Intuitive Surgical, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Intuitive Surgical Q1 2020 earnings release. At this time, all participants are in listen-only mode. Later, we'll have an opportunity for your questions. Instructions will be given at that time. If you should require assistance today, please press star zero, and operator will assist you offline. As a reminder, today's conference is being recorded. I'll now like to turn the conference over to Kelvin Darling, Senior Director of Finance, Investor Relations, for Intuitive Surgical. Please go ahead.

Thank you. Good afternoon, and welcome to Intuitive's first quarter earnings conference call. With me today, we have Gary Guthart, our CEO, and Marshall Moore, our chief financial officer. 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 our Securities and Exchange Commission filings, including our most recent Form 10-K, filed on February 7, 2020. Our SEC filings can be found through our website or at the SEC's website. Investors are cautioned not to place undue reliance on such forward-looking statements. Please note that this conference call will be available for audio replay on our website at intuitive.com on the latest events section under our investor relations page. Today's press release and supplementary financial data tables have been posted to our website. In addition, this quarter we have also posted charts illustrating DaVinci procedure trends in Q1, which are intended to provide additional perspective and detail regarding the impact of COVID-19 on our business. Today's format will consist of providing you with highlights of our first 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 financial results. Then I will discuss procedure details. And finally, we will host a question and answer session. With that, I will turn it over to Gary.

Thank you for joining us today. Our first quarter 2020 performance reflects the rise of COVID-19 and the global response to it. On this call, we'll describe our experience in the quarter, our framework for engaging those who rely on us, and our priorities and actions in these challenging times. Our focus now and in the past is the safety and well-being of patients, care teams, our communities, and our employees. For the first two and a half months of the quarter, procedure performance was at the high end of our expectations. with procedure trends consistent with the prior quarters. General surgery in the United States was strong, as was urology outside the United States. As we disclosed previously, recommendations by surgical societies and healthcare organizations to delay certain surgeries to conserve resources for COVID care are having a material impact on surgery broadly, including robotic-assisted surgery. We support government and hospital policies to direct resources to COVID care, and recognize these policies vary greatly by region and by hospital system. We are analyzing customer procedure deferrals in response to COVID. Patients undergoing da Vinci procedures do so in response to an underlying disease. While these procedures may be delayed in the short term, without treatment of some sort, the disease and its impairment persist and often worsens. Said simply, the vast majority of these patients will ultimately seek treatment. We are analyzing both the clinical drivers of return to treatment and customer plans and processes to recover. The categories of benign disease and cancer are not entirely predictive of the urgency of surgical intervention. Clearly aggressive cancers require treatment and are delayed at significant risk to patients. Likewise, some benign conditions require timely intervention as well. We're working internally and with customers to understand their needs to restart surgery for those patients whose condition requires action. The effect of COVID on the surgical market has impacted different regions differently. Starting with China, procedure performance was impacted by COVID earliest, with sharp declines in surgery as resources were diverted to respond to COVID care. Procedures in China have been recovering steadily since that time. However, steep declines in procedures that can be deferred are occurring in other regions, particularly Europe and the United States. For the quarter, procedures grew 10% over Q1 of 2019. Given early strength followed by sharp declines in the last two weeks of the quarter, I refer you to the materials we posted to our website prior to this call to get a better picture of the dynamics in Q1. With regard to systems, our total number of placements for the quarter was below our expectations in spite of having strong capital performance in the first two months of the quarter. In March, rapid changes by hospitals delayed some system placements, and are likely to significantly impact system contracts and placements in future quarters. Financial pressures exerted on hospitals in response to treating COVID patients and deferring other care are likely to be significant and are unlikely to resolve quickly. Marshall and Calvin will take you through procedure and capital dynamics in the quarter in greater detail later in the call. To help articulate our priorities and actions during this period of change, We have adopted the phased framework described in the American Enterprise Institute's National Coronavirus Response. In phase one, which is the slow-to-spread phase of coronavirus response, Intuitive's priorities are as follows. First, we are focused on the health and safety of all those we serve, our customers, our communities, our employees, and our suppliers, implementing early and continuous updates to our health and safety policies and processes. Second, we are supporting our customers according to their priorities, clinical, operational, and economic. Third, we're focused on continuity of supply by working with our suppliers and distributors. To date, our delivery capability and inventory positions are on firm footing. Fourth, we are securing our workforce economically. We have built an outstanding team over the years, and we believe their strength will be essential in the recovery that follows. Fifth, in partnership with our intuitive foundation, We are contributing material, product, and volunteers to the front lines of COVID support. We've designed, produced, and delivered PPE to local hospitals, and our staff have volunteered in several communities. And sixth, we are eliminating avoidable spend during the stop-the-spread phase of the virus. The current situation in hospitals responding to viral care is fluid, and the depth and duration of this disruption is difficult to predict. New issues are arising with respect to surgery that will require mitigation in time. Some hospital customers and some of our suppliers will experience significant financial stress in this period. Regulatory agency priorities and resources are shifting globally as they devote their resources to infectious disease detection and treatment needs. And lastly, surgeons are being dedicated to frontline COVID work or are being idled by a lack of resources in this period. We are adjusting quickly to the issues described, and we're confident in both the need for surgery and in our products as the response to COVID evolves. We're planning for Phase 2, the return to surgery, for those patients who cannot wait. Those countries that have been managing the disease the longest have returned to da Vinci surgery steadily over time or have been able to maintain da Vinci surgery concurrently with COVID care. We are analyzing the order in which different procedures are likely to return and and the strategies likely to be employed by hospital systems to manage surgical practices while still providing COVID care. For example, some health systems are dedicating specific sites to COVID care while operating rooms for outpatient surgeries are dedicated in other locations. We'll support customers closely as they bring capabilities back online. We're also adapting our training and intuitive telepresence capabilities to support team training and skills retention in a Phase II world. We're optimizing our R&D facilities and methods to allow us to progress on important innovation programs while employing up-to-date workplace safety guidelines. Lastly, we look forward to accelerating clinical trial activities and the associated regulatory work as trial sites increase their surgical volume. In constructing our financial plans in the current environment, we're balancing five objectives that reflect our priorities mentioned above. They are, first, Customer-focused economic policies that meet their needs during this disruption. Second, employee policies that secure our valuable workforce needed for hospital recovery and to drive our innovation. Third, securing and stabilizing critical supply chain resources. Fourth, eliminating spending that is not effective during this period. For example, pausing hiring and volume-related roles and spend on projects that cannot progress in the current phase. And finally, shareholder policies that don't interfere with the priorities mentioned above. We remain in close contact with our customers, our community representatives, our employees, and our suppliers during this period. While the depth and duration of the current challenges are difficult to predict, the need for both COVID and non-COVID care is clear. Given time and resources, health systems have continued to choose DaVinci. The collaborations and solutions orientation among our stakeholders is clear and inspiring. I believe our long-term opportunity is substantial, and our business is well positioned financially and organizationally to weather this COVID outbreak. I'll now turn the call over to Marshall, who will take you through financial matters in greater detail.