a significant decline in procedures and system placements in the second quarter of 2020 and potentially beyond. Consequently, the company has withdrawn its full-year 2020 financial and procedure guidance.

Total revenue for the quarter increased by 13% to $1.1 billion. This was driven by product revenue (up 13% to $901 million, with instruments and accessories up 12% and systems revenue up 14%) and service revenue (up 14% to $199 million). Recurring revenue, which includes instruments, accessories, and services, represented 78% of total revenue.

The company maintains a strong financial position with $5.9 billion in cash, cash equivalents, and investments as of March 31, 2020. Net cash provided by operating activities was $353 million for the quarter, indicating healthy cash generation, though this is expected to be impacted by the pandemic.