Financial Performance - For the quarter ended September 2024, Intuitive Surgical, Inc. reported revenue of $2.04 billion, reflecting a 16.9% increase year-over-year [1] - EPS for the quarter was $1.84, up from $1.46 in the same quarter last year [1] - The reported revenue exceeded the Zacks Consensus Estimate of $2.01 billion by 1.17%, while the EPS surpassed the consensus estimate of $1.65 by 11.52% [1] Key Metrics - Total System Units Placed by the company reached 379, exceeding the average estimate of 316 by analysts [2] - The installed base of the Da Vinci Surgical System was 9,539, slightly above the estimated 9,498 [2] - In the United States, Total System Units Placed were 219, surpassing the average estimate of 160 [2] - Revenue from Products (Instruments and accessories and Systems) was $1.71 billion, compared to the estimated $1.66 billion, marking a 17.8% increase year-over-year [2] - Revenue from Services was $328.90 million, slightly below the average estimate of $332.31 million, but still representing a 12.3% year-over-year increase [2] - Revenue from Systems was $445 million, exceeding the estimated $417.75 million, with a year-over-year increase of 17.3% [2] - Revenue from Instruments and accessories was $1.26 billion, compared to the estimated $1.24 billion, reflecting an 18% year-over-year change [2] - Gross profit from Services was $220.10 million, below the estimated $225.36 million, while Gross profit from Products was $1.15 billion, exceeding the estimate of $1.10 billion [2] Stock Performance - Shares of Intuitive Surgical have returned -3.3% over the past month, contrasting with the Zacks S&P 500 composite's +3.8% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Financial Performance - Total revenue for Q3 2024 reached $2,038.1 million, a 16.9% increase from $1,743.7 million in Q3 2023[15] - Product revenue was $1,709.2 million, up 17.8% from $1,450.8 million year-over-year[15] - Net income attributable to Intuitive Surgical, Inc. was $565.1 million, representing a 36% increase from $415.7 million in Q3 2023[15] - Gross profit for Q3 2024 was $1,373.9 million, compared to $1,167.2 million in Q3 2023, reflecting a gross margin improvement[15] - Basic net income per share increased to $1.59 from $1.18 in Q3 2023[15] - Total comprehensive income attributable to Intuitive Surgical, Inc. was $601.5 million, compared to $439.0 million in Q3 2023[15] - Net income for the nine months ended September 30, 2024, was $1,649.5 million, an increase from $1,206.6 million in the same period of 2023, representing a growth of approximately 36.5%[18] - Operating income for Q3 2024 increased by 24% to $577 million, compared to $466 million in Q3 2023[150] - Net income attributable to Intuitive Surgical, Inc. for the period was $1,191.8 million[81] Cash and Investments - Cash and cash equivalents decreased to $2,413.3 million from $2,750.1 million as of December 31, 2023[11] - Long-term investments rose significantly to $4,079.8 million, compared to $2,120.0 million at the end of 2023[11] - Cash, cash equivalents, and restricted cash at the end of the period were $2,446.3 million, down from $3,622.9 million at the end of the previous year[18] - The company experienced a net cash used in investing activities of $(2,008.6) million, contrasting with a net cash provided of $684.1 million in the prior year[18] - Cash and cash equivalents plus investments increased by $0.97 billion to $8.31 billion as of September 30, 2024, from $7.34 billion at the end of 2023[177] - Net cash provided by operating activities for the nine months ended September 30, 2024, was $1.59 billion, slightly less than net income of $1.65 billion[181] Operating Expenses - Operating expenses increased to $796.6 million, up from $701.4 million in Q3 2023, driven by higher selling, general, and administrative expenses[15] - Selling, general and administrative expenses for Q3 2024 rose by 13% to $511 million, up from $452 million in Q3 2023, driven by higher headcount and personnel-related expenses[169] - Research and development expenses for Q3 2024 increased by 15% to $286 million, compared to $249 million in Q3 2023, primarily due to higher personnel-related expenses[172] - Selling, general and administrative expenses for the nine months ended September 30, 2024, increased by 9% to $1.53 billion, compared to $1.40 billion in the same period of 2023[171] - Research and development expenses for the nine months ended September 30, 2024, increased by 15% to $851 million, compared to $739 million in the same period of 2023[172] Assets and Liabilities - Total assets increased to $17,743.4 million, up from $15,441.5 million at the end of 2023[12] - Total accounts receivable, net, as of September 30, 2024, was $1,153.0 million, compared to $1,130.2 million as of December 31, 2023, reflecting a slight increase of 2.0%[44] - Total inventory as of September 30, 2024, was $1,481.7 million, up from $1,220.6 million as of December 31, 2023, indicating a significant increase of 21.4%[44] - Total stockholders' equity increased to $15,677.5 million as of September 30, 2024, up from $14,796.5 million[77] Legal and Regulatory Matters - The company is currently involved in multiple product liability lawsuits related to the da Vinci surgical system, which may have a material adverse effect on its financial condition[70] - In a patent infringement lawsuit, the damages awarded were reduced from $10 million to nominal damages of $1, with ongoing appeals expected to influence the final outcome[71] - The court has set a trial date for the antitrust claims against the company to commence on January 6, 2025[74] - The company is currently unable to estimate any potential losses arising from ongoing litigation matters[74] - The court ruled that the da Vinci robot and EndoWrist instruments occupy separate product markets for antitrust purposes[74] - The company has consolidated class action complaints related to antitrust allegations into a single case, which is ongoing[74] Product and Market Performance - The installed base of da Vinci surgical systems increased by 15% to approximately 9,539 systems as of September 30, 2024, up from 8,285 systems a year earlier[150] - Approximately 670,000 da Vinci procedures were performed in Q3 2024, marking an 18% increase from 567,000 in Q3 2023[150] - Instruments and accessories revenue rose by 18% to $1.26 billion in Q3 2024, compared to $1.07 billion in Q3 2023[150] - The company placed 379 da Vinci surgical systems in Q3 2024, up from 312 systems in Q3 2023[145] - The da Vinci surgical systems are designed to improve patient outcomes and lower the total cost to treat per patient episode compared to existing treatment alternatives[107] - The company plans to seek additional FDA clearances for the da Vinci SP surgical system and expand its regulatory approvals in international markets over time[109] Shareholder Activities - The company repurchased 1.5 million shares at an average price of $238.1 per share, totaling $350.0 million in share repurchases[85] - As of September 30, 2024, the remaining amount authorized for share repurchases under the program was approximately $1.1 billion[82] - The company has reserved approximately 20.6 million shares for future issuance under its stock plans, with a maximum of 8.9 million shares available as restricted stock units (RSUs)[90] - The unvested balance of RSUs as of September 30, 2024, was 5.3 million shares, with a weighted-average grant-date fair value of $311.73[92] - The company’s stock repurchase program has been authorized for a total of $10.0 billion since its inception, with the latest increase in July 2022 to $3.5 billion[82] Economic and Market Conditions - Future results may be adversely affected by macroeconomic factors, including inflationary pressures and elevated interest rates, which could impact hospital operations and patient care[23] - Hospitals are facing significant financial pressure due to elevated operating costs from supply chain constraints and inflation, which may negatively impact the number of da Vinci procedures performed[112] - Supply chain constraints have improved to pre-COVID-19 levels, although some residual stresses remain, particularly for engineered raw materials[23] - The company is actively engaged in mitigating supply chain risks and disruptions to ensure operational continuity[23]

Core Insights - Intuitive Surgical, Inc. reported strong third-quarter earnings, exceeding analyst expectations in both sales and earnings growth [1][2][3] Financial Performance - The company achieved third-quarter revenues of $2.04 billion, representing a 17% year-on-year increase and surpassing consensus estimates of $2 billion [3] - Earnings beat expectations by 12%, attributed to revenue drop-through and strong margins [2] - Adjusted operating margins were reported at 37.0%, significantly higher than the expected 33.3% [4] Growth Projections - Management raised the low end of their guidance for procedure volumes by 50 basis points to 16%-17%, with a projected 2.6 million procedures in 2024 [2][3] - The installed base growth rate reached 15.1%, positioning the company to approach 10,000 robots installed by the end of 2024 [2] - The company is experiencing post-launch growth momentum for the US da Vinci 5 (dv5) system, suggesting potential acceleration in 2025 [3] Analyst Ratings and Price Targets - RBC Capital Markets raised the price target from $525 to $555 while maintaining an Outperform rating [1] - Stifel increased its price target from $475 to $525, maintaining a Buy rating [1] - Goldman Sachs raised its price target from $583 to $604, reaffirming a Buy rating [1] - Piper Sandler lifted its price target from $495 to $538 while maintaining an Overweight rating [1] - Truist Securities reiterated a Buy rating with a price target of $570 [1] Market Reaction - Shares of Intuitive Surgical rose by 8.63% to $514.59 following the earnings report [5]

Core Viewpoint - Intuitive Surgical reported strong third-quarter 2024 results, with adjusted earnings per share (EPS) of $1.84, exceeding estimates and showing significant year-over-year growth [1][7] Revenue Details - The company generated revenues of $2.04 billion, reflecting a 17% increase from the previous year and surpassing consensus estimates by 1.2% [2] Segmental Details - **Instruments & Accessories**: Revenues reached $1.26 billion, an 18% year-over-year increase, driven by an 18% growth in da Vinci procedure volume and a 73% increase in Ion procedures [3] - **Systems**: This segment reported revenues of $445 million, up 17.4% year over year, with 341 da Vinci Surgical Systems shipped [3] - **Services**: Revenues amounted to $328.9 million, a 3.7% increase from the prior year [4] Margins - Adjusted gross profit was $1.41 billion, up 17.3% year over year, with a gross margin of 69.1% [5] - Adjusted operating income totaled $754.9 million, reflecting a 21% year-over-year increase, with an operating margin of 37% [5] Financial Position - The company ended the quarter with cash, cash equivalents, and investments totaling $8.31 billion, an increase from $7.68 billion in the previous quarter [6] - Total assets rose to $17.74 billion from $16.65 billion a year ago [6] Market Performance - Intuitive Surgical's shares gained 6.1% in after-hours trading following the earnings report, and the stock has risen 40.4% year to date, outperforming the industry [7][9]

Financial Data and Key Metrics - Revenue grew 17% YoY in Q3 2024, reaching $2 billion, driven by DaVinci procedure growth, expansion of the DaVinci installed base, and growth in the Ion business [33] - Pro forma gross margin improved to 69.1% in Q3 2024, up from 68.8% in Q3 2023, primarily due to leveraged fixed overhead, lower component costs, and lower logistics costs [36] - Pro forma operating margin for YTD Q3 2024 was 36%, an increase of 184 basis points compared to the same period in 2023, driven by higher gross margin and SG&A leverage [38] - Pro forma EPS increased 25% YoY for YTD Q3 2024, reflecting revenue growth and higher operating margins [38] - Cash and investments stood at $8.3 billion at the end of Q3 2024, up from $7.7 billion in the previous quarter [40] Business Line Data and Key Metrics - DaVinci procedure growth was 18% in Q3 2024, with U.S. procedures growing 16% and OUS procedures growing 24% [31][32] - Ion procedure growth was 73% in Q3 2024, with approximately 25,000 procedures completed [35] - SP procedure growth was 70% in Q3 2024, with strong multi-specialty growth in Korea and early-stage growth in Japan and Europe [35] - DaVinci instrument and accessory revenue per procedure was approximately $1,800, flat compared to the prior quarter but lower than the previous year's $1,830 [34] Market Data and Key Metrics - In Europe, the five-year CAGR for procedures was 21%, while in Asia, it was 25%, and in other markets outside the U.S., it was 18% [14] - Capital placements in Europe and China continued to face pressure, with 65 systems placed in Europe and 14 in China in Q3 2024 [32][33] - Reimbursement coverage for robot-assisted surgery expanded in many countries, though localization efforts are still in early stages [15] Company Strategy and Industry Competition - The company is focused on the measured rollout of DaVinci 5, with plans for a broad launch in mid-2025, including additional software updates and regulatory clearances [23] - Intuitive is expanding its digital ecosystem, with tools aimed at improving OR outcomes, creating better care teams, and driving efficiencies while maintaining cybersecurity and data privacy [13] - The company is investing in R&D to support platform growth, expand manufacturing facilities, and leverage enabling functions [18] Management Commentary on Operating Environment and Future Outlook - Management highlighted the dynamic global environment but noted healthy procedure growth, solid capital placements, and strong operational execution in Q3 2024 [8] - The company raised its full-year 2024 procedure growth forecast to a range of 16% to 17%, reflecting mixed conditions in Asia and potential headwinds in bariatric procedures [41] - Management expects gross margins to decline slightly in 2025 due to increased depreciation from new facilities, with a long-term aspiration to return to 70% gross margins [56] Other Important Information - The company opened a new system manufacturing facility in Peachtree Corners, Georgia, and a Global Capability Centre in Bangalore, India, to support growth [36] - Intuitive submitted its CE technical file for DaVinci 5 in Europe and received clearance in Korea, with ongoing regulatory processes in Japan [23] - The company continues to focus on improving product quality, margins, and productivity, particularly in high-volume manufacturing [30] Q&A Session Summary Question: DaVinci 5 Ramp and Customer Feedback - The company plans to continue software updates for DaVinci 5, with a broad launch expected in mid-2025. Early feedback from surgeons highlights efficiency gains, particularly in console time savings [46][47] Question: International Expansion and Regulatory Updates - Supply is available to support demand in Korea following regulatory approval. The CE mark process in Europe is expected to conclude by the end of 2025, while Japan's timeline remains uncertain [49][50] Question: New Procedures and Market Sizing - The company is exploring new procedures such as appendectomy, foregut, and hepatobiliary, with early adoption in the U.S. and ongoing clinical work to expand indications [51][52] Question: Margin Progression and Depreciation Impact - Management expects gross margins to decline in 2025 due to increased depreciation from new facilities. Long-term aspirations include returning to 70% gross margins, with operating margins targeted below 40% [55][56] Question: Ion Platform Adoption Curve - In the U.S., Ion has crossed the chasm in lung nodule biopsies, with a focus on high utilization and additional indications. Outside the U.S., the platform is in early stages of adoption, particularly in Europe and China [62][63] Question: Usage-Based Agreements and P&L Impact - Usage-based agreements are growing in popularity, particularly in the U.S., as they allow customers to access systems without consuming capital budgets. These arrangements are slightly accretive to the P&L compared to traditional operating leases [64][65][66] Question: DaVinci 5 Utilization and Software Innovation - DaVinci 5 is being used across a broad set of procedures, though utilization comparisons to Xi are premature. Software innovation cycles are faster than hardware, particularly for non-medical device software [81][82] Question: U.S. Growth Drivers and New Segments - Growth in the U.S. is expected to be balanced between deeper penetration in existing procedures and exploration of new indications, particularly in niche markets [85][86]

Company Performance - Intuitive Surgical reported quarterly earnings of $1.84 per share, exceeding the Zacks Consensus Estimate of $1.65 per share, and up from $1.46 per share a year ago, representing an earnings surprise of 11.52% [1] - The company achieved revenues of $2.04 billion for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 1.17%, and an increase from $1.74 billion year-over-year [1] - Over the last four quarters, Intuitive Surgical has consistently surpassed consensus EPS and revenue estimates [1] Stock Performance - Intuitive Surgical shares have increased approximately 41.3% since the beginning of the year, outperforming the S&P 500's gain of 22.5% [2] - The current consensus EPS estimate for the upcoming quarter is $1.74 on revenues of $2.18 billion, and for the current fiscal year, it is $6.66 on revenues of $8.1 billion [4] Industry Outlook - The Medical - Instruments industry, to which Intuitive Surgical belongs, is currently ranked in the top 39% of over 250 Zacks industries, indicating a favorable outlook [5] - The performance of Intuitive Surgical's stock may be influenced by the overall industry outlook, as the top 50% of Zacks-ranked industries tend to outperform the bottom 50% by a factor of more than 2 to 1 [5]

da Vinci Surgical System Performance - Worldwide da Vinci procedures grew approximately 18% compared with the third quarter of 2023[1] - The Company placed 379 da Vinci surgical systems, including 110 da Vinci 5 systems, in Q3 2024, up from 312 systems in Q3 2023[1] - The da Vinci surgical system installed base grew to 9,539 systems as of September 30, 2024, a 15% increase from 8,285 systems at the end of Q3 2023[1] - In October 2024, the Company obtained regulatory clearance in South Korea for the da Vinci 5 surgical system for use in multiple surgical procedures[1] Revenue and Financial Performance - Q3 2024 revenue increased 17% to $2.04 billion compared to $1.74 billion in Q3 2023[1] - Total revenue for Q3 2024 reached $2,038.1 million, up 16.9% YoY from $1,743.7 million in Q3 2023[13] - Nine-month total revenue for 2024 reached $5,938.6 million, up 14.3% YoY from $5,195.8 million in 2023[16] - Instruments and accessories revenue increased by 18% to $1.26 billion in Q3 2024, driven by 18% growth in da Vinci procedure volume and 73% growth in Ion procedure volume[2] - Instruments and accessories revenue grew 18.0% YoY to $1,264.2 million in Q3 2024[13] - Systems revenue was $445 million in Q3 2024, compared to $379 million in Q3 2023, with 220 systems placed under operating lease arrangements, including 141 under usage-based leases[2] Net Income and Earnings Per Share - Q3 2024 GAAP net income attributable to Intuitive was $565 million, or $1.56 per diluted share, compared to $416 million, or $1.16 per diluted share, in Q3 2023[1] - Q3 2024 non-GAAP net income attributable to Intuitive was $669 million, or $1.84 per diluted share, compared to $524 million, or $1.46 per diluted share, in Q3 2023[1] - Net income attributable to Intuitive Surgical, Inc. increased 35.9% YoY to $565.1 million in Q3 2024[13] - Diluted net income per share rose 34.5% YoY to $1.56 in Q3 2024[13] - Nine-month net income attributable to Intuitive Surgical, Inc. increased 37.3% YoY to $1,636.9 million[16] - GAAP net income attributable to Intuitive Surgical, Inc. for the nine months ended September 30, 2024, was $1,636.9 million, compared to $1,191.8 million for the same period in 2023[23] - Non-GAAP net income attributable to Intuitive Surgical, Inc. for the nine months ended September 30, 2024, was $1,851.2 million, compared to $1,467.9 million for the same period in 2023[23] - GAAP net income per share attributable to Intuitive Surgical, Inc. - diluted for the nine months ended September 30, 2024, was $4.53, compared to $3.34 for the same period in 2023[23] - Non-GAAP net income per share attributable to Intuitive Surgical, Inc. - diluted for the nine months ended September 30, 2024, was $5.12, compared to $4.11 for the same period in 2023[23] Cash, Investments, and Assets - The Company ended Q3 2024 with $8.31 billion in cash, cash equivalents, and investments, an increase of $628 million during the quarter[3] - Cash, cash equivalents, and investments grew 13.2% to $8,311.5 million as of September 30, 2024[19] - Property, plant, and equipment increased 25.3% to $4,433.0 million as of September 30, 2024[19] - Total assets grew 14.9% to $17,743.4 million as of September 30, 2024[19] - Stockholders' equity increased 17.0% to $15,677.5 million as of September 30, 2024[20] Gross Profit and Expenses - GAAP gross profit for the nine months ended September 30, 2024, was $3,992.0 million, compared to $3,452.1 million for the same period in 2023[23] - Non-GAAP gross profit for the nine months ended September 30, 2024, was $4,092.6 million, compared to $3,543.8 million for the same period in 2023[23] - Share-based compensation expense for the nine months ended September 30, 2024, was $499.8 million, compared to $442.4 million for the same period in 2023[23] - Long-term incentive plan expense for the nine months ended September 30, 2024, was $4.4 million, compared to $5.9 million for the same period in 2023[23] - Amortization of intangible assets for the nine months ended September 30, 2024, was $13.6 million, compared to $15.1 million for the same period in 2023[23] - Litigation charges (recoveries) for the nine months ended September 30, 2024, was $7.2 million, compared to $(4.0) million for the same period in 2023[23]

Core Viewpoint - Intuitive Surgical is set to report earnings, with expectations of a gain of $1.63 per share on $2.02 billion in revenue, while the Whisper number suggests a gain of $1.67 per share [2]. Financial Performance - The company has shown consistent earnings growth, increasing from $3.03 in 2017 to $5.71 in 2023, with projections of $6.64 in 2024 and $7.65 in 2025 [3]. - The current price-to-earnings (P/E) ratio stands at 75, which is 3.1 times that of the S&P 500 [3]. Technical Analysis - The stock is trading approximately 4.4% below its 52-week high and just below its 50-day moving average [4]. - The stock is close to its all-time high of just under $500, indicating potential volatility following the earnings report [4]. Company Overview - Intuitive Surgical, Inc. specializes in developing, manufacturing, and marketing products that enhance minimally invasive care, including the da Vinci Surgical System and Ion endoluminal system [5][6]. - The company provides a range of services, including installation, repair, maintenance, and technical support, alongside integrated digital capabilities for performance enhancement [6]. - Established in 1995 and headquartered in Sunnyvale, California, the company also collaborates with FluoGuide A/S for head and neck cancer treatments [6].

Earnings and Revenue Expectations - Intuitive Surgical is expected to report Q3 2024 revenues of $2 billion and adjusted earnings of $1.60 per share, slightly below consensus estimates [1] - The company's revenue growth is driven by increased procedure volume and placements of the new da Vinci 5 surgical platform [1] Trends Driving Q3 Results - Intuitive Surgical benefits from expanding its installed base, leading to growth in recurring revenues such as consumables [2] - Global da Vinci procedure volume is projected to grow 15.5%-17% in 2024, driving consumables and services revenue [2] - Operating margin is expected to see slight growth, bolstering the company's bottom line [2] Previous Quarter Performance - Q2 revenue was $2.0 billion, reflecting a 6% year-over-year growth, driven by a 17% rise in worldwide da Vinci procedure volume [3] - The company placed 341 da Vinci systems in Q2, including 70 da Vinci 5 systems, increasing the total installed base by 14% year-over-year to 9,203 systems [3] - Operating margin expanded by 340 basis points to 28.2% in Q2, with adjusted earnings of $1.78, a 25% increase over the prior-year quarter [3] Stock Performance and Valuation - ISRG stock has appreciated 45% year-to-date, outperforming the broader markets [4] - The stock is estimated to be valued at $462 per share, slightly below the current market price of $480, based on a 20x P/S multiple [4] - ISRG stock has shown more volatile annual returns compared to the S&P 500, while the Trefis High Quality Portfolio has consistently outperformed with less volatility [4] Peer Comparisons - Intuitive Surgical's valuation and performance can be compared with peers across industries using metrics provided by Trefis [5]

Core Viewpoint - Intuitive Surgical, Inc. (ISRG) is expected to report third-quarter 2024 earnings on October 17, with sales and earnings estimates at $2.02 billion and $1.65 per share respectively, while earnings per share estimates for 2024 and 2025 have remained stable at $6.67 and $7.66 over the past 60 days [1][2] Estimate Movement - The earnings surprise for ISRG in the last reported quarter was 16.34%, with an average surprise of 8.97% over the trailing four quarters [2][3] Factors to Note - ISRG reported sales of $3.27 billion in the first half of 2024, reflecting a year-over-year growth of 13.5%, driven by strong procedure performance and capital placements [5] - The Instruments & Accessories segment is expected to report robust results due to strong da Vinci procedure growth, with a 17% increase in procedures during the second quarter [5][6] - The revenue per procedure increased to approximately $1,800, up about $20 sequentially, although unfavorable currency movements may offset some gains [6] - Sales growth is likely to be supported by China's recovery and rising adoption in Japan and India [6][7] - The Systems segment is expected to reflect strong adoption of the newly launched da Vinci 5, with 70 systems placed in the U.S. during the second quarter [7][8] - The Services segment is anticipated to show strong adoption of digital products and services [8] Price Performance & Valuation - ISRG shares have appreciated 28.8% in the past six months, outperforming the industry growth of 4.2% and the S&P 500 Index's rise of 15% [9] - Currently, ISRG is trading at a forward 12-month P/E of 65.48X, compared to the industry's 32.6X, although this valuation has decreased from a high of 87.37X [10] Investment Thesis - Continued growth in da Vinci procedure volume and strong Ion procedure growth are expected to drive ISRG's performance for the rest of 2024 [11] - The launch of da Vinci SP in Europe and da Vinci 5 in the U.S. is anticipated to boost system placements [11] Conclusion - ISRG's unfavorable Earnings ESP suggests no significant movement post-earnings results, and while the company has a favorable Zacks Rank, its high valuation may deter immediate investment [12][13]