A Look At Intuitive Surgical’s Services Business

Intuitive Surgical (NASDAQ:ISRG) generates its revenues primarily from da Vinci products and accessories sales, and services, which includes full-time support to its customers for installation, repairs, and maintenance. It also includes training surgeons to use the complex da Vinci Surgical Systems. The company enters into service contracts with their customers at the time of sale. The segment revenues have grown from $343 million in 2012, to $582 million in 2017. We expect steady growth in the segment revenues, primarily led by higher da Vinci shipments in the near term. We have created an interactive dashboard analysis ~ A Look At Intuitive Surgical’s Services Business. You can adjust the revenue drivers to see the impact on overall revenues and the company’s earnings and share price estimate.

Expect High Single Digit Revenue Growth For Services Segment

We expect Intuitive Surgical’s services revenues to grow in high single digits in the coming years. Services revenues are dependent on two factors – installed base, and average revenue per unit. While we don’t expect any significant growth in the pricing, we expect the company’s installed base to grow, led by higher shipments of da Vinci systems. The company’s installed base has increased consistently over the last few years due to increasing adoption of robotic surgery for a variety of procedures. The installed base figure stood at 4,409 in 2017 and we forecast it to be around 8,000 by the end of our forecast period. We expect the company to continue to increase its annual unit sales of da Vinci Surgical systems. However, the increase in the installed base will lag the number of annual units sold due to certain number of systems being traded in for newer versions. The overall demand for da Vinci products will be dependent on expansion of procedures. For instance, last month, the company received FDA approval for da Vinci Single Port platform for a urological surgical procedure. The company stated that it will likely seek regulatory clearances for transoral, transanal, and extraperitoneal applications, thereby widening the scope of its Single Port platform. Higher product sales will also drive growth for the Services segment.

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