Intuitive Surgical Earnings: da Vinci Xi Continues To Drive Sales, Procedural Growth

-9.54%
Downside
393
Market
355
Trefis
ISRG: Intuitive Surgical logo
ISRG
Intuitive Surgical

Intuitive Surgical (NASDAQ:ISRG) announced first quarter earnings of $3.57 per share on Tuesday, April 21, reporting year-over-year increases for da Vinci unit sales, total revenue, and net income. Increasing acceptance of the da Vinci Xi system, which received FDA approval in 2014, primarily drove the increase in unit sales. Total revenue was up 15% year over year to $532 million, on account of growth across divisions – Instruments and Accessories, Systems and Services. [1]

Quarterly revenue spiked from the previous quarter due to sales of the new da Vinci Xi model and a 13% rise in total procedures. For the full year 2014, procedure volumes grew by 13% y-o-y, driven primarily by general surgery procedures in the U.S. and urologic procedures outside of the U.S.

On the cost side, the company continues to face pressure on its gross margins. In Q1 2015, the gross margin declined to 65.6% compared to 70.2% in Q1 2014. This decline can be attributed to a higher proportion of manufacturing and service costs due to growing sales of new systems. We expect gross margins to decline further in the near term due to the company’s focus on new products such as the da Vinci Xi and da Vinci Sp. However, over the longer term we expect margins to bounce back.

Relevant Articles
  1. Should You Pick Intuitive Surgical Stock At $375 After An Upbeat Q4?
  2. Is Intuitive Surgical Stock A Pick After A 9% Fall In A Month Amid Mixed Q3?
  3. Procedure Volume Growth To Drive Intuitive Surgical’s Q3
  4. With 2x Potential Returns Is DexCom A Better Pick Over Intuitive Surgical?
  5. Here’s What To Expect From Intuitive Surgical’s Q2
  6. Should You Buy Intuitive Surgical Stock Over MDT?

We currently have a price estimate of $479 for Intuitive Surgical, which is about 15% below the market price.

See our full analysis for Intuitive Surgical

da Vinci Xi Drives System Sales

Intuitive Surgical received FDA clearance for two new surgical systems last year – the da Vinci Xi and da Vinci Sp. The da Vinci Xi system is aimed at multi-port procedures with better mobility and ease-of-use. It also boasts a better imaging system than previous models.

In the first quarter of 2015, the da Vinci Xi model dominated system sales figures. Of the total 99 systems shipped, 76% were the new Xi model. 63 of the 75 da Vinci Xi units sold in the quarter were sold in the U.S., compared to 45 systems sold in in the U.S. in the first quarter of 2014. The rise in sales was a result of the new system receiving FDA approval in April 2014. The trend was reversed in the international market, where 36 systems were sold in the first quarter compared to 42 systems sold in the first quarter of 2014. The reduction is partly due to Japanese customers holding off purchases in anticipation of approval of the new da Vinci Xi model. With the company receiving clearance at the end of March to sell the da Vinci Xi Surgical System in Japan, we expect international sales to gain momentum. [2]

Procedure Volumes Grow Both Domestically and Internationally

Intuitive Surgical reported a 13% y-o-y increase in procedure volumes in Q1, primarily driven by a rise in general surgery procedures in the U.S. and urologic procedures internationally. More procedures generally lead to greater instruments and accessories sales, due to greater demand and a shorter replacement cycle.

Procedural volume grew 22% year-over-year in the international market, compared to an 11% year-over-year increase in the U.S. Prostatectomy procedures have been growing consistently since the second half of 2014, while U.S. gynecology procedures grew at a tepid rate. General surgery procedures in the U.S. – driven by colorectal and hernia surgery – remained strong, with only cholecystectomies declining moderately. During the quarter, the company specifically focused on the efficacy of the da Vinci system in hernia operations, a trend that is likely to continue in the near future. In the international market, Europe added 18 systems – compared to 14 in the first quarter of 2014 – while China added eight systems in the quarter.

We expect procedures to increase going forward, as the company focuses on promoting the use of the da Vinci systems in gynecology and urology procedures worldwide. The total number of procedures performed in 2014 was 570,000. The company previously estimated that procedures would grow 7-10% in 2015. With the increasing adoption of the da Vinci Xi system worldwide, growing U.S. general surgery procedures and worldwide urologic procedures, the company changed its estimates to 8-11% for 2015.

View Interactive Institutional Research (Powered by Trefis):

Global Large CapU.S. Mid & Small CapEuropean Large & Mid Cap
More Trefis Research

 

Notes:
  1. Form 8-K, Press Release []
  2. Intuitive’s (ISRG) CEO Gary Guthart on Q1 2015 Results – Earnings Call Transcript, Seeking Alpha []