10-QPeriod: Q3 FY2022

INTUITIVE SURGICAL INC Quarterly Report for Q3 Ended Sep 30, 2022

Filed October 21, 2022For Securities:ISRG

Summary

Intuitive Surgical Inc. (ISRG) reported its third-quarter and nine-month results for the period ending September 29, 2022. Total revenue for the third quarter increased by 11% year-over-year to $1.56 billion, driven by a 20% increase in da Vinci procedures and a 15% rise in instruments and accessories revenue. However, system placements saw a slight decrease of 9% year-over-year to 305 units, impacted by macroeconomic challenges and fewer system trade-ins. For the nine-month period, total revenue grew 10% to $4.57 billion, with a 18% increase in procedures and a 14% rise in instruments and accessories revenue, while system placements decreased by 7% to 895 units. The company highlighted strong procedure growth both in the U.S. and internationally, particularly in general surgery and urology. Despite the revenue growth, operating income for the third quarter decreased by 10% to $399 million due to increased operating expenses, including higher selling, general, and administrative (SG&A) and research and development (R&D) costs, as well as a decline in gross profit margin from 69.2% to 67.6%. The company's balance sheet remains strong with $7.39 billion in cash, cash equivalents, and investments as of September 30, 2022, though this represents a decrease from the prior year-end due to significant share repurchases and capital expenditures.

Financial Highlights

45 data points
Beta

Revenue

$1.56B

67.6% Gross Margin

Net Income

$324.00M

20.8% Net Margin

EPS (Diluted)

$0.90

Total Assets

$13.26B

Cash & Equivalents

$1.55B

Free Cash Flow

$383.20M

Financial Statements
Beta
Revenue$1.56B
Cost of Revenue$505.30M
Gross Profit$1.05B
R&D Expenses$217.10M
SG&A Expenses$436.10M
Operating Expenses$653.20M
Operating Income$398.90M
Net Income$324.00M
EPS (Basic)$0.91
EPS (Diluted)$0.90
Shares Outstanding (Basic)355.30M
Shares Outstanding (Diluted)360.50M

Key Highlights

  • 1Total revenue for Q3 2022 increased by 11% year-over-year to $1.56 billion, with instruments and accessories revenue up 15% and service revenue up 12%.
  • 2Worldwide da Vinci procedures increased by 20% in Q3 2022 compared to Q3 2021, indicating strong procedural adoption and utilization.
  • 3Systems revenue saw a modest increase of 3% in Q3 2022, but da Vinci Surgical System placements decreased by 9% year-over-year to 305 units, influenced by macroeconomic headwinds and fewer trade-ins.
  • 4Operating income for Q3 2022 decreased by 10% to $399 million, primarily due to a 10% increase in operating expenses, including higher SG&A and R&D costs, and a slight decline in gross profit margin.
  • 5The installed base of da Vinci Surgical Systems grew by 13% year-over-year to approximately 7,364 systems as of September 30, 2022.
  • 6The company repurchased approximately 4.6 million shares of common stock for $1.0 billion in Q3 2022 as part of an accelerated share repurchase program.
  • 7Cash, cash equivalents, and investments decreased to $7.39 billion as of September 30, 2022, from $8.62 billion at the end of 2021, mainly due to share repurchases and capital expenditures.

Frequently Asked Questions

Total revenue increased by 11% to $1.56 billion, primarily driven by a 15% increase in instruments and accessories revenue, fueled by a 20% rise in da Vinci procedures. Service revenue also contributed with a 12% increase. Systems revenue saw a smaller increase of 3%.

System placements declined by 9% year-over-year to 305 units in Q3 2022. This decrease was attributed to macroeconomic challenges impacting U.S. customer capital spending and a reduction in the availability of older generation da Vinci systems for trade-ins.

Intuitive Surgical acknowledges ongoing macroeconomic challenges, including inflation, rising interest rates, and labor shortages, which are impacting customers' ability and willingness to invest in capital equipment. The company also continues to face supply chain constraints, particularly for semiconductor components, although these have not materially impacted their ability to deliver products. They are actively working to mitigate these disruptions.

Operating income decreased by 10% to $399 million. This was due to a slight decrease in gross profit margin from 69.2% to 67.6% and a significant 20% increase in operating expenses, particularly in selling, general, and administrative (SG&A) and research and development (R&D) costs, reflecting investments in growth and headcount.