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Thank you for standing by and welcome to the Intuitive Third Quarter 2025 Earnings Release. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Dan Connolly, Head of Investor Relations at Intuitive. Please go ahead, Sarah.

Good afternoon, and welcome to Intuitive's third quarter earnings conference call. Joining me today are Dave Rosa, our CEO, and Jamie Samath, our CFO. Before we begin, I would like to remind you that comments on today's call may 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 our Securities and Exchange Commission filings, including our most recent 10-K filed on January 31st, 2025, and Form 10-Q filed on July 23rd, 2025. Our SEC filings can be found through our website at intuitive.com 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 in the events section under our investor relations page. We have posted today's press release and supplementary financial data tables to our website. Our format for this afternoon's earnings conference call is as follows. Dave will review business and operational highlights. Jamie will provide a review of our financial results and procedure highlights. I will review clinical highlights and discuss our updated financial outlook for 2025. And finally, we will host a question and answer session. With that, I'll turn it over to Dave.

Good afternoon, and thank you for joining us today. Q3 2025 was an excellent quarter for Intuitive, which strengthened worldwide procedure growth and capital placements. as well as increasing utilization across all platforms. Globally, customer interest in and adoption of DaVinci 5 expanded. Domestically, customers responded to our first full quarter of broad DaVinci 5 availability with increased demand for system upgrades and dual consoles. Internationally, we placed our first systems in Japan and Europe, with surgeons performing initial cases in those geographies. Turning to procedures. Da Vinci procedures increased by 19% and ion procedures were higher by 52%, leading to total worldwide procedure growth of 20%. Da Vinci procedure growth reflected strength in benign general surgery in the US and accretive growth in general surgery and gynecology internationally. System utilization defined as procedures per installed clinical system per quarter grew 4% for our Da Vinci multiport platforms 35% for SP, and 14% for Ion. In the first 18 months since launch, DaVinci Utilization is validating our design intent, already outpacing XI. Procedure demand has been healthy, and as DaVinci 5 catalyzed upgrades, we saw the multi-port install-based utilization ticking up to absorb that demand. This is healthy for our customers and for our company. Turning to capital, we placed 427 DaVinci systems, including 240 DaVinci 5 systems and 30 SP systems, as well as 50 Ion systems. Demand for DaVinci 5 upgrades drove strong domestic placements. We believe upgrades are an effective way for customers to expand throughput and capabilities. These capabilities include force sensing, surge in autonomy, telepresence, and various other digital tools that may lead to enhanced understanding of what great surgery looks like and further adoption of robotic-assisted surgery over time. Additionally, it is our intent to offer refurbished XI systems as part of our broader portfolio, which will help expand access in certain geographies and sites of care. Internationally, da Vinci placements reflected ongoing external dynamics in Japan, China, and the UK, offset by broad-based strength in other international markets. Customer adoption of our products resulted in strong financial performance reflected in 23% revenue growth, and combined with strong operating discipline, 30% earnings growth. Jamie will provide further details on procedures, systems, and finances later in the call. Last month, we hosted our 10th annual Intuitive360 User Conference in San Diego. where more than 1,100 healthcare professionals representing over 450 institutions from around the world gathered to exchange ideas and shape the future of patient care. Customers remained acutely focused on improving patient outcomes, reducing clinical and operational variation, driving efficiency, and increasing access to minimally invasive care. More than 30 institutions presented their own clinical and financial outcomes data which further validated the value of our three existing platforms. I had the opportunity to sit down with multiple customers and dive deep into their robotic programs, including the impact of DaVinci 5 and potential fleet standardization, site of care dynamics, and their overall lung cancer programs. I was encouraged to see the depth of their data and analyses and how these customers were able to quantify the impact of their intuitive programs on aspects of the quintuple aim. Domestically, while we remain in limited launch with force feedback instrumentation, we are working closely with customers to support their analyses of the impact of force feedback on clinical outcomes and learning progression. I am encouraged by early feedback and excited to see where some of these studies are leading. Dan will highlight some of this data later in the call. Across all of our platforms, we consistently upgrade capability and reliability through software and hardware releases. In Q3, we received FDA 510 clearance for the first in a series of software updates for DaVinci 5. With the addition of network central configuration management, we are now able to deploy updates remotely, which significantly streamlines workflow for both our customers and Intuitive. This release also includes the visual representation of force through force gauge and focus mode, which enables in-console video replay and viewing registration and manipulation of 3D models. These features enhance surgeon awareness and interoperative decision making. You will see us continue to make improvements to the platform that advance our vision of delivering real-time insights at the point of care to support clinical efficiency with the aim of improving outcomes. Internationally, we placed our first nine systems in Japan and Europe and have received positive early feedback. We look forward to engaging customers as they continue to evaluate DaVinci 5. Our DaVinci SinglePort platform made further progress in Q3. Procedures increased 91%, led by ongoing growth in Korea, continued early progress in other international markets, and initial domestic use of the SP stapler in colorectal and thoracic procedures. At 360, I had a conversation with a longtime DaVinci thoracic surgeon about his initial experience using SP on about 40 patients. He was enthusiastic both about the reduction in length of stay and also his first few cases of using the SP stapler. I share his enthusiasm about these early results and look forward to seeing more data from colorectal and thoracic procedures as our launch progresses. Recent 510 clearances support several advanced features. including sensitive Firefly and various control algorithms aimed at further improving SP stapler usability. Since we last spoke with you on our Q2 call, we have completed US regulatory submissions for nipple sparing mastectomy and other general surgery procedures. We look forward to updating you on these efforts on future calls. Turning to ION, worldwide procedures grew 52% to just under 38,000. We are now delivering ION's differentiated value at scale, providing precise and individualized patient-specific navigation plans, using AI to segment each CT scan and plan the biopsy trajectory. This quarter, we received FDA clearance for a significant software release that improves workflow and imaging options, including upgraded system software that uses real-time AI to enable even more precise airway navigation and tomosynthesis integration, broadening the suite of imaging offerings when combined CT is not available. In closing, we are committed to our 2025 priorities. First, focusing on the full launch of DaVinci 5, its regional clearances and follow-on feature releases. Second, we'll pursue increased adoption of our focused procedures by country through training, commercial activities, and market access efforts. Third, we'll drive continued progress in building industrial scale, product quality, and manufacturing optimization. And finally, we'll focus on excellence and availability of our digital tools. Looking ahead, by virtue of our focus on patients, our alignment with customers in pursuit of the quintuple aim, our investments in both industrial scale and innovation, and our commercial excellence, We are well positioned, operationally and financially, to further increase value to patients, physicians, hospitals, and payers globally. With that, I'll turn the time over to Jamie to take you through our business and finances in greater detail. Good afternoon.

I will begin by highlighting our third quarter performance on a non-GAAP or pro forma basis, and I'll also summarize our GAAP results later in my remarks. A reconciliation between our pro forma and gap results is available on our website. The third quarter was a strong quarter for Intuitive. Taking DaVinci and ION together, total procedure growth was 20% compared to 18% growth for the first half of 2025. In quarter three, revenue grew 23% to $2.5 billion. Pro forma operating margin was 39%. and pro forma earnings per share increased 30%. The strength of our financial results reflected the broad launch of DaVinci 5 and expanded adoption of our ION and SP platforms. For our DaVinci business, procedures grew 19%, the installed base of DaVinci systems increased by 13% to almost 10,800 systems, and average system utilization increased by 4%. We continue to see robust growth for our ION platform, with procedures increasing 52%, the installed base up by 30% to approximately 950 systems, and average system utilization increasing by 14%. In the US, total procedures, da Vinci and ION, increased 18%, reflecting 16% growth in da Vinci procedures and 48% growth in ION procedures. DaVinci utilization in the U.S. increased 2% in Q3 compared to flat utilization in the first half of this year and 2% growth last year. Increased growth in U.S. DaVinci utilization reflected strong Q3 procedure growth and a higher mix of DaVinci 5 in the installed base where utilization is higher than XI. This reflects surge in interest in using our latest technology and efficiency gains from DaVinci 5's higher levels of surgeon autonomy and integration. As one example, in quarter three, almost 90% of DaVinci 5 procedures used our integrated insufflation technology. Outside the U.S., total procedures DaVinci and ION grew 25%, driven by 24% growth in DaVinci procedures and a quadrupling of ion procedures from a small base. OUS procedure growth reflected an approximate one percentage point benefit as a result of the timing of certain local holidays. DaVinci procedure growth in OUS markets included strong results in India, Canada, Korea, Taiwan, and Brazil, and solid growth in China, the UK, Italy, and France. Procedure growth in Japan was a little lower than our expectations, reflecting lower capital placements over the last several quarters. Globally, we continue to see strong procedure growth for SP at 91% for Q3, with strength in Korea and earlier stage growth in Europe and Japan. In total, for our OUS markets, we saw accretive da Vinci procedure growth across benign general surgery up 39%, colorectal up 28%, hysterectomy, which grew 27%, and thoracic procedures, which increased 26%. Combined, those categories are approximately 40% of OUS da Vinci procedures. Average system utilization in OUS markets combined grew 8% in Q3 as compared to 6% in the first half of this year and 4% growth in 2024. Accelerating utilization in Q3 is driven by strong multi-specialty procedure growth in India, Korea, Taiwan, and distributor markets, and customers in countries with capital constraints driving increasing use of the existing installed base. As of Q3, aggregate average system utilization in OUS markets is approximately 20% below that of systems in the US. As a result of our clinical performance, total INA revenue in quarter three grew 20% to $1.5 billion, consistent with overall procedure growth. DaVinci INA revenue per procedure was approximately $1,800, flat with last quarter and last year. On a year-over-year basis, we saw downward pressure from lower bariatrics procedures and higher cholecystectomy procedures, offset by higher SP procedures and da Vinci 5 specific INA. For our ion platform, INA revenue per procedure was approximately $2,200, relatively consistent with prior periods. Turning to capital performance and starting with our da Vinci business, we placed 427 da Vinci systems in quarter three, a 13% increase from the 379 systems placed in the same quarter last year. 240 of the 427 placements were DaVinci 5, including 12 in OUS markets following recent clearances in Japan and Europe. The installed base of DaVinci 5 is now 929 systems. In the U.S., we have at least one DaVinci 5 system in 18 of the largest 20 IDNs. And of hospitals that have three or more multiple systems, 21 of those hospitals have fully standardized 2 da Vinci 5. We saw 141 trading transactions in Q3, up from 38 a year ago, primarily driven by US customers upgrading 2 da Vinci 5. Some customers are shifting budgets to upgrades, partly with the intention of taking advantage of the efficiency potential of da Vinci 5. We are also actively working with some customers to acquire DaVinci 5 and move their XIs to alternative sites within their network. In the US, we placed 263 systems, up from 219 last year, driven by demand for DaVinci 5. Outside the US, we placed 164 systems, compared to 160 last year. OUS placements included 63 systems in Europe, 16 in Japan, and 13 in China, compared to 65, 39, and 14, respectively, last year. We continue to see government budget challenges in Japan and the UK and a constrained and competitive marketplace in China. Performance in markets served by distributors continue to be relatively strong. In Q3, we placed 64 systems, compared to 52 systems last year. Q3 performance was driven by strength in Brazil and the Middle East. Within the 427 DaVinci placements, we placed 30 SP systems in the third quarter, higher than the 21 systems last year, driven primarily by OUS markets. For our ION platform, we placed 50 systems in the quarter compared to 58 systems last year. Q3 ION placements included nine systems in OUS markets. Lower ion placements in the US primarily reflects a joint focus with our customers on increasing utilization. As a function of our capital performance, quarter three systems revenue grew 33% to $590 million. For our da Vinci business, leasing represented 54% of da Vinci placements, as compared to 49% last quarter and 58% last year, driven primarily by customer mix. We continue to expect that rates of leasing will increase over time, primarily driven by OUS markets. DaVinci leasing revenue increased 33%, reflecting an 18% expansion of the install base under operating lease arrangements, and a 10% increase in lease revenue per system driven by a higher mix of DaVinci 5. The average selling price for purchased DaVinci systems was $1.6 million in Q3, as compared to $1.5 million last year, driven by a higher mix of DaVinci 5 and a higher mix of dual console systems, partially offset by higher trade-ins. Lease buyout revenue was $22 million, as compared to $30 million last quarter and $24 million last year. Quarter 3 service revenue increased 20% to $396 million, reflecting an increase of the DaVinci install base of 13% and the Ion install base of 30%. Service revenue per system for our DaVinci install base increased 5% year over year, primarily reflecting a higher mix of DaVinci 5 systems. Total revenue for the quarter was $2.51 billion, representing 23% growth over the prior year. On a constant currency basis, revenue growth was also 23%. Recurring revenue grew 21%, continuing to account for 85% of total revenue. Turning now to the rest of the P&L. Proforma gross margin for the quarter was 68%, down from 69.1% in Q3 of last year. The year-over-year decline reflects a 90 basis point impact from tariffs, higher facility costs, a greater mix of lower margin DaVinci 5 and Ion revenue, and higher service costs related to DaVinci 5, partially offset by cost reductions. Quarter 3 pro forma operating expenses increased 11% year-over-year, driven by higher headcount, increased facility costs, and higher R&D prototype expenses, partially offset by lower legal spending. We added approximately 340 employees during the quarter, primarily in our core commercial, engineering and manufacturing functions. As a reminder, we are planning to go direct in Italy, Spain and Portugal in the first half of next year. This will involve the transfer of approximately 250 employees. We expect to describe the impact of this in greater detail at our next earnings call. Pro forma other income was $93 million for the quarter, flat to the prior quarter, reflecting lower interest income offset by a lower FX impact from re-measurement of the balance sheet. Our pro forma effective tax rate for quarter three was 18.3%, lower than our expectations, reflecting the impact of the new US tax provisions for the treatment of R&D expenses, and a $16 million discrete benefit from the release of tax reserves associated with statute of limitation expiration. We are still evaluating potential impacts of U.S. tax reform for our 2026 tax rate. Performer net income for the third quarter was $867 million compared with $669 million last year. Performer earnings per share was $2.40 per share. Excluding the benefit to tax expense in Q3 from the US tax reform and release of tax reserve, pro forma EPS would have been $2.28 per share. Now turning to our GAAP results. GAAP net income for the quarter was $704 million, or $1.95 per share, compared to $565 million, or $1.56 per share in Q3 of last year. The differences between our pro forma and GAAP results are outlined and quantified on our website. We ended the quarter with $8.4 billion in cash and investments, down from $9.5 billion last quarter. In line with our capital allocation priorities, during the quarter we used $1.9 billion of cash to repurchase approximately 4 million of intuitive shares. The sequential reduction in cash and investments reflects the stock repurchases partially offset by strong free cash flow of $736 million. With that, I'll turn it over to Dan to discuss recent clinical publications and our updated outlook for 2025.

Thank you, Jamie. Turning to the clinical side of our business, I'd like to share with you data from several notable recent studies. In addition to the specific data highlighted on this call, we encourage you to consider the wide body of evidence detailing these topics and others. and published scientific studies over the years. Last month at the European Respiratory Society's annual conference, we saw continued growth in evidence describing the ion and the luminal systems impact in geographies outside the United States. At the conference, Dr. Carolyn Steinack from University Hospital Zurich in Switzerland presented an abstract of detailed results from an open-label randomized controlled trial that compared ion plus integrated mobile cone beam CT to conventional bronchoscopy. Conducted at University Hospital Zurich, this study compared outcomes from pulmonary nodule biopsies performed in 78 patients with 39 patients in each group. Median nodule size was just 11 millimeters in each group. Results demonstrated an increase in diagnostic yield between the two groups in excess of 60 percentage points. with the ION group at 84.6% and the conventional bronchoscopy group at 23.1%. Procedure times and complication rates in both groups were comparable. Additionally, in the same presentation, the group showed a center-wide increase in early stage cancer diagnosis after implementation of the integrated ION and mobile cone beam CT system with an increase of stage 1A non-small cell lung cancer diagnosis of approximately 30 percentage points. Dr. Stanak concluded, even with minimal training, ion robotic assisted bronchoscopy with integrated cone beam CT is a pivotal tool for effective early lung cancer diagnosis and a potential driver of a shift towards early stage diagnosis. On previous calls, we have shared published studies that describe the impact of force feedback technology across multiple specialties. In September, Dr. Peter Nertz from the Ohio State University, in collaboration with other thoracic surgeons and Intuitive, published Force in Robotic Thoracic Surgery, a One-Year Analysis of DaVinci 5 Force Feedback in the Journal of Robotic Surgery. To date, the inability for surgeons to feel force exerted in the operative field has been a meaningful limitation of robotic-assisted thoracic surgery. This study incorporated data from over 400 common thoracic procedures performed by 70 surgeons with DaVinci 5 and force feedback technology. The analysis showed that median instrument tip forces decreased stepwise based on force feedback sensitivity setting across all procedures. Moreover, there was a significant difference in the amount of time at peak force greater than 6.5 Newtons across force feedback settings, with a reduction of approximately 20% in peak force application when force feedback instruments were set to medium or high. The authors noted that this study provides clinical evidence that force feedback technology may help reduce force during robotic-assisted thoracic surgery and result in objectively gentler surgery. The first step in evaluating the impact of force feedback is to see an intraoperative difference in applied force. Here we are encouraged by early results across specialties on the value that we believe force feedback technology brings to patients and surgeons. The next step in evaluating the impact of force feedback is to assess whether changes in forces applied during surgery translate to the patient experience on measures like pain or other functional patient outcomes. These studies are underway, and we look forward to their publication and discussion in the coming quarters and years. I will now turn to our updated financial guidance for 2025, starting with DaVinci procedure growth. On our last call, we forecast full-year 2025 DaVinci procedure growth within a range of 15.5% and 17%. We are updating our 2025 DaVinci procedure growth guidance to be within a range of 17% and 17.5%. Turning to gross profit, on our last call, we forecast pro forma gross profit margin in 2025 to be within a range of 66% and 67% of revenue. Given Q3 results, which reflected greater leverage of fixed costs and benefits from cost reductions, as well as a lower expected tariff impact for the year, We are updating our estimate of pro forma gross margin to be within a range of 67 percent and 67.5 percent of revenue. Within that range, we now expect the impact of tariffs for the year to be 70 basis points plus or minus 10 basis points. We expect pro forma operating expense growth to be between 11 percent and 13 percent, which includes increased depreciation from new facilities and investments to drive our growth objectives. We estimate non-cash stock compensation expense to be between $785 million and $795 million. We forecast other income, which is comprised mostly of interest income, to total between $350 million and $360 million. We expect capital expenditures to range between $625 million and $675 million, which reflects planned facility construction activities. With regard to income tax, due primarily to the lower Q3 non-GAAP effective tax rate that Jamie described earlier, we now estimate our 2025 pro forma income tax rate to be between 21 percent and 22 percent. This concludes our prepared comments. As we open the line for questions, we ask that you please limit yourself to one or two questions.

Ladies and gentlemen, as a reminder, if you do have a question at this time, please press star 11 on your telephone. Our first question comes from the line of Robert Marcus from JP Morgan. Your question, please.

Oh, great. Congratulations on a great quarter here. Two for me. One, I'll start with procedures and then I have one on margins. 20% procedure volume growth was just a really impressive uptick year over year as well as quarter over quarter. I was hoping if you could talk to the trends you're seeing both U.S. and outside U.S. that are driving that. How sustainable is it? And how much do you think is attributed to the introduction of DaVinci 5?

Yeah, I'll take that first, Robbie. So if you look at U.S. DaVinci procedure growth, maybe just to frame it, In Q1, it was 13%, Q2, 14%, and then in Q3, 16%. So, obviously, that Q3 U.S. da Vinci procedure growth number was strong relative to recent trends. We saw strong growth in after-hours surgery and acute care and in a subset of the benign general surgery procedures that I think we've referenced in the past in cholecystectomy, appendectomy, And then there were a couple of categories that were a little above our expectation, also in benign general surgery, so hernia repair, a couple of the benign GYN procedures. We have had just anecdotally indications that there may have been, let's say, acceleration of procedures in July and August for elective procedures given all of the noise around Medicare funding and even ACA premium changes. We have looked at third-party data, which obviously lags. It's not clear that that's supported by the third-party data, so we don't have evidence to that effect. We've heard it from some customers, and we've heard other commentary to that effect, and so that may be in effect in terms of what's reflected in the Q3 U.S. strength. I'd just say in terms of OUS DaVinci procedure growth, As I said in the prepared remarks, there is about one percentage point benefit to the growth there relative to just the timing of holidays. There's a set of autumn festivals in Asia markets that last year occurred in September. In this year, they'll occur in October.

And Rob, you had mentioned DB5, you know, as we talked about, it was our intent to design DB5 to be easier to learn, easier to use, and support higher efficiencies. And, you know, the data that we're seeing from the customers who are adopting DaVinci 5, you know, it is supporting that design intent. And so they're, to the extent that customers are adopting DB5, then that too supports some of this utilization within the existing accounts.

Yeah, maybe as a reference point, Robbie, that was about 67,000 da Vinci 5 procedures done in Q3. That compares to 50,000 da Vinci 5 procedures done in Q2.

Great. And I mentioned margins for my second question, but I've actually changed my mind. I want to ask about refurbished XIs. And you mentioned how some of your customers were interested in upgrading and moving their XIs to new sites of care, and this is one area. I don't think many street models have XI refurbished units in them as of now. Maybe you could just speak to how you're thinking about the progress in 26 and beyond in terms of new channels, new countries, just how much Greenfield can refurbished XIs add, and where do you think there'll be you know, clients will be most interested. Thanks a lot.

Yeah, Robbie, maybe I can just speak from a portfolio perspective and then Jamie, you know, please fill in with any other color. And so, we, the trade-in cycle, the upgrade cycle that DaVinci 5 is catalyzing obviously gets us a number of XI systems coming back to intuitive. We're able to refurbish those and then offer those within our portfolio. And so, what I always think about in terms of satisfying or meeting our customers' needs is having a portfolio that spans a range of capability from X now to the refurbished XI up through DaVinci 5, and a range of financial instruments to help customers acquire those portfolios. And so the refurbished XI is going to be an important part of that, certainly for certain sites of care within the U.S. but also outside the U.S. And for those customers who are cost sensitive and trying to really look carefully at the economics of their programs and how they initiate a robust robotic assisted surgery program, we really think that the refurbished XI is an important component in that.

We've sold 20 refurbished XIs so far. Our regional leaders are excited to have both that and DaVinci 5 in the portfolio, and I think it provides some really nice segmentation for those customers that want to be early adopters of the latest technology and for those sites that are cost sensitive. And that includes all the way to the U.S. and maybe surgery centers. We have, I think, really nice flexibility in terms of what the pricing might be for a refurbished XI. We're not ready to kind of describe what the range of that might be because we're early, but I think it's giving our commercial team some really nice options.

Great. Congrats again. Appreciate the color. Thanks, Robbie. Thanks, Robbie.

Thank you. And our next question comes from the line of Travis Deed from B of A. Your question, please.

Hey, congrats on the good quarter. Maybe just a follow-up on that. You talked also about some of the XIs are being redeployed within the same hospitals to be used in alternative sites. I'm curious, when you see the hospital buy the DV5 and keep the older XI and redeploy it, what are you seeing in terms of utilization on that system, new categories getting opened up, is it tending to go into... you know, the ASC or just help us understand, you know, how that's working and how many hospitals are taking up on an opportunity?

You know, one, I appreciate the question. One of the dynamics that we do see when hospitals engage with DB5 and move XI to other sites of care, the nice thing is the systems are able or were designed to have access very consistent user interfaces. So those surgeons could work back and forth across those platforms. If it happens to be where the DV5 is in the flagship hospital and the XI was moved to an alternative side of care like an ASC, then it allows those surgeons to move back and forth in their care teams easily. There's not retraining or relearning to do. The other nice thing, as I think you know, is the inventory of instruments across Both XI and DP5 can largely be used interchangeably, and so that's another advantage that allows our customers to deploy these fleets as they need to suit what they're trying to get done, be it decanting their main OR into ambulatory environments or perhaps adjusting where they're trying to treat patients within their larger IDN. You know, we think that's a powerful component of the DV5 upgrade cycle that will allow our customers some flexibility in how they build out their fleets.

Great. And I have a follow-up. Jamie, do you have anything else to jump in?

No, we'll go from my side.

Okay. But I have a follow-up on, you mentioned, you know, new platforms recently and, you know, maybe opening up new disease states. Curious if we could elaborate on that. And, you know, cardio... is an area that you guys are clearly investing in. I'm curious what you see as the problems with the current standard of care and places you could kind of apply the Equine Triple Aim to cardio.

Sure, sure. That's kind of two separate components in there. So maybe starting with the cardiac side of things. And so we've talked about for a long time, cardiac surgeons have been using off of a very small base our current systems you know, X and Xi to perform cardiac surgery. And with the capabilities of DB5 around precision, motion control, integration of imaging, we think that those capabilities coupled with some new instrumentation that we need to develop, it really brings some differentiated capability to cardiac surgery. And so if you look within the cardiac surgery patient community, Many, many are served well with percutaneous approaches, but there's a subsegment of patients where surgery is the best option for them. And minimally invasive surgery, I think, with da Vinci is a better option for them. So we think that it's a meaningful segment of the market and that da Vinci 5 plus ongoing development with instruments and software and other areas can make a difference for cardiac surgeons and their patients. When you look at new platforms, here's the way that I think about it. So, if you say, what is Intuitive good at? I think we're really good at advanced robotic platforms that include precision motion control, integration of advanced imaging and other types of sensors, the precise control of complex, rigid, and flexible instrumentation the integration of digital tools in the emerging field of AI. And so you say, those are our core capabilities. Then I look out in the world and say, where are there health care problems to be solved where existing solutions aren't meeting the needs of physicians and their patients? And there are many. And where those two intersect, our capabilities plus an unmet need, I think that's where some magic can happen. And so that's where we're looking. And we believe we have some opportunities where those do intersect. We have ongoing R&D in those areas. And just look forward to updating you more in the future.

Great.

Can't wait to see some of the magic. Thanks a lot. Thank you. And our next question comes from the line of Larry Bejelson from Wells Fargo. Your question, please.

Thanks. Congrats on a great quarter. Excuse me. Thanks for taking the question. Just two for me, one on the U.S., one on margins. Dave or Jamie, how are you thinking about utilization in the U.S. going forward as DaVinci 5 becomes a higher percent of the install base? Could we continue to see it trend higher? And net placements have been down recently year over year. I think that's primarily because of a tough comp. last year, but how do you think about that metric? Some investors are focused on it, and I have one follow-up.

Yeah, I'm going to maybe zoom out for a second, Larry, and recognize the discussion on net placements that's been occurring. In terms of our approach, we're first focused on aligning with customers in ways where They need extra capacity for da Vinci because it brings patient benefit, patient value. And so we actually look first and foremost at procedure growth as our primary metric of success because obviously that reflects adoption and use of our technology for patients. So therefore we take a customer by customer approach in terms of how we engage with them on the capital side. And we're as happy to help them expand their installed base as a way to increase capacity as we are to do an upgrade, give them DaVinci 5, particularly in the context of what we see are opportunities to have efficiency benefits in DaVinci 5 that in effect also create a capacity expansion opportunity. And so you see that reflected in Q3 results now that we're in broad launch and that you have 900-plus systems in the field. And we think that whichever way we go, as long as it's in alignment with the customer, it's healthy for them and for us. And I think that's well illustrated in Q3 results. Now, in terms of the question, what will long-term US utilization growth be, I think we're focused more at the segments of customers than the US average, because I do think, as we've talked about in the past, There are likely some mixed dynamics, particularly as we look to capture benign procedures that are in community and rural hospitals that are going to have smaller programs. But think of larger institutions with a larger number of procedures utilizing DV5. We'd expect them to be able to drive improvements to utilization. Where that nets out to, I think we'll see, because it's so early with respect to the DV5 launch.

That's super helpful. Jamie, on margins, it looks like the implied gross margin in Q4 at the midpoint of the guidance range is slightly below 67%. So my questions on next year, just what are some of the puts and takes to consider? Is that kind of Q4 number a good starting point for next year for the gross margin or are there additional

know headwinds or tailwinds to to consider and any directional color and the impact of going direct in those three markets you called out net positive negative or just anything directional thank you yep i understand the question on gross margins for 26. larry we're going to wait till january to provide color on what the outlook is there with respect to going direct in italy spain portugal We continue to expect that to be slightly accretive to perform an EPS upon going direct, and that's really a function of you eliminate the margin of the distributor, and that gets partially offset by the team that we take on the transfers from them to us.

All right. Thanks so much, Jamie. Thank you. And our next question comes from the line of Rick Wise from Stifel. Your question, please.

Good afternoon, everybody. Thanks for another stellar quarter. I guess I'll start with, let me start with two softer areas that you talked about, Dave. The downward pressure on the bariatric side and China, you just described the environment as constrained and competitive. Maybe you could talk about both of these and when do we get past the When is bariatrics less of a drag? It seems like it's been going on for a while. We should be almost largely over that impact at some point. I don't know. Maybe you can share some thoughts there. And China, how do we think about the outlook from here? And then I have one follow-up. Thank you.

Hey, Rick. It's Dan. On bariatrics domestically, we haven't seen a change in trajectory. I think in Q3, domestic bariatric procedures continue to decline at high single digits. So it's roughly six quarters of down mid single digits to down high single digits. I think in total domestic bariatrics is a little less than 3% of overall da Vinci procedures.

Maybe I'll pass it to Jamie on the China question, but maybe just on bariatrics for a second. Um, Dave and I actually met with about 25 bariatric surgeons earlier this week. We met with another group about that size about six weeks ago and obviously had an exchange here about the impact of GOP-1s and what they're seeing in their practices. They are not yet at a position where they feel like they can predict when the declines are going to end. They're not seeing the dynamics in the practice that gives them the confidence to make that prediction. So honestly, it feels like we're still in this realm where You have some patients that have been on GLP-1s and are starting to come off because of costs and side effects, but that's offset by new patients starting on kind of the regimen of the drugs. But none of the surgeons we engage with are yet at a point where they're predicting a change in trajectory. On China, and Dave and I were recently in China several weeks ago, I'd say the environment is quite consistent from what we've seen over the last year or so in terms of tenders are slow, competition is pretty healthy. I think there's generally a preference technology-wise for da Vinci, and I think that there are many local provinces that want their local player to win. And so we're just navigating and executing within that environment. Price pressure on the capital side and on the INA side continue.

Gotcha. And just as a follow-up question, I was curious, to what extent is Hub, what's its role in driving some of this da Vinci uptake? When I talk to doctors, I'm just continually struck by their interest in and what sounds like the potential utilization of Hub features. Just this quarter, I saw that you got approval for system software modifications to include something called Surgeon Cloud Accounts. My question is, can you talk about what are we here in the Hub story, the Hub evolution, the potential to enhance DaVinci 5 performance users? Just any color and direction you could give us would be great. Thank you so much.

Sure, sure. Let me take that question. And so, you know, I might just reframe it a bit from Hub, but just to kind of the digital foundation of DaVinci 5 that we've talked about. You know, when we launched the system, we were talking about its 10,000 times increased compute power. And the Hub is a part of that story. So we now have the integrated Hub hardware system. that is foundational to collecting some of the video data and getting it processed by Intuitive and then returned back to customers through Case Insights, kind of said simply. And so this digital promise, if you will, of how it's going to impact surgery through DaVinci Five and more You have to remember, it has layers. It's gonna be a progressive kind of growth over time, and it starts with really good data, and we've talked about that before. So different sources of data, one of which is video data, and that's where HUB is integral in collecting that video data and getting it to intuitive so it can be segmented and have other measures and analyses performed. And there are all sorts of other kinds of data, including kinematic data, and force data, electronic medical record data for certain customers when we have an agreement signed. So you take those data and then you can start analyzing the data using these powerful tools that we have increasingly available to us with AI and machine learning, and you start drawing meaningful insights from those data. And so that's that progression, ultimately leading, we think, to augmented dexterity or intraoperative guidance to really bring to life, you know, how do we help surgeons and care teams make better decisions, different decisions to optimize outcomes, economics, or other measures of surgery. And so that is that progression. And HUB, your question specifically, is really an important part of that because of its integration around video. But overall, we're excited about this area and what it can mean to progress in the quintupling. And so DaVinci Five's that foundational platform that will bring aspects of our AI, ML, digital world to life and impact surgery.

Thanks so much, Dave.

Thank you. And our next question comes from the line of Patrick Wood from Morgan Stanley. Your question, please.

Beautiful. Thank you so much. I'll keep it to one in the interest of time. I'd love to do more on the alternative side of care side of things. And I know you guys have talked in the past about, you know, excise going into the ASC. I guess my question is, how much do you think the original capital cost is a constraint versus, you know, Medicare coverage and commercial rates relative to, you know, INA instrumentation costs? And then there's also like that sterilization challenge in there. So I guess the crux of the question is, how much do you guys think you need to continue to bend the cost curve down for INA to make it work in the ASC? And do you feel like the sterilization challenge is small enough that it kind of doesn't really matter and you don't need to develop like disposable instrumentation or something like that?

Thanks.

Yeah, I would just say maybe our experience so far in the U.S. is By some way, the greater constraint is on the capital side. A number of the systems we have in ASCs have been leased. The majority of systems in US ASCs are XI, but we do have a number of Xs just obviously because of the lower price point. While it's a relatively small installed base, procedure growth in ASCs in the U.S. is quite a bit accretive to what we see in terms of overall U.S. procedure growth. I think that with XIR, ASCs are going to be an area of increased interest and focus for us and obviously we're going to look carefully at the economics. It's fair to say that as we stand today, the reimbursement in an ASC is a fraction of the reimbursement in a HOPT, and so that creates a barrier, particularly for ASCs owned by IDNs. Have not had a lot of pushback on INA prices at this point in ASCs, but I think from a strategic perspective, within the quintuple A, we look to lower total cost to treat, and I think therefore it's a topic of strategic interest to us.

It is, and to your last kind of part of your question around sterilization and INA, my experience in the ASCs that I visited and talking with our teams is that sterilization hasn't been an impediment to the overall program and the consideration of placing a robotic system there. And so I don't believe that single-use INA is a requirement to go into the ASC environment.

Super clear. Thanks for taking the question, guys.

Thank you. And our next question comes from the line of David Roman from Goldman Sachs. Your question, please.

Good afternoon. Thank you for taking the question. I had one on haptics and a follow-up on ION slash SP. Maybe starting on the haptics and force feedback side, I think a little over a year ago when you launched DV5, you got the question on an earnings call, what are the specific procedure categories where you see DV5 most applicable? And I think your response was something to the effect of DV5 is about making robotic surgery ubiquitous. Today you're talking about, I think, expansion of procedures into benign general surgery, and I don't know if that's a reflection of that strategy of making robotic surgery ubiquitous, but maybe you should talk to how you're seeing that unfold and where force feedback fits into that trajectory.

Sure. Let me start with the force feedback side. So you heard from Dan a little bit about the journey of force feedback and what it's going to take. Starting with instruments that are robust enough to be used on a daily basis and getting sterilized and getting to scale for our customers. And we're well on our way there. And then what we've seen is data, and Dan did talk about this, data that shows that through the use of force feedback, you can see lower forces in surgery. And so now we have to connect that to outcomes and see whether or not that lower force is actually leading to either improved outcomes or speeding up of learning. And so that is where we are today. We've seen some early data that shows it's very interesting and I think very aligned to the hypothesis of force feedback, which says if we can actually apply lower forces, we do expect that to have an improvement on outcomes. And so that has to happen procedure by procedure, because as you look inside of each procedure, it's likely that those forces will impact outcomes in a different way. For example, with prostatectomy, you might be looking at functional outcomes as a result of how much force is applied to nerves. If you're in nephrectomies or other colorectal procedures, you might be looking at recovery of bowel function as a result of how much force is applied to the bowel during those procedures. And so each one of those will happen in varying ways. And I think as that evidence emerges, that's the catalyst. That's the catalyst to broader adoption and how you see now force feedback impact aspects of the quintuple aim at scale. And so that just goes to, I think, the overall thesis of robotic-assisted surgery improving aspects of the quintuple aim. We've seen that throughout our history, and now with the addition of force feedback, that's just one more piece of the puzzle here.

That's very helpful. And then maybe quickly, just I'll follow up on ION and SP. I think you talked about a little over 50% procedure growth in ION, and I think I heard 91% in SP. You've had a number of SP clearances over the past six months or so. Maybe just help us contextualize performance in those segments and how we should think about them on a go-forward basis.

Here's the way I think about SP. It is doing great. We're seeing a growing body of evidence that there's patient value beyond Cosmesis. You're right, growth in SP procedures at 92% is strong. Utilization in Korea outpaces that of XI. And our team is focused on continuing to deliver software and instruments and other enhancements to the platform to continue to increase its capability. Another area we're working hard in, in the US in particular, are clearances. And so we know that a broad set of clearances is important for the use of Singapore. You see that in Korea. We see that elsewhere. And so in the US, we are on the pathway to continue to add more clearances to SP, and that will be a part of how that grows and continues to grow in the future.

Thank you. And our next question comes from the line of Adam Meter from Piper Sandler. Your question, please.

Hi, good afternoon. Congrats on the quarter and thank you for squeezing me in here. I will keep it to one. I wanted to ask about the DB5 OUS launch in Europe and Japan. And I was wondering if you could share just a little bit more kind of early feedback that you've gathered to date. Help us better understand the rollout strategy there. And, you know, any broad color around the pace of DV5 placements outside the U.S. and subsequent quarters into 2026 would be much appreciated. Thank you for taking the question.

Yeah. I'd just say it's relatively early. We take a local approach to each of those launches. Obviously, we have a pipeline in Europe and in Japan. You see the larger institutions and those institutions, the want to be early adopters and want to get hold of the latest technology to be those that are most interested. There is a little bit more of a segmentation discussion in terms of some incremental cost sensitivity to the DaVinci 5 pricing relative to, say, the US market. I think we have a healthy pipeline in both markets, but there's work to be done to have customers work through the evaluation process.

Okay, that was our last question. Thank you for all the interesting questions. In closing, we continue to believe there's a substantial and durable opportunity to fundamentally improve surgery and acute interventions. Our teams continue to work closely with hospitals, physicians, and care teams in pursuit of what our customers have termed the quintuple aim. Better and more predictable patient outcomes, better experiences for patients, better experiences for their care teams, lower total cost of care, and finally, increased access to care. We believe value creation in surgery and acute care is foundationally human. It flows from respect for and understanding of patients and care teams and their needs and their environment. At Intuitive, we envision a future of care that is less invasive and profoundly better, where diseases are identified earlier and treated quickly, so patients can get back to what matters most. Thank you again for your support on this extraordinary journey. We look forward to talking with you again in three months.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.