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Intuitive Surgical Management Discusses Q2 2012 Results - Earnings Call Transcript

Globally, our business in Asia has continued to build as a result of fine execution by our team. Japan's system sales and procedure performance have responded well to MHLW's reimbursement of da Vinci Prostatectomy at the start of the second quarter, and we continue to invest in building our capabilities in Japan. Conditions in Europe are challenging, with both broad austerity issues, as well as specific structural issues impacting our business. In response to these conditions, we have brought in an experienced executive from our key accounts group in the United States to lead our European commercial organization. We also continue to invest in our international regulatory and reimbursement teams. Given the depth of environmental issues in Europe, we expect challenging conditions to persist into the second half of the year.

Turning to operating highlights for the second quarter. Procedures grew approximately 26% over the second quarter of 2011. We sold 150 da Vinci Surgical Systems, up from 129 during the second quarter of last year. Total revenue was $537 million, up 26% over last year. Instrument and accessory revenue increased to $224 million, up 30% over Q2 2011. Total recurring revenue grew to $307 million, up 28% from prior year and comprising 57% of total revenue. Net income was $155 million, up 32% over last year. We generated an operating profit of $259 million before noncash stock option expense, up 27% from the second quarter of last year. We generated $223 million in gross cash flow from operations and ended the quarter with $2,631,000,000 in cash and investments.

Turning to recently launched products and those in development. In the second quarter, we focused on launches of our Single-Site instruments and vessel sealer. We expanded the use of Single-Site cholecystectomy in the U.S. in response to growing early customer demand. Surgeon and patient response to Single-Site has been positive with over 200 of our U.S. hospital customers having purchased initial Single-Site kits 2 quarters after launch. As mentioned in prior calls, we are working on expanding our instrument offering in Single-Site to enable its use in additional indications.

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