Intuitive Surgical (ISRG)
Q4 2010 Earnings Call
January 20, 2011 4:30 pm ET
Marshall Mohr - Chief Financial Officer, Principal Accounting Office and Senior Vice President
Jerome McNamara - Executive Vice President of Worldwide Sales and Marketing
Aleks Cukic - Vice President of Strategy
Calvin Darling - Director of Financial Planning
Gary Guthart - Chief Executive Officer, President and Director
David Roman - Goldman Sachs Group Inc.
Tycho Peterson - JP Morgan Chase & Co
Frederick Wise - Leerink Swann LLC
Ben Andrew - William Blair & Company L.L.C.
Amit Hazan - Gleacher & Company, Inc.
Previous Statements by ISRG
» Intuitive Surgical CEO Discusses Q3 2010 Results - Earnings Call Transcript
» Intuitive Surgical, Inc. Q2 2010 Earnings Call Transcript
» Intuitive Surgical, Inc. Q1 2010 Earnings Call Transcript
Ladies and gentlemen, thank you for standing by, and welcome to the Intuitive Surgical Fourth Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to your host, Director of Financial Planning and Analysis for Intuitive Surgical, Calvin Darling. Please go ahead.
Thank you. Good afternoon, and welcome to Intuitive Surgical's fourth quarter conference call. With me today, we have Gary Guthart, our President and CEO; Marshall Mohr, our Chief Financial Officer; Aleks Cukic, our Vice President of Strategic Planning; and Jerry McNamara, our Executive Vice President of Worldwide Sales and Marketing.
Before we begin, I would like to inform you that comments mentioned on today’s call may be deemed to contain forward-looking statements. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are described in detail in the company’s Securities and Exchange Commission filings. Prospective investors are cautioned not to place undue reliance on such forward-looking statements.
Please note that this conference will be available for audio replay on our website at intuitivesurgical.com on the Audio Archives section under our Investor Relations page. In addition, today’s press release has been posted to our website.
Today’s format will consist of providing you with the highlights of our fourth quarter results as described in our press release announced earlier today, followed by a question-and-answer session. Gary will present the quarter’s business and operational highlights. Marshall will provide a review of our fourth quarter financial results. Aleks will discuss marketing and clinical highlights, and I will provide our financial forecast for 2011. And finally, we will host a question-and-answer session. With that, I'll turn it over to Gary.
Thank you for joining us on the call today. 2010 was a year with some broad challenges and encouraging trends. In the year, our procedure mix shifted in favor of gynecology, as it eclipsed urology as the largest specialty we serve. We are making good progress in responding to the challenges inherent in our expanding business.
In 2010, our focus was in four areas: first, driving the adoption of da Vinci surgery within the gynecology market; second, enabling growth of new procedures within new specialties; third, the expansion of our business internationally; and fourth, rightsizing our various core teams within the company to support our growth, most notably our sales organization.
Looking back at the full year 2010, our operating highlights were as follows. Worldwide procedures grew by 35%, with international procedures growing by 42%. We sold 441 da Vinci Surgical Systems in the year, up from 338. Total revenue grew to $1.413 billion, up 34%. Recurring revenue grew to $753 million, up 34% and comprising 53% of total revenue. We generated $673 million in operating profit before noncash stock compensation expense, up 42% from last year. And GAAP net income grew to $382 million, up 64% year-over-year.
Now turning to operating highlights for the fourth quarter. Procedures grew 35%. We sold 124 da Vinci Surgical Systems. We ended the fourth quarter with 1,752 da Vinci systems installed worldwide. Total revenue for the quarter was $389 million. Instrument and accessory revenue increased to $151 million, up 33%.
Total recurring revenue including service grew to $212 million, comprising 54% of total revenue. We generated an operating profit of $184 million in the quarter before noncash stock compensation expense, up 20% from the fourth quarter of last year. And GAAP net income grew to $121 million, up 56%.
We ended the year with $1.609 billion in cash and investments, down $12 million from last quarter and up $437 million from last year. We received $141 million in cash during the year from the exercise of stock options and invested $79 million in intellectual property, working capital, property plant and equipment and $199 million in stock repurchases for the year. Going forward, we will continue to look for stock repurchase opportunities.
Gross cash from operations for the year were $573 million, or $14.22 per fully diluted share and 150% of our reported GAAP net income for the year. This is a reflection of the significant noncash stock option and statutory tax expenses reflected in our GAAP net income and is the reason that we believe that gross cash generated from operations remains the best measure of our financial performance.
In our adopting procedures in the U.S., da Vinci Hysterectomy continued its strong growth, both in malignant and benign conditions, growing 59% year-over-year. Sacrocolpopexy and Myomectomy also continued to track their adoption curves. Urology also grew for the full year of 2010 through the continued adoption of Partial Nephrectomy and growth in dVP, the latter being focused in Europe.
As benign conditions became a larger part of our procedure base in the U.S., we experienced increased exposure to seasonality and other patient treatment deferrals that are less common with cancer operations. We expect this exposure to be an ongoing part of our business.
2010 was a strong year for emerging procedures. In fact, procedures falling outside the above-mentioned adopting procedures grew by 47% over 2009. Among procedures in new specialties that may emerge as adoptions are da Vinci colorectal procedures, da Vinci thoracic procedures and da Vinci transoral head and neck procedures. Patient value in these specialties appears to be high, and surgeon interest and early growth has been encouraging. I'll leave it to Aleks to provide more detail on our progress later in the call.