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Please note that this conference call 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 highlights of our second 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 second quarter financial results. Aleks will discuss marketing and clinical highlights, and I will provide an update to our financial forecast for 2010, and finally, we will host a question-and-answer session. With that, I will turn it over to Gary. Gary Guthart Thank you for joining us today. In the second quarter our team executed well. We continued to expand da Vinci Surgery to a broader base of customers, which is reflected in our financial results for the quarter. In the quarter we experienced strong growth in several markets. da Vinci Hysterectomy became the largest single procedure in our business this quarter. We also experienced growth in other benign gynecology procedures including da Vinci Myomectomy and da Vinci Sacral Colpopexy. In Urology, da Vinci Surgery continues to expand and we see continuing growth in da Vinci partial Nephrectomy and da Vinci Cystectomey. da Vinci Prostatectomy is now maturing the United States and was flat relative to last quarter. We expect dVP growth to be largely driven by international markets as we go forward. da Vinci Surgery is also being adopted in other surgical specialties. We are experiencing growth in da Vinci Transoral surgery by ENT surgeons; in general surgery, colorectal procedures are growing; and in thoracic surgery we are achieving early success in da Vinci Surgery for lung cancer. While we are not ready to declare these procedures as full-scale adoptions, their early growth is encouraging.
Now, looking at systems sales, we sold 108 da Vinci Systems in the quarter. U.S. sales grew sequentially over Q1 and we sold slightly more systems in Europe this quarter than last. That said, we continue to see fiscal pressures in Europe. Lastly, we are pleased with our systems sales performance in Asia, outside of Japan. As we have mentioned previously, we expect Japan system and revenue growth to be slow as we work through post market surveillance and reimbursement pathways.As we move to highlights for the second quarter, recall that Q2 2009 financials include a recognition of revenue that was deferred in association with the introduction of the da Vinci Si System. In my year-over-year comparisons, I will compare financial performance excluding the deferral to give a more accurate picture of relative performance. With that as background, operating highlights for the second quarter were as follows: Procedures grew 36% over second quarter of 2009. We sold 108 da Vinci Surgical Systems, up from 76 during the second quarter of last year. Total revenue was $351 million, up 42% over Q2 2009. Instrument and accessory revenue increased to $128 million, up 35% over last year. Total recurring revenue grew to $183 million, up 35% from prior year and comprising 52% of total revenue. Net income was $89 million, up 64% over the last year. We generated an operating profit of $170 million before non-cash stock option expense, up 54% from the second quarter of last year. We ended the quarter with $1,588 million in cash and investments, up $193 million from last quarter and up $686 million from second quarter 2009. Significant cash outlays for the quarter included $20 million invested in intellectual property and fixed assets. Excluding the impact of this outlay as well as $23 million from stock proceeds and $53 million return from working capital, we generated $137 million in gross cash flow from operations, which is 154% or reported GAAP net income in the second quarter.
As I mentioned on our last call, we are increasing investments in our business by building our sales force, by bringing to market new technologies that will extend our products into new procedures and bring additional patient value to existing procedures and by increasing our manufacturing capability. The investment made in sales force expansion in the first quarter is just beginning to make an impact in the field and early indications are positive. We believe that close clinical sales support of emerging and high growth procedures is an important catalyst for procedure adoption. This quarter we added an additional 119 people to our team predominantly in sales, manufacturing, and R&D, bringing our total team to 1476 employees.Read the rest of this transcript for free on seekingalpha.com