Intuitive (ISRG) Q2 2025 Earnings Transcript

Image source: The Motley Fool

ETCALL PARTICIPANTSChief Executive Officer — Dave RosaChief Financial Officer — Jamie SamathChief Medical Officer — Dan ConnallyNeed a quote from one of our analysts. [ tected] RISKSJamie Samath stated, " forma gross margin was 67 (noteworthy indeed)

Moreover, 9% in Q2 2025, down from 70% in Q2 2024. " attributing the decline to "higher facilities costs," "a greater mix of lower-margin ION and da Vinci five revenue," and "higher service costs related to da Vinci five" (non-GAAP) in Q2 2025

Additionally, At the same time, Management explicitly noted, "Our capital performance outside the US continues to be impacted by financial and budgetary pressures in Japan, China, and Europe. " attributing these challenges to government budget deficits and uncertainties over the trade environment

Nevertheless, Jamie Samath highlighted, "the impact of tariffs for 2025 is expected to be apximately 100 basis points, plus or minus 20 basis points, given the current landscape. " with the caveat, "future tariff rates could have a significant incremental impact on our cost of sales (which is quite significant). "The company acknowledged uncertainty regarding Medicaid coverage in the US, saying "uncertainty remains whether some patients may lose coverage," which could create financial challenges for hospitals and potentially affect capital or operational budgets

Margins and Earnings: forma gross margin was 67

R&D and Digital Initiatives: Force back and case insights features on da Vinci five generated early evidence of positive impact; digital collaboration and telepresence developments were highlighted, with telesurgery demonstration performed between Atlanta and Strasbourg

However, SUMMARYManagement emphasized a measured international rollout of da Vinci five in Europe and Japan, noting early adopter interest but also regulatory and duct feature timing constraints

However, Capital spending plans include a newly opened facility in Bulgaria and planned expansion in Germany and Mexico to support industrial-scale revenue growth

Nevertheless, Company executives directly addressed marketplace concerns competition from third-party remanufactured instruments, highlighting safety, performance, and supply chain reliability as differentiators (which is quite significant)

Market analysis shows company acknowledged and potentially increasing tariff impacts, as well as the uncertain effects of US Medicaid coverage changes on hospital capital spending decisions

Dan Connally cited recently published clinical evidence from the REAL study, which found robotic-assisted surgery showed a "55% lower risk of local regional recurrence at three years compared to laparoscopy" for middle or low rectal cancer

Jamie Samath stated, "recently, average system utilization on da Vinci five surpassed Xi (fascinating analysis)

Furthermore, " but cautioned further robust data is needed to confirm long-term efficiency imvements from platform upgrades (which is quite significant)

New digital features and future software enhancements for the da Vinci five are planned, with most vided at no additional charge, potentially enhancing system value and driving upgrade decisions

Moreover, Capital allocation priorities remain: organic investment, targeted acquisitions, and opportunistic repurchases, with continued review each quarter "the volatility that's in the environment in part because of the trade environment

Nevertheless, Moreover, "INDUSTRY GLOSSARYSP (Single Port): An Intuitive Surgical, Inc

Robotic system enabling minimally invasive surgery through a single patient entry site, in this volatile climate

ION: Intuitive Surgical, Inc, considering recent developments

Moreover, 's robotic bronchoscopy platform for minimally invasive lung biopsy cedures (an important development)

Case Insights: The company's AI-enabled analytics tool that aggregates cedural data from da Vinci platforms to optimize clinical outcomes and training

On the other hand, Instrument and Accessory (INA) Revenue: Per-cedure sales derived from consumable instruments and accessories used with installed surgical systems

Moreover, Meanwhile, Quintuple Aim: A healthcare framework emphasizing imved patient outcomes, patient experience, care team experience, lower total cost, and expanded access

Furthermore, Full Conference Call TranscriptDave will review and operational highlights, Jamie will vide a review of our financial results and cedure highlights

And finally, we will host a question and answer session

Meanwhile, With that, I will turn it over to Dave (fascinating analysis) (an important development)

Nevertheless, Good afternoon, and thank you for joining us today

Before we ceed, I'd to take a moment Dave Rosa: to recognize and thank Gary Guthart, in this volatile climate

As you know, after more than fifteen years as Intuitive Surgical, Inc

At the same time, 's CEO, Gary transitioned to executive chair of the board earlier this month

This analysis suggests that 's been a privilege to work alongside Gary for nearly thirty years, considering recent developments

Furthermore, On behalf of the patients, surgeons, and care teams we support, our employees, and so many other stakeholders, we thank Gary for his leadership at Intuitive Surgical, Inc. , and his contributions to advancing minimally invasive care

Moreover, I am grateful for the strong foundation he's created, and honored to serve as Intuitive Surgical, Inc

I'm excited to lead the company forward as we continue to advance the Quintuple Aim and der value for our stakeholders

Moving to the, our financial metrics were strong in the second quarter, with solid cedure growth and capital placements despite macro challenges in certain international

On the other hand, Our teams achieved significant milestones across our ecosystem of ducts and services, while navigating dynamic market conditions globally (something worth watching)

Our duct operations teams continue to build capacity and der for our customers, while optimizing duction costs within our existing manufacturing and supply chain foot

Our re and development efforts continue to build momentum in the quarter, given the current landscape

Our newest platform, da Vinci five, is in broad launch in the United States, and received ances in Europe and Japan where we will begin measured launches

On the other hand, We're pleased with customer back and adoption of our newer platforms, and remain committed to supporting high-quality, minimally invasive care with a comprehensive and impactful duct portfolio (remarkable data)

Nevertheless, Benign general surgery led US cedure growth with a strong contribution from after-hours cedures, while international growth was led by non-urology cedures

At the same time, Regional performance highlights included strength in India, Korea, and distribution

Conversely, Jamie will vide further details on cedure dynamics later in the call

Capital placements were strong in the US, while macro challenges in Japan, China, and Europe continued

Moreover, We also placed 54 ION systems in the quarter, considering recent developments

Duct margins and operating expenses were slightly favorable to our expectations

Turning to our multiport, da Vinci V has been an important addition to our robotic surgical system portfolio

We're pleased to offer da Vinci five broadly in the United States (this bears monitoring)

Commercialization in Europe and Japan will be measured, as we work through additional ances to fully enable the da Vinci five ecosystem (remarkable data) (noteworthy indeed)

However, Additionally, Additionally, we received a cedure ance for tracheobronchoplasty, a surgical treatment for a collapsed trachea and main bronchi during normal breathing

With respect to our digital ecosystem, customers continue to collect and publish data force back and other aspects of da Vinci five, through their use of case insights

Dan will highlight some of this data later in the call

We believe these telecollaboration capabilities can advance clinician training, enhance patient care, and optimize care dery (fascinating analysis) (an important development)

Conversely, Intuitive Telepresence with our hub software will enable customers to use on-demand scheduling connecting easily with a known group of peers, similar to the favorites screen on your phone (noteworthy indeed), given current economic conditions

Last week, at the Society of Robotic Surgery Conference, doctor Doug Stoddard, director of surgery and robotics at Christus Health, and doctor Andrea Pakula, medical director of robotic surgery at Adventist Health, performed a telesurgery demonstration between Atlanta and Strasbourg on an advanced tissue model using da Vinci five, including force back

While the long-term opportunity for telesurgery is potentially significant, we recognize that achieving safe, consistent adoption will require robust cybersecurity and privacy infrastructure, new workflows at hospitals, revised medical and legal policies, and appriate economics

As with our apach to innovation broadly, our work here is focused on applying our experience and expertise to der safe, meaningful, grounded solutions that address real-world healthcare challenges

Additionally, We're still early in our European launch and are pleased with gress to date

Additionally, Our priorities for SP in the near term include additional indications in the US, expansion in international, enhancing core capability, and imving duct costs (remarkable data), given current economic conditions

We recently sold our first systems in Australia and Korea, and performed our first commercial cedures

Our priorities for ION in the near term are supporting utilization growth in the US, expansion in international, enhancing overall cedure workflow, and imving duct costs (noteworthy indeed)

Over recent years, we have highlighted our investments in and focus on dering for our customers across all aspects of our ecosystem, at industrial scale

Customers around the globe rely on Intuitive Surgical, Inc, given current economic conditions

As has been the case throughout our thirty-year history, we will continue to innovate across our instrument portfolio as illustrated by the introduction of our force back and ext use instrumentation

We're aware that third parties have sought to offer ducts or services to healthcare viders that would modify some of our instruments to extend their use (something worth watching)

On the other hand, As customers consider remanufactured instruments from third-party suppliers, we expect key areas such as safety, performance, quality, reliability, supply continuity, and pricing will be carefully evaluated and compared, considering recent developments

Our strong belief is that high-quality instruments with consistent performance, broad operational support, and predictable supply chains vide the greatest value to our customers

Additionally, First, focusing on the full launch of da Vinci five, its regional ances and -on feature releases (noteworthy indeed)

Second, we'll pursue increased adoption for our focused cedures by country through training, commercial activities, and market access efforts

Moreover, Third, we'll drive continued gress in building industrial scale, duct quality, and manufacturing optimization

And finally, we'll focus on excellence and availability of our digital tools

Furthermore, Our core es have momentum, and our teams are focused on the significant long-term opportunity to imve the Quintuple Aim through our connected ecosystem

At the same time, We're well-positioned operationally and financially to execute against our priorities (noteworthy indeed)

Additionally, I'll now tu.