Intuitive Surgical, Inc.

Ladies and gentlemen, thank you for your patience and holding, and welcome to the Intuitive fourth quarter of 2020 earnings release. At this time, all of your participant phone lines are in a listen-only mode, and later there will be an opportunity for your questions. If you'd like to queue up at any point during the presentation, feel free to press 1 followed by 0. Just a brief reminder, today's conference is being recorded. Now happy to turn the conference over to Head of Investor Relations, Philip Kim.

Good afternoon, and welcome to Intuitive's fourth quarter earnings conference call. With me today, we have Gary Guthardt, 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 or uncertainties. These risks and uncertainties are described in detail in our Securities and Exchange Commission's filings, including our most recent Form 10-K filed on February 7, 2020, and Form 10Q filed on October 19, 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. Today's format will consist of providing you with 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 financial results. Then I will discuss procedure and clinical highlights. 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 fourth quarter capped a year in which the pandemic challenged our customers and our business. It highlighted some course ranks for the company, introduced some obstacles to overcome, and triggered some changes for us. To put the year and quarter in context, let me first review some of the numbers. Procedures grew 6% year-over-year for the fourth quarter and 1% for the full year over 2019, resulting in approximately 1.25 million procedures in 2020. We placed 326 systems in the quarter, down from 336 systems in Q4 of 2019. For the full year, we placed 936 systems in 2020, down from 1,119 systems in 2019. Finally, revenue fell 3% in 2020 as the result of delays in surgical procedures as hospitals focused on treating COVID patients. Digging a little deeper, our core business remains healthy. After the first surge of COVID evaded during this past summer, our customers returned to more routine use of our systems and solutions. We believe that the intuitive ecosystem enabled increased access to and practice of high-quality, minimally invasive surgery, which may have helped hospitals conserve valuable intensive care resources during the pandemic. Despite pressure on utilization of our systems due to COVID, our hospital customers continue to invest in building their intuitive robotics programs with additional systems evidenced by a 7% increase in the clinical install base in 2020. We saw committed customers strengthening their programs, likely due to their analysis of how well the intuitive ecosystem satisfied their quadruple aim objectives, better outcomes, better care team experiences, better patient experiences, and lower total cost to treat per patient episode. Lastly, we believe our investments in our analytics programs have helped customers routinely analyze their performance, supporting their programmatic insights in the year. Our confidence in our core business and our long-term opportunity remains robust, in spite of near-term uncertainty, which is as follows. First, the pandemic is resurgent in many regions, powered now by more contagious variants. While hospitals have better protocols to manage patients today than they did earlier in 2020, our weekly surgical data in December 2020 and continuing today shows another clampdown on surgeries. Furthermore, we believe diagnostic procedures are slowing in hard-hit regions. With diagnostic procedures running significantly below pre-pandemic levels, patients in hospitals will acutely feel the impact through disease progression and the more complex therapies necessary when patients do return for care. This delay in diagnostic pipelines will likely take several quarters to resolve, even after the threat of COVID begins to abate. Second, we know that future new capital installs are highly sensitive to utilization rates. Delayed surgeries will also impact the growth of surgical departments, pressuring new system installs until excess capacity is consumed. Third, in countries where the government pays the healthcare bill, budget strain and economic fallout from COVID may impact healthcare spending in new and variable ways in different countries. Lastly, the trend that started prior to the pandemic for increased data requirements and longer clearance timelines from regulators in the United States and Europe for our industry has continued this year. Taken together, these obstacles make predictions for the next several quarters difficult. As I mentioned earlier, 2020 has broadly illuminated some longer-term trends in healthcare that validate our thesis. The increased pressure on healthcare systems to conserve acute care resources for the sickest patients may have accelerated investments that enable patients to get the care they need with fast recovery, minimizing consumption of scarce hospital resources, and reducing complications. The compounding value of analyzing real-time data and offline healthcare data to derive insights to drive better care has become obvious this year. Lastly, we saw an acceleration of remote technology used to enable proctoring, learning, and analysis. I've heard it said that in good times, we develop ourselves to become who we want to be, while hard times reveal who we really are. In the year, we set our priorities based on our values. We implemented community relief and customer relief, launched our extended use instruments program, mobilized local and remote training resources to support customers differently, and continued to listen carefully to our customers to best understand their needs. We've seen positive customer response to this approach, which is reflected in our net promoter score, You can find more information on these scores in our JP Morgan Healthcare Conference presentation from this month posted on our website. Over the past several years, we've been building our capabilities in different countries to better serve their healthcare systems. I'd like to take a moment to take you through how we performed outside the United States in the year. Turning first to Asia, our business in Japan is moving beyond urology, given reimbursements for a broad slate of procedures obtained in Japan in 2018 and 2020. Government hospitals in Japan have been conserving resources for COVID care, and the pandemic has introduced noticeable delays as the healthcare system reacts to outbreaks. In Korea, our business continues to be dynamic, with an innovation-oriented customer group adopting new products like our DaVinci SP. In China, we saw accelerated customer acceptance of our partnership with Fosun Pharma and our products, with growth in procedures and the business overall outpacing our pre-pandemic plans. In 2020, China emerged as our number two procedure market. Turning to Europe, our team in Germany has had success in engaging larger German hospital groups, with increased system placements broadening our market access. Constraints on elective surgery have been implemented assertively in Germany in light of COVID. In Germany, France, the UK, Italy, and the Nordics, our goals have been to broaden da Vinci use beyond urology. Progress therein has been hampered significantly by COVID. Lastly, we see relatively low public sector reimbursements in Europe for benign procedures. Innovations from Intuitive, like DaVinci S and our extended use instruments, are providing an option for more price-sensitive customers in these markets. With regard to our innovation and product engines, we spent time walking through our progress at the J.P. Morgan Healthcare Conference this month, and our presentation is available online at our website, intuitive.com. I'd recommend to the interested listener a review of those materials for greater insight into our progress. Summarizing briefly here, we're making good progress in advancing many elements of our ecosystem, including our advanced instruments, deepening our imaging and informatics programs, including our augmented reality program, IRIS, and extending the launches of our new platforms. We grew the install base and procedures for our single-port platform, DaVinci SP. We're focused on advancing clinical indications for SP in several regions, as well as extending its instrument and accessory portfolio. For our flexible robotics platform, ION, we saw strong clinical results and demand in the year, but met manufacturing and supply performance challenges in the fourth quarter, as catheter demand outpaced our forecasting models, and the need for important quality improvement implementations and COVID quarantines hampered our productions. We are currently shipping high on product and expect to meet the demand curve in the first half of 2021. Before Marshall takes you through our finances in detail, I'd like to touch on our financial strategy. Our operating model withstood the strains of 2020 well. Starting with our decision several years ago to shift to greater flexibility in system placement models, the incorporation of sales, leasing, and risk-shared models allowed us to meet customers' needs during a disruptive time. Our investments in advanced instruments, including stapling and energy, have been fruitful, with growing revenues, improving margins, and growing customer appreciation for advanced instruments. We've been investing capital in our manufacturing methods to increase quality and lower our costs, which in turn has allowed us to extend savings to our customers to allow them greater flexibility in deploying our products in more cost-sensitive environments. This has triggered a virtuous cycle that allows us greater volume, which in turn gives us greater ability to invest in higher volume processes. We'll continue to invest in this cycle going forward. We believe we are still in the early innings of a long opportunity to substantially improve the quadruple aim in acute medical interventions using robotics, computing, advanced imaging, and informatics. As a result, we continue to invest in our innovation engines to create and pursue these opportunities. In closing, Our priorities for 2021 are as follows. First, we'll support our customers' recovery of surgery during and post-pandemic. Second, we'll focus on outstanding regional performance. Third, we'll advance our priority programs and launches, SP, ION, imaging, and analytics, including new indications. And finally, continued expansion of clinical, economic, and analytical evidence base for key procedures in countries. And I'll turn the call over to Marshall, who will take you through financial matters in greater detail.