Intuitive Surgical, Inc.

Thank you, everyone, for standing by. Welcome to the intuitive fourth quarter 2023 earnings call. At this time, all participants are on a listen-only mode. Later, we will conduct a question and answer session. If you wish to place yourself in queue for questions today, please press 1 and 0 on your telephone keypad. If you want to remove yourself from the Q&A, you may repeat the 1 and 0 command. I will now turn the call over to your host, Head of Investor Relations, Brian King. Please go ahead.

Good afternoon, and welcome to Intuitive's fourth quarter earnings conference call. With me today, we have Gary Guttart, our CEO, and Jamie Samath, our CFO. 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 10, 2023, and Form 10-Q filed on October 20, 2023. 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 event 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 full year and four quarter results, as described in our press release announced earlier today, followed by a question and answer session. Gary will present business and operational highlights. Jamie will provide a review of our financial results. Then I will discuss procedure and clinical highlights and provide our financial outlook for 2024. And finally, we will host a question and answer session. And with that, I will turn it over to Gary.

Thank you for joining us today. I'll touch on our performance last quarter and for the full year 2023 and share our perspective on 2024. The past year was a good one for Intuitive. With use of our platforms growing nicely, hospitals building additional system capacity to support that growth, and increased average utilization per system per year for each of our platforms. Our teams have been delivering to meet customer demand, driving quality and availability improvements, running clinical trials, and readying new products and services for the market. We'll touch on a few of those efforts on this call. Starting first with procedures, growth for the full year was 22%. Areas of strength included general surgery in the United States and regional performance in countries including Germany, France, the UK, and Ireland, to name a few. In the U.S., general surgery procedure growth was led by cholecystectomy, with foregrip procedures rising as well. Colon and hernia procedure growth was also healthy for the year. Bariatric procedures grew year over year. However, we saw continued deceleration of growth throughout 2023 and likely the result of the uptake of GLP-1 drugs for obesity. Procedure growth outside the United States diversified beyond urology, with nice growth in categories including gynecology and general surgery. In flexible robotics, ion procedures showed continued strength, with 129% growth for the full year. SP procedure growth was accretive in the year, with 48% growth over a full year, driven by acceleration in the United States. On the capital front, we placed 1,313 multiport systems in the full year 23, compared with 1,241 multiport systems in 2022. ION placements for the year were 213 versus 192 prior year, and SP placements were 57 for the full year versus 23 systems in the prior year. Globally, placements were strong in the United States and Japan in the year. The use of flexible financing arrangements was substantial in the quarter, particularly in the United States, as customers seek to build capacity, balance their da Vinci system portfolios to improve access, and lastly, to allow flexibility to upgrade to future systems. Jamie will take you through placement dynamics in more detail later in the call. System utilization, defined as procedures per installed clinical system per quarter, grew 9% globally year-over-year for our multiport platforms. reaching a new high as customers adopt a broad mix of procedures on our systems. Utilization grew 15% for SP in the year, while it grew 6% for ION over 2022. Utilization is an important indicator of customer health because it is correlated to patient demand, care team satisfaction, and hospital financial health. The above performance reported revenue of $7.1 billion for the year, 14% growth over 2022. Our capital and operating expenses were on the upper end of our spend guidance, reflecting continued investments in R&D to support growth of our platforms and digital tools, expansion of our manufacturing and commercial footprints, and capital amortization. Product margins were challenged in the full year as a result of higher than expected costs, primarily for our newer platforms. Jamie will take you through our financial performance in greater detail later in the call. Strength in procedures, growth in the clinical install base, and increased utilization signal continued belief by our customers that our platforms make a difference in their efforts to pursue the quadruple aim. Better outcomes, better patient experiences, better care team experiences, and lower total cost to treat for patient episode. As we look to 2024, I'd like to share with you that we have submitted to FDA our 510K application for our next generation multiport platform, DaVinci Five. Our design priorities for our new platforms are as follows. First, we look for opportunities to bring better minimally invasive care to more patients. Second, we work to improve the performance of our platforms and existing procedures. Third, we seek to improve care team satisfaction through product utility, dependability, and usability improvements. And finally, we strive to help lower the total cost to treat per patient episode. Once cleared, we believe DaVinci 5 will make a positive impact on each of these objectives through hundreds of design changes that respond to surgeon and care team inputs and fulfill our design priorities. As just one example, DaVinci 5 possesses four orders of magnitude greater processing power than our Generation 4 products. That means 10,000 times the processing power to gather data, improve sensing, and deliver better digital and analytic performance. Given the sophistication of the technologies involved, we plan a phased launch in the first several quarters after clearance, giving us time to mature our supply and manufacturing processes for the new system. DaVinci 5 will join our existing robotic surgical system portfolio alongside multi-port systems X and Xi and single-port system SP, offering surgeons and hospitals their choice of highly capable, proven solutions from Intuitive. We have been in communication with FDA on DaVinci 5 for the past several quarters and have completed a comprehensive multicenter IDE trial. This trial finished accruing patients in May of 2023 and we submitted for our 510 to FDA for DaVinci 5 in August last year. We are currently responding to FDA's questions. The timing of the US launch will depend on the time required to resolve these questions So far, we believe the questions asked fall within normal expectations for a submission of this type. In addition to FDA, we have initiated conversations on DaVinci 5 with regulators in Japan and in Korea, and will report our progress toward commercialization in countries outside the United States as we know more. Once FDA cleared, we will communicate features and benefits in greater depth. We started 2023 focused on increased adoption of our priority procedures in countries through outstanding training, commercial, and market access execution. We pursued expanded indications and launches for ION and SP. We focused on excellence and continuity of supply, product quality, and services provision as we emerged from pandemic stresses. And finally, we pursued increased productivity in our functions that benefit from scale. Taken together, our team made good progress against these objectives. As we enter 2024, our company priorities are as follows. First, we'll focus on innovation through expanded indication and launches of our new platforms by region, including our first phase of DaVinci 5 launch once cleared. Second, we'll pursue increased adoption for focus procedures by country through training, commercial activities, and market access efforts. Third, we will drive quality and gross margin improvements. And finally, we continue to focus on increasing our productivity, particularly in functions that benefit from industrial scale. I'll now turn the time over to Jamie.