INTUITIVE SURGICAL INC

Previous wording

Management’s discussion and analysis of financial condition as of June 30, 2024, and results of operations for the three and six months ended June 30, 2024, and 2023, should be read in conjunction with management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

Management’s discussion and analysis of financial condition as of September 30, 2024, and results of operations for the three and nine months ended September 30, 2024, and 2023, should be read in conjunction with management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Previous wording

This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements relate to expectations concerning matters that are not historical facts. Statements using words such as “estimates,” “projects,” “believes,” “anticipates,” “plans,” “expects,” “intends,” “may,” “will,” “could,” “should,” “would,” “targeted,” and similar words and expressions are intended to identify forward-looking statements. These forward-looking statements include, but are not limited to, statements related to future results of operations, future financial condition, the expected impacts of COVID-19 on our business, financial condition, and results of operations, our financing plans and future capital requirements, our potential tax assets or liabilities, and statements based on current expectations, estimates, forecasts, and projections about the economies and geographic markets in which we operate and our beliefs and assumptions regarding these economies and markets. These forward-looking statements are necessarily estimates reflecting the judgment of our management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. These forward-looking statements should be considered in light of various important factors, including, but not limited to, the following: the overall macroeconomic environment, which may impact customer spending and our costs, including the levels of inflation and interest rates; the conflict in Ukraine; conflicts in the Middle East, including Israel; disruption to our supply chain, including difficulties in obtaining a sufficient supply of materials; curtailed or delayed capital spending by hospitals; the impact of global and regional economic and credit market conditions on healthcare spending; the risk that COVID-19 could lead to material delays and cancellations of, or reduced demand for, procedures; delays in obtaining new product approvals, clearances, or certifications from the United States (“U.S.”) Food and Drug Administration (“FDA”), comparable regulatory authorities, or notified bodies; the risk of our inability to comply with complex FDA and other regulations, which may result in significant enforcement actions; regulatory approvals, clearances, certifications, and restrictions or any dispute that may occur with any regulatory body; healthcare reform legislation in the U.S. and its impact on hospital spending, reimbursement, and fees levied on certain medical device revenues; changes in hospital admissions and actions by payers to limit or manage surgical procedures; the timing and success of product development and customer acceptance of developed products; the results of any collaborations, in-licensing arrangements, joint ventures, strategic alliances, or partnerships, i…

Excerpt shortened here; the source contains the full paragraph.

Current wording

This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements relate to expectations concerning matters that are not historical facts. Statements using words such as “estimates,” “projects,” “believes,” “anticipates,” “plans,” “expects,” “intends,” “may,” “will,” “could,” “should,” “would,” “targeted,” and similar words and expressions are intended to identify forward-looking statements. These forward-looking statements include, but are not limited to, statements related to future results of operations, future financial condition, the expected impacts of COVID-19 on our business, financial condition, and results of operations, our financing plans and future capital requirements, our potential tax assets or liabilities, and statements based on current expectations, estimates, forecasts, and projections about the economies and geographic markets in which we operate and our beliefs and assumptions regarding these economies and markets. These forward-looking statements are necessarily estimates reflecting the judgment of our management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. These forward-looking statements should be considered in light of various important factors, including, but not limited to, the following: the overall macroeconomic environment, which may impact customer spending and our costs, including the levels of inflation and interest rates; the conflict in Ukraine; conflicts in the Middle East, including Israel and Iran; disruption to our supply chain, including difficulties in obtaining a sufficient supply of materials; curtailed or delayed capital spending by hospitals; the impact of global and regional economic and credit market conditions on healthcare spending; delays in obtaining new product approvals, clearances, or certifications from the United States (“U.S.”) Food and Drug Administration (“FDA”), comparable regulatory authorities, or notified bodies; the risk of our inability to comply with complex FDA and other regulations, which may result in significant enforcement actions; regulatory approvals, clearances, certifications, and restrictions or any dispute that may occur with any regulatory body; healthcare reform legislation in the U.S. and its impact on hospital spending, reimbursement, and fees levied on certain medical device revenues; changes in hospital admissions and actions by payers to limit or manage surgical procedures; the timing and success of product development and customer acceptance of developed products; the results of any collaborations, in-licensing arrangements, joint ventures, strategic alliances, or partnerships, including the joint venture with Shanghai Fosun Pharmaceutical (Group) Co., Ltd.; our completion of an…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Intuitive®, Intuitive Surgical®, da Vinci®, da Vinci S®, da Vinci Si®, da Vinci X®, da Vinci Xi®, da Vinci 5™, da Vinci SP®, Advanced Insights Suite™, Case Insights™, EndoWrist®, Firefly®, Intuitive Learning™, Intuitive Hub™, Insights Engine™, Ion®, My Intuitive™, SimNow®, and SureForm® are trademarks or registered trademarks of the Company.

Current wording

Intuitive®, Intuitive Surgical®, da Vinci®, da Vinci S®, da Vinci Si®, da Vinci X®, da Vinci Xi®, da Vinci 5™, da Vinci SP®, Advanced Insights Suite™, Case Insights™, EndoWrist®, Firefly®, Insights Engine™, Intuitive Hub™, Intuitive Learning™, Ion®, My Intuitive™, SimNow®, and SureForm® are trademarks or registered trademarks of the Company.

Previous wording

We address our customers’ needs by sharing their goals reflected in the quintuple aim. First, we focus on improving patient outcomes through an ecosystem of advanced robotic systems, instruments and accessories, progressive technology learning pathways, and comprehensive support and program assistance services. Second, we seek to improve the patient experience by minimizing disruption to lives and creating greater predictability for the treatment experience. Third, we seek to improve care team satisfaction by creating products and services that are dependable, smart, and optimized for the care environment in which they are used. Fourth, we aim to expand access to high-quality minimally invasive care and effectively address implementation barriers that are the causes of heath inequities and are currently developing our plans in this area. Finally, we seek to lower the total cost to treat per patient episode when compared with existing treatment alternatives, providing a return on investment for hospitals and healthcare systems and value for payers.

Current wording

We address our customers’ needs by sharing their goals reflected in the quintuple aim. First, we aim to improve patient outcomes through an ecosystem of advanced robotic systems, instruments and accessories, progressive technology learning pathways, and comprehensive support and program assistance services. Second, we aim to improve the patient experience by minimizing disruption to lives and creating greater predictability during procedures. Third, we aim to improve care team satisfaction by creating products and services that are dependable, smart, and optimized for the care environment in which they are used. Fourth, we aim to expand access to high-quality minimally invasive care and effectively address implementation barriers that are the causes of heath inequities. Finally, we aim to lower the total cost to treat per patient episode using our technology when compared with existing treatment alternatives, providing a return on investment for hospitals and healthcare systems and value for payers.

Previous wording

Our da Vinci products fall into five broad categories: da Vinci surgical systems, da Vinci instruments and accessories, da Vinci stapling, da Vinci energy, and da Vinci vision, including Firefly fluorescence imaging systems and da Vinci endoscopes. We also provide a comprehensive suite of systems, learning, and services offerings. Digitally enabled for nearly three decades, these three offerings aim to decrease variability by providing dependable, consistent functionality and an integrated user experience. Our systems category includes robotic platforms, software, vision, energy, and instruments and accessories. Our learning category includes learning and enabling technology, such as simulation and telepresence as well as technical training programs and personalized peer-to-peer learning opportunities. Our services category assists and optimizes minimally invasive programs through readiness, on-demand support, consultation for minimally invasive program optimization, and customized analytics for hospitals. Within our integrated ecosystem, our focus is to decrease variability in surgery by offering actionable insights, with digital solutions, to take action with the potential to improve outcomes, personalize learning, and optimize efficiency. We take a holistic approach, offering intelligent technology and systems designed to work together to make MIS intervention more available and applicable.

Current wording

Our da Vinci products fall into five broad categories: da Vinci surgical systems, da Vinci instruments and accessories, da Vinci stapling, da Vinci energy, and da Vinci vision, including Firefly fluorescence imaging systems and da Vinci endoscopes. We provide a comprehensive suite of systems, learning, and services offerings. Digitally enabled for nearly three decades, these three offerings aim to decrease variability by providing dependable, consistent functionality and an integrated user experience. Our systems category includes robotic platforms, software, vision, energy, and instruments and accessories. Our learning category includes learning and enabling technology, such as simulation and telepresence as well as technical training programs and personalized peer-to-peer learning opportunities. We have a global network of field service engineers and distributors through which we deliver a suite of services, including installation, repair, maintenance, around-the-clock technical support, and system monitoring. We also offer customized analytics and consultation to hospitals for program optimization.

Previous wording

We are in the early stages of launching our da Vinci SP surgical system, and we have an installed base of 222 da Vinci SP surgical systems as of June 30, 2024. We have received FDA clearance for the da Vinci SP surgical system for urologic, general thoracoscopic, and certain transoral procedures. Also, we have received regulatory clearance in South Korea, where the da Vinci SP surgical system may be used for a broad set of procedures, and in Japan, where the da Vinci SP surgical system may be used for the same set of procedures as can be performed on the da Vinci Xi surgical system in Japan. In January 2024, we obtained the European certification in accordance with Regulation (EU) 2017/745 of the European Parliament and of the Council of 5 April 2017 on medical devices (the “EU MDR”) for our da Vinci SP surgical system for use in endoscopic abdominopelvic, thoracoscopic, transoral otolaryngology, transanal colorectal, and breast surgical procedures. We are commercializing the da Vinci SP surgical system in select major European countries throughout 2024 as part of a measured rollout strategy. We plan to seek FDA clearances for additional indications for the da Vinci SP surgical system over time. We also plan to seek additional clearances (including for additional indications) in OUS markets over time. The success of the da Vinci SP surgical system is dependent on positive experiences and improved clinical outcomes for the procedures for which it has been cleared as well as securing additional clinical clearances.

Current wording

2024, the da Vinci SP surgical system received European certification in accordance with Regulation (EU) 2017/745 of the European Parliament and of the Council of 5 April 2017 on medical devices (the “EU MDR”) for our da Vinci SP surgical system for use in endoscopic abdominopelvic, thoracoscopic, transoral otolaryngology, transanal colorectal, and breast surgical procedures, and we are commercializing the da Vinci SP surgical system in select major European countries throughout 2024 as part of a measured rollout strategy. In August 2024, we obtained regulatory clearance in Taiwan for our da Vinci SP surgical system for use in endoscopic abdominopelvic, thoracoscopic, transoral otolaryngology, transanal colorectal, transanal total mesorectal excision, and breast surgical procedures. We plan to seek FDA clearances for additional indications for the da Vinci SP surgical system and expand the system’s regulatory approvals (including for additional indications) in outside of the U.S. (“OUS”) markets over time. The success of the da Vinci SP surgical system is dependent on positive experiences and improved clinical outcomes for the procedures for which it has been cleared as well as securing additional clinical clearances.

Previous wording

In March 2024, we obtained FDA clearance for our da Vinci 5 surgical system, our next-generation multi-port robotic system, for use in all surgical specialties and procedures indicated for da Vinci Xi, except for cardiac and pediatric indications. We are in the early stages of launching da Vinci 5, and we have an installed base of 78 da Vinci 5 surgical systems as of June 30, 2024. We plan a phased launch over several quarters, giving us time to mature our supply and manufacturing processes for the new system. Additionally, we are in the regulatory process in Japan and South Korea for da Vinci 5.

Current wording

In March 2024, we obtained FDA clearance for our da Vinci 5 surgical system, our next-generation multi-port robotic system, for use in all surgical specialties and procedures indicated for da Vinci Xi, except for cardiac and pediatric indications. In October 2024, we obtained regulatory clearance in South Korea for the da Vinci 5 system for use in in urologic, general, gynecologic, thoracoscopic, thoracoscopically-assisted cardiotomy, and transoral otolaryngology surgical procedures. We are in the early stages of launching da Vinci 5, and we have an installed base of 188 da Vinci 5 surgical systems as of September 30, 2024. We are in the midst of a phased launch over several quarters, giving us time to mature our supply and manufacturing processes for the new system. Additionally, we are in the regulatory process in Japan and Europe for da Vinci 5.

Previous wording

In 2019, the FDA cleared our Ion endoluminal system, which is a flexible, robotic-assisted, catheter-based platform that utilizes instruments and accessories for which the first cleared indication is minimally invasive biopsies in the lung. Our Ion system extends our commercial offering beyond surgery into diagnostic, endoluminal procedures. The system features an ultra-thin, ultra-maneuverable catheter that can articulate 180 degrees in all directions and allows navigation far into the peripheral lung and provides the stability necessary for precision in a biopsy. Many suspicious lesions found in the lung may be small and difficult to access, which can make diagnosis challenging, and Ion helps physicians obtain tissue samples from deep within the lung, which could help enable earlier diagnosis. Regulatory clearances for our Ion endoluminal system outside of the U.S. (“OUS”) include European certification in accordance with the EU MDR, which was received in March 2023, regulatory clearance in South Korea, which was received in September 2023, and National Medical Products Administration (“NMPA”) regulatory clearance in China, which was received in March 2024. We plan to seek additional clearances, approvals, and certifications for the Ion endoluminal system in OUS markets over time.

Current wording

In 2019, we commercialized our Ion endoluminal system, which is a flexible, robotic-assisted, catheter-based platform that utilizes instruments and accessories for which the first cleared indication is minimally invasive biopsies in the lung. Our Ion system extends our commercial offering beyond surgery into diagnostic, endoluminal procedures. The system features an ultra-thin, ultra-maneuverable catheter that can articulate 180 degrees in all directions and allows navigation far into the peripheral lung and provides the stability necessary for precision in a biopsy. Many suspicious lesions found in the lung may be small and difficult to access, which can make diagnosis challenging, and Ion helps physicians obtain tissue samples from deep within the lung, which could help enable earlier diagnosis. Our Ion endoluminal system has received FDA clearance, and regulatory clearances OUS include European certification in accordance with the EU MDR, regulatory clearance in South Korea, and National Medical Products Administration (“NMPA”) regulatory clearance in China. We plan to seek additional clearances, approvals, and certifications for the Ion endoluminal system in OUS markets over time.

Previous wording

Uncertainty surrounding macroeconomic and geopolitical factors in the U.S. and globally characterized by the supply chain environment, inflationary pressure, elevated interest rates, instability in the global financial markets, disruptions in the commodities’ markets as a result of the conflict between Russia and Ukraine and conflicts in the Middle East, including Israel, and the introduction of or changes in tariffs or trade barriers may result in a recession, which could have a material adverse effect on our business.

Current wording

Uncertainty surrounding macroeconomic and geopolitical factors in the U.S. and globally characterized by the supply chain environment, inflationary pressure, elevated interest rates, disruptions in the commodities’ markets as a result of the conflict between Russia and Ukraine and conflicts in the Middle East, including Israel and Iran, and the introduction of or changes in tariffs or trade barriers may result in a recession, which could have a material adverse effect on our business.

Previous wording

Market-related supply chain constraints have generally eased, with some isolated residual stresses, particularly for engineered materials and at certain subcontract suppliers. These isolated instances of supply disruption have not had a material impact through the first half of 2024. Additionally, prices of materials remain elevated from historical levels due to market demand or production-related cost inflation. With elevated interest rates, access to credit is more difficult, and any insolvency of certain suppliers, including sole- and single-sourced suppliers, may have heightened continuity risks. Incidents of cybersecurity breaches, which have not significantly impacted our supply chain to date, also remain an active threat to sustained supply continuity. We are actively engaged in activities that seek to mitigate the impact of any supply chain risks and disruptions on our operations.

Current wording

Supply chain constraints have generally improved to pre-COVID-19 pandemic levels, with some isolated residual stresses, particularly for engineered raw materials and at certain subcontract suppliers that are operationally challenged to meet our production requirements. These isolated instances of supply chain constraints have not had a material impact during the first nine months of 2024. Additionally, prices of materials for some components remain elevated from historical levels due to strong market demand or supply chain cost inflation. With elevated interest rates, access to credit is more difficult, and any insolvency of certain suppliers, including sole- and single-sourced suppliers, may have heightened continuity risks. Incidents of cybersecurity breaches, which have not significantly impacted our supply chain to date, also remain an active threat to sustained supply continuity. We are actively engaged in activities that seek to mitigate the impact of any supply chain risks and disruptions on our operations.

Previous wording

During the first half of 2024, we did not experience noticeable procedure volume disruptions due to COVID-19. We also believe that a large portion of the patients in the backlog that required treatment during the COVID-19 pandemic have now been treated. Therefore, we expect that the impact of patient backlogs has been, and will continue to be, less significant on procedure volumes in 2024 than in the prior year.

Current wording

During the first nine months of 2024, we did not experience noticeable procedure volume disruptions due to COVID-19. We also believe that a large portion of the patients in the backlog that required treatment during the COVID-19 pandemic have now been treated. Therefore, we expect that the impact of patient backlogs has been, and will continue to be, less significant on procedure volumes in 2024 than in the prior year.

Previous wording

We generate revenue from our Ion endoluminal system in a business model consistent with the da Vinci surgical system model described above. We generate up-front revenue from the placement of Ion systems through sales or sales-type lease arrangements and recurring revenue over time through fixed-payment or usage-based operating lease arrangements. We also earn recurring revenue from the sales of instruments, accessories, and services. The Ion endoluminal system generally sells for between $500,000 and $675,000. Our instruments and accessories have limited lives and will either expire or wear out as they are used in procedures, at which point they need to be replaced. We typically enter into service contracts at the time systems are sold or leased at an annual fee between $55,000 and $70,000.

Current wording

We generate revenue from our Ion endoluminal system in a business model consistent with the da Vinci surgical system model described above. We generate up-front revenue from the placement of Ion systems through sales or sales-type lease arrangements and recurring revenue over time through fixed-payment or usage-based operating lease arrangements. We also earn recurring revenue from the sales of instruments, accessories, and services. The Ion endoluminal system generally sells for between $500,000 and $815,000. Our instruments and accessories have limited lives and will either expire or wear out as they are used in procedures, at which point they need to be replaced. We typically enter into service contracts at the time systems are sold or leased at an annual fee between $55,000 and $80,000.

Previous wording

Our da Vinci surgical systems are generally used for soft tissue surgery for areas of the body between the pelvis and the neck, primarily in general, gynecologic, urologic, cardiothoracic, and head and neck surgeries. Within these categories, procedures range in complexity from cancer and other highly complex procedures to less complex procedures for benign conditions. Cancer and other highly complex procedures tend to be reimbursed at higher rates than less complex procedures for benign conditions. Thus, hospitals are more sensitive to the costs associated with treating less complex, benign conditions. Our strategy is to provide hospitals with attractive clinical and economical solutions across the spectrum of procedure complexity. Our fully featured da Vinci Xi and da Vinci 5 surgical systems with advanced instruments (including da Vinci energy and da Vinci stapler products) and our Integrated Table Motion product target the more complex procedure segment. Our da Vinci X surgical system is targeted toward price-sensitive geographic markets and procedures. Our da Vinci SP surgical system complements the da Vinci X, da Vinci Xi, and da Vinci 5 surgical systems by enabling surgeons to access narrow workspaces.

Current wording

Our da Vinci surgical systems are generally used for soft tissue surgery for areas of the body between the pelvis and the neck, primarily in general, gynecologic, urologic, cardiothoracic, and head and neck surgical procedures. Within these categories, procedures range in complexity from cancer and other highly complex procedures to less complex procedures for benign conditions. Cancer and other highly complex procedures tend to be reimbursed at higher rates than less complex procedures for benign conditions. Thus, hospitals are more sensitive to the costs associated with treating less complex, benign conditions. Our strategy is to provide hospitals with attractive clinical and economical solutions across the spectrum of procedure complexity. Our fully featured da Vinci Xi and da Vinci 5 surgical systems with advanced instruments (including da Vinci energy and da Vinci stapler products) and our Integrated Table Motion product target the more complex procedure segment. Our da Vinci X surgical system is targeted toward price-sensitive geographic markets and procedures. Our da Vinci SP surgical system complements the da Vinci X, da Vinci Xi, and da Vinci 5 surgical systems by enabling surgeons to access narrow workspaces.

Previous wording

FDA or other foreign regulatory authorities and compliance with medical device reporting regulations, which require that manufacturers report to the FDA or other foreign regulatory authorities if their device caused or contributed, or may have caused or contributed, to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur.

Current wording

Our products and operations are also subject to increasingly stringent medical device, privacy, and other regulations by regional, federal, state, and local authorities. After a device is placed on the market, numerous FDA and comparable foreign regulatory requirements continue to apply. These requirements include establishment registration and device listing with the FDA or other foreign regulatory authorities and compliance with medical device reporting regulations, which require that manufacturers report to the FDA or other foreign regulatory authorities if their device caused or contributed, or may have caused or contributed, to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur.

Previous wording

We have generally obtained the regulatory clearances, approvals, and certifications required to market our products associated with our da Vinci multi-port surgical systems (da Vinci S, da Vinci Si, da Vinci Xi, da Vinci X, and da Vinci 5 systems) for our targeted surgical specialties within the U.S., South Korea, Japan, and the European markets in which we operate. Since 2022, we have additionally obtained regulatory clearances, approvals, and certifications for the following products:

Current wording

We have generally obtained the regulatory clearances, approvals, and certifications required to market our products associated with our da Vinci multi-port surgical systems (da Vinci S, da Vinci Si, da Vinci Xi, da Vinci X, and da Vinci 5 systems) for our targeted surgical specialties within the U.S., South Korea, Japan, and the European markets in which we operate. We have additionally obtained regulatory clearances, approvals, and certifications for the following products over the past several years:

Previous wording

•In March 2024, we obtained FDA clearance for our da Vinci 5 surgical system, our next-generation multi-port robotic system, for use in all surgical specialties and procedures indicated for da Vinci Xi, except for cardiac and pediatric indications as well as one contraindication related to the use of force feedback in hysterectomy and myomectomy procedures. Da Vinci 5 was initially made available to a select group of customers in the U.S. who had collaborated with us during the development period and those with mature robotic surgery programs. We will continue working with surgeons at these initial sites to generate additional data on the system’s use before a wider commercial introduction.

Current wording

•In October 2024, we obtained regulatory clearance in South Korea for our da Vinci 5 surgical system, our next-generation multi-port robotic system, for use in urologic, general, gynecologic, thoracoscopic, thoracoscopically-assisted cardiotomy, and transoral otolaryngology surgical procedures. In March 2024, we obtained FDA clearance for our da Vinci 5 surgical system for use in all surgical specialties and procedures indicated for da Vinci Xi, except for cardiac and pediatric indications as well as one contraindication related to the use of force feedback in hysterectomy and myomectomy surgical procedures. Da Vinci 5 was made available to customers in the U.S. who had collaborated with us during the development period and those with mature robotic surgery programs. We will continue working with surgeons to generate additional data on the system’s use and on expansion of our manufacturing and supply capacity before a wider commercial introduction.

Previous wording

•In April 2024, we obtained European certification in accordance with the EU MDR for our redesigned 8 mm SureForm 30 Curved-Tip and Straight-Tip Stapler instruments and reloads for use in general, thoracic, gynecologic, urologic, and pediatric surgery and recently filed a new submission for FDA clearance.

Current wording

•In September 2024, we obtained FDA clearance for our redesigned 8 mm SureForm 30 Stapler and 8 mm SureForm 30 Curved-Tip Stapler instruments and reloads for use in general, thoracic, gynecologic, urologic, and pediatric surgical procedures. In April 2024, we obtained European certification in accordance with the EU MDR for our redesigned 8 mm SureForm 30 Stapler and 8 mm SureForm 30 Curved-Tip Stapler instruments and reloads for use in general, thoracic, gynecologic, urologic, and pediatric surgical procedures.

Previous wording

•In January 2024, we obtained European certification in accordance with the EU MDR for our da Vinci SP surgical system for use in endoscopic abdominopelvic, thoracoscopic, transoral otolaryngology, transanal colorectal, and breast surgical procedures. We plan to commercialize the da Vinci SP surgical system in select major European countries throughout 2024 as part of a measured rollout strategy. During the second quarter of 2024, we placed 10 da Vinci SP systems in Europe. In September 2022, we obtained regulatory clearance for our da Vinci SP surgical system in Japan for use in general surgeries, thoracic surgeries (excluding cardiac procedures and intercostal approaches), urologic surgeries, gynecologic surgeries, and transoral head and neck surgeries.

Current wording

•In August 2024, we obtained regulatory clearance in Taiwan for our da Vinci SP surgical system for use in endoscopic abdominopelvic, thoracoscopic, transoral otolaryngology, transanal colorectal, transanal total mesorectal excision, and breast surgical procedures. In January 2024, we obtained European certification in accordance with the EU MDR for our da Vinci SP surgical system for use in endoscopic abdominopelvic, thoracoscopic, transoral otolaryngology, transanal colorectal, and breast surgical procedures. We are commercializing the da Vinci SP surgical system in select major European countries throughout 2024 as part of a measured rollout strategy. During the third quarter of 2024, we placed 7 da Vinci SP systems in Europe. In September 2022, we obtained regulatory clearance for our da Vinci SP surgical system in Japan for use in general, thoracic (excluding cardiac procedures and intercostal approaches), urologic, gynecologic, and transoral head and neck surgical procedures.

Previous wording

•In April 2023, we obtained FDA clearance for the use of our da Vinci SP surgical system in simple prostatectomy procedures. We also obtained FDA clearance for the use of our da Vinci SP surgical system in transvesical approaches to simple and radical prostatectomy.

Current wording

•In July 2024, we obtained FDA clearance for the use of our da Vinci SP surgical system in general thoracoscopic surgical procedures. In April 2023, we obtained FDA clearance for the use of our da Vinci SP surgical system in simple prostatectomy procedures. We also obtained FDA clearance for the use of our da Vinci SP surgical system in transvesical approaches to simple and radical prostatectomy.

Previous wording

•In March 2024, we received NMPA regulatory clearance for our Ion endoluminal system in China. We plan to launch the Ion endoluminal system in a measured fashion later in 2024 in China while we optimize training pathways and our supply chain as well as collect additional clinical data. In September 2023, we received regulatory clearance in South Korea for our Ion endoluminal system. We expect the introduction of the Ion system in South Korea to follow the refinement of our training pathways in the region and the gathering of local clinical and economic data. In March 2023, we obtained European certification in accordance with the EU MDR for our Ion endoluminal system. In Europe, we are seeing continued progress in our commercialization in the United Kingdom (“UK”) and are beginning to place Ion systems in continental Europe with a similar approach of initially focusing on the collection of clinical data in support of our European reimbursement strategy.

Current wording

•In March 2024, we received NMPA regulatory clearance for our Ion endoluminal system in China. We placed our first Ion systems in China during the third quarter of 2024 and will continue our rollout of the Ion system in China in a measured fashion while we optimize training pathways and collect additional clinical data. In September 2023, we received regulatory clearance in South Korea for our Ion endoluminal system. We expect the introduction of the Ion system in South Korea to follow the refinement of our training pathways in the region and the gathering of local clinical and economic data. In March 2023, we obtained European certification in accordance with the EU MDR for our Ion endoluminal system. In Europe, we are seeing continued progress in our commercialization in the United Kingdom (“UK”) and are beginning to place Ion systems in continental Europe with a similar approach of initially focusing on the collection of clinical data in support of our European reimbursement strategy.

Previous wording

In June 2023, the China National Health Commission published the 14th five-year plan quota for major medical equipment to be sold in China on its official website (the “2023 Quota”). Under the 2023 Quota, the government will allow for the sale of 559 new surgical robots into China, which could include da Vinci surgical systems as well as surgical systems introduced by others. As of June 30, 2024, including systems that were sold in prior quarters, we have placed 92 da Vinci surgical systems under the 2023 Quota. Future sales of da Vinci surgical systems under this and any previously published open quotas are uncertain, as they are open to other medical device companies that have introduced robotic-assisted surgical systems and are dependent on hospitals completing a tender process and receiving associated approvals. Our ability to track the number of systems that could be sold under these quotas in the future is limited by provincial and national agencies making such information publicly available.

Current wording

In June 2023, the China National Health Commission published the 14th five-year plan quota for major medical equipment to be sold in China on its official website (the “2023 Quota”). Under the 2023 Quota, the government will allow for the sale of 559 new surgical robots into China, which could include da Vinci surgical systems as well as surgical systems introduced by others. As of September 30, 2024, including systems that were sold in prior quarters, we have placed 103 da Vinci surgical systems under the 2023 Quota. Future sales of da Vinci surgical systems under this and any previously published open quotas are uncertain, as they are open to other medical device companies that have introduced robotic-assisted surgical systems and are dependent on hospitals completing a tender process and receiving associated approvals. Our ability to track the number of systems that could be sold under these quotas in the future is limited by provincial and national agencies making such information publicly available.

Previous wording

The adoption of robotic-assisted surgery using the da Vinci surgical system has the potential to grow for those procedures that offer greater patient value than to non-da Vinci alternatives and competitive total economics for healthcare providers. Our da Vinci surgical systems are used primarily in general, gynecologic, urologic, cardiothoracic, and head and neck surgeries. We focus our organization and investments on developing, marketing, and training products and services for procedures in which da Vinci can bring patient value relative to alternative treatment options and/or economic benefit to healthcare providers. Target procedures in general surgery include hernia repair (both ventral and inguinal), colorectal, cholecystectomy, and bariatric procedures. Target procedures in urology include prostatectomy and partial nephrectomy. Target procedures in gynecology include hysterectomy for both cancer and benign conditions and sacrocolpopexy. In cardiothoracic surgery, target procedures include lung resection. In head and neck surgery, target procedures include transoral surgery. Not all indications, procedures, or products described may be available in a given country or region or on all generations of da Vinci surgical systems. Surgeons and their patients need to consult the product labeling in their specific country and for each product in order to determine the cleared uses, as well as important limitations, restrictions, or contraindications.

Current wording

The adoption of robotic-assisted surgery using the da Vinci surgical system has the potential to grow for those procedures that offer greater patient value than to non-da Vinci alternatives and competitive total economics for healthcare providers. Our da Vinci surgical systems are used primarily in general, gynecologic, urologic, cardiothoracic, and head and neck surgical procedures. We focus our organization and investments on developing, marketing, and training products and services for procedures in which da Vinci can bring patient value relative to alternative treatment options and/or economic benefit to healthcare providers. Target procedures in general surgery include hernia repair (both ventral and inguinal), colorectal, cholecystectomy, and bariatric procedures. Target procedures in urology include prostatectomy and partial nephrectomy. Target procedures in gynecology include hysterectomy for both cancer and benign conditions and sacrocolpopexy. In cardiothoracic surgery, target procedures include lung resection. In head and neck surgery, target procedures include transoral surgery. Not all indications, procedures, or products described may be available in a given country or region or on all generations of da Vinci surgical systems. Surgeons and their patients need to consult the product labeling in their specific country and for each product in order to determine the cleared uses, as well as important limitations, restrictions, or contraindications.

Previous wording

Overall. Total da Vinci procedures performed by our customers grew approximately 17% for the three months ended June 30, 2024, compared to approximately 22% for the three months ended June 30, 2023. Total da Vinci procedures performed by our customers grew approximately 16% for the six months ended June 30, 2024, compared to approximately 24% for the six months ended June 30, 2023. We believe that the growth in the comparative second quarter 2023 U.S. and OUS procedures partially reflected a benefit from incremental procedures performed, which resulted from a backlog of patient treatments that had been built during the COVID-19 pandemic, as noted in the COVID-19 Pandemic section above. The second quarter 2024 procedure growth was largely attributable to growth in U.S. general surgery, OUS general surgery (particularly cancer), OUS urologic surgery, U.S. gynecologic surgery, and OUS gynecologic surgery.

Current wording

Overall. Total da Vinci procedures performed by our customers grew approximately 18% for the three months ended September 30, 2024, compared to approximately 19% for the three months ended September 30, 2023. Total da Vinci procedures performed by our customers grew approximately 17% for the nine months ended September 30, 2024, compared to approximately 22% for the nine months ended September 30, 2023. The third quarter 2024 procedure growth was largely attributable to growth in U.S. general surgery, OUS general surgery (particularly cancer), OUS urologic surgery, U.S. gynecologic surgery, and OUS gynecologic surgery.

Previous wording

U.S. Procedures. U.S. da Vinci procedures grew approximately 14% for the three months ended June 30, 2024, compared to approximately 19% for the three months ended June 30, 2023. U.S. da Vinci procedures grew approximately 14% for the six months ended June 30, 2024, compared to approximately 22% for the six months ended June 30, 2023. The second quarter 2024 U.S. procedure growth was largely attributable to strong growth in general surgery procedures, most notably cholecystectomy, hernia repair, and colorectal procedures. The number of U.S. da Vinci bariatric procedures performed declined modestly in the second quarter of 2024 compared to the second quarter of 2023. It is unclear whether the overall decline in the U.S. for surgical bariatric procedures will continue as patients evaluate new drug therapies and, if the decline continues, it is unclear what the rate of decline will be.

Current wording

U.S. Procedures. U.S. da Vinci procedures grew approximately 16% for the three months ended September 30, 2024, compared to approximately 17% for the three months ended September 30, 2023. U.S. da Vinci procedures grew approximately 15% for the nine months ended September 30, 2024, compared to approximately 20% for the nine months ended September 30, 2023. The third quarter 2024 U.S. procedure growth was largely attributable to strong growth in general surgery procedures, most notably cholecystectomy, hernia repair, and colorectal procedures. The number of U.S. da Vinci bariatric procedures performed declined modestly in the third quarter of 2024 compared to the third quarter of 2023. It is unclear whether the overall decline in the U.S. for surgical bariatric procedures will continue as patients evaluate new drug therapies and, if the decline continues, it is unclear what the rate of decline will be.

Previous wording

OUS Procedures. OUS da Vinci procedures grew approximately 22% for the three months ended June 30, 2024, compared to approximately 28% for the three months ended June 30, 2023. OUS da Vinci procedures grew approximately 21% for the six months ended June 30, 2024, compared to approximately 28% for the six months ended June 30, 2023. The second quarter 2024 OUS procedure growth was driven by growth in general surgery procedures, most notably colorectal and hernia repair procedures, urologic procedures, most notably prostatectomy and partial nephrectomy procedures, and gynecologic procedures. We saw strong procedure growth in Germany, the UK, Italy, and India during the second quarter of 2024. While geographic market maturity and levels of adoption differ by region and country, OUS da Vinci procedure growth is generally being driven by procedures beyond urology, reflecting surgeons’ growing adoption of general surgery, gynecologic, and thoracic procedures. In Korea, we believe that the number of procedures performed were significantly negatively impacted by doctor strikes in the country during the first half of 2024. The extent of the continued impact of these strikes on procedures in Korea remains uncertain.

Current wording

OUS Procedures. OUS da Vinci procedures grew approximately 24% for the three months ended September 30, 2024, compared to approximately 24% for the three months ended September 30, 2023. OUS da Vinci procedures grew approximately 22% for the nine months ended September 30, 2024, compared to approximately 27% for the nine months ended September 30, 2023. The third quarter 2024 OUS procedure growth was driven by growth in general surgery procedures, most notably colorectal and hernia repair procedures, urologic procedures, most notably prostatectomy and partial nephrectomy procedures, and gynecologic procedures. We saw strong procedure growth in Japan, Germany, the UK, India, France, and Italy during the third quarter of 2024. While geographic market maturity and levels of adoption differ by region and country, OUS da Vinci procedure growth is generally being driven by procedures beyond urology, reflecting surgeons’ growing adoption of general surgery, gynecologic, and thoracic procedures. In Korea, we believe that the number of procedures performed were significantly negatively impacted by doctor strikes in the country during the first nine months of 2024. The extent of the continued impact of these strikes on procedures in Korea remains uncertain.

Previous wording

We placed 341 da Vinci surgical systems in the second quarter of 2024, compared to 331 systems in the second quarter of 2023. The increase in system placements reflects incremental sales of our next-generation da Vinci 5 system and continued demand for additional capacity by our customers as a result of procedure growth, partially offset by a smaller number of third-generation da Vinci systems available for trade-in. During the second quarter of 2024, we placed 70 da Vinci 5 systems.

Current wording

We placed 379 da Vinci surgical systems in the third quarter of 2024, compared to 312 systems in the third quarter of 2023. The increase in system placements reflects incremental demand for our next-generation da Vinci 5 system and continued demand for additional capacity by our customers as a result of procedure growth, partially offset by a smaller number of third-generation da Vinci systems available for trade-in. During the third quarter of 2024, we placed 110 da Vinci 5 systems.

Previous wording

We continue to see our customers challenged by staffing shortages, inflation, debt servicing costs, government spending, and other financial pressures. As a result, we expect our customers to continue to be cautious in their overall capital spending. In addition, system demand in China has been impacted by increasing robotic-assisted surgical system competition from domestic companies as well as a broader central government focus on systematic governance. Targeting the healthcare sector, this campaign was initially launched by the Chinese government in July 2023 and has resulted in heightened scrutiny by medical institutions with respect to initiating tenders, with some tenders being canceled or delayed without a timeline. In the second quarter of 2024, the effect of this campaign contributed to fewer systems being placed in China. Currently, the extent of the impact of this campaign on our business remains uncertain.

Current wording

We continue to see some customers challenged by staffing shortages, decreased government funding in healthcare (particularly in Europe), and other financial pressures. As a result, we expect our customers to continue to be cautious in their overall capital spending. In addition, system demand in China has been impacted by increasing robotic-assisted surgical system competition from domestic companies as well as a broader central government focus on systematic governance. Targeting the healthcare sector, this campaign was initially launched by the Chinese government in July 2023 and has resulted in heightened scrutiny by medical institutions with respect to initiating tenders, with some tenders being canceled or delayed without a timeline. In the third quarter of 2024, the effect of this campaign contributed to fewer systems being placed in China. Currently, the extent of the impact of this campaign on our business remains uncertain.

Previous wording

Demand may also be impacted by competition, including from companies that have introduced products in the field of robotic-assisted medical procedures or have made explicit statements about their efforts to enter the field including, but not limited to, the following companies: Asensus Surgical, Inc.; Beijing Surgerii Robotics Company Limited; CMR Surgical Ltd.; Johnson & Johnson; Medicaroid Corporation; Medtronic plc; meerecompany Inc.; Noah Medical; Shandong Weigao Group

Current wording

Demand may also be impacted by competition, including from companies that have introduced products in the field of robotic-assisted medical procedures or have made explicit statements about their efforts to enter the field including, but not limited to, the following companies: Beijing Surgerii Robotics Company Limited; CMR Surgical Ltd.; Harbin Sizhe Rui Intelligent Medical Equipment Co., Ltd.; Johnson & Johnson; Karl Storz SE & Co. KG; Medicaroid Corporation; Medtronic plc; meerecompany Inc.; Noah Medical; Shandong Weigao Group Medical Polymer Company Ltd.; Shanghai Microport Medbot (Group) Co., Ltd.; Shenzhen Edge Medical Co., Ltd.; and SS Innovations International, Inc.

Previous wording

Second Quarter 2024 Operational and Financial Highlights

Current wording

Third Quarter 2024 Operational and Financial Highlights

Previous wording

•Approximately 661,000 da Vinci procedures were performed during the three months ended June 30, 2024, an increase of 17% compared to approximately 567,000 da Vinci procedures for the three months ended June 30, 2023.

Current wording

•Approximately 670,000 da Vinci procedures were performed during the three months ended September 30, 2024, an increase of 18% compared to approximately 567,000 da Vinci procedures for the three months ended September 30, 2023.

Previous wording

•Approximately 23,200 Ion procedures were performed during the three months ended June 30, 2024, an increase of 82% compared to approximately 12,700 Ion procedures for the three months ended June 30, 2023.

Current wording

•Approximately 25,000 Ion procedures were performed during the three months ended September 30, 2024, an increase of 73% compared to approximately 14,500 Ion procedures for the three months ended September 30, 2023.

Previous wording

•During the three months ended June 30, 2024, we placed 341 da Vinci surgical systems compared to 331 systems during the three months ended June 30, 2023. The second quarter 2024 da Vinci surgical system placements included 70 da Vinci 5 systems.

Current wording

•During the three months ended September 30, 2024, we placed 379 da Vinci surgical systems compared to 312 systems during the three months ended September 30, 2023. The third quarter 2024 da Vinci surgical system placements included 110 da Vinci 5 systems.

Previous wording

•As of June 30, 2024, we had a da Vinci surgical system installed base of approximately 9,203 systems, an increase of 14% compared to an installed base of approximately 8,042 systems as of June 30, 2023.

Current wording

•As of September 30, 2024, we had a da Vinci surgical system installed base of approximately 9,539 systems, an increase of 15% compared to an installed base of approximately 8,285 systems as of September 30, 2023.

Previous wording

•Utilization of da Vinci surgical systems, measured in terms of procedures per system per year, increased 2% relative to the second quarter of 2023.

Current wording

•Utilization of da Vinci surgical systems, measured in terms of procedures per system per year, increased 3% relative to the third quarter of 2023.

Previous wording

•Gross profit as a percentage of revenue was 68.3% for the three months ended June 30, 2024, compared to 66.7% for the three months ended June 30, 2023.

Current wording

•Gross profit as a percentage of revenue was 67.4% for the three months ended September 30, 2024, compared to 66.9% for the three months ended September 30, 2023.

Previous wording

•Operating income increased by 22% to $567 million for the three months ended June 30, 2024, compared to $463 million during the three months ended June 30, 2023. Operating income included $176 million and $148 million of share-based compensation expense related to employee stock plans and $5.2 million and $6.5 million of intangible asset-related charges for the three months ended June 30, 2024, and 2023, respectively.

Current wording

•Operating income increased by 24% to $577 million for the three months ended September 30, 2024, compared to $466 million during the three months ended September 30, 2023. Operating income included $176 million and $157 million of share-based compensation expense related to employee stock plans and $3.5 million and $12.6 million of intangible asset-related charges for the three months ended September 30, 2024, and 2023, respectively.

Previous wording

•As of June 30, 2024, we had $7.68 billion in cash, cash equivalents, and investments. Cash, cash equivalents, and investments increased by $0.34 billion, compared to $7.34 billion as of December 31, 2023, primarily as a result of cash provided by operating activities and proceeds from stock option exercises and employee stock purchases, partially offset by cash used for capital expenditures and taxes paid related to net share settlements of equity awards.

Current wording

•As of September 30, 2024, we had $8.31 billion in cash, cash equivalents, and investments. Cash, cash equivalents, and investments increased by $0.97 billion, compared to $7.34 billion as of December 31, 2023, primarily as a result of cash provided by operating activities and proceeds from stock option exercises and employee stock purchases, partially offset by cash used for capital expenditures and taxes paid related to net share settlements of equity awards.

Previous wording

Total revenue increased by 14% to $2.01 billion for the three months ended June 30, 2024, compared to $1.76 billion for the three months ended June 30, 2023, resulting from 16% higher instruments and accessories revenue, 14% higher systems revenue, and 10% higher service revenue.

Current wording

Total revenue increased by 17% to $2.04 billion for the three months ended September 30, 2024, compared to $1.74 billion for the three months ended September 30, 2023, resulting from 18% higher instruments and accessories revenue, 17% higher systems revenue, and 12% higher service revenue.

Previous wording

Total revenue increased by 13% to $3.90 billion for the six months ended June 30, 2024, compared to $3.45 billion for the six months ended June 30, 2023, resulting from 17% higher instruments and accessories revenue, 11% higher service revenue, and 6% higher systems revenue.

Current wording

Total revenue increased by 14% to $5.94 billion for the nine months ended September 30, 2024, compared to $5.20 billion for the nine months ended September 30, 2023, resulting from 17% higher instruments and accessories revenue, 9% higher systems revenue, and 11% higher service revenue.

Previous wording

Revenue denominated in foreign currencies as a percentage of total revenue was approximately 25% for both the three and six months ended June 30, 2024, and 25% for both the three and six months ended June 30, 2023. We generally sell our products and services in local currencies where we have direct distribution channels. Foreign currency rate fluctuations, as determined by comparing current period revenue in USD to current period revenue in local currency using the same foreign exchange rates as the prior year same period, net of the impacts from foreign currency hedging, had an unfavorable impact on OUS total revenue of $16 million and an unfavorable impact on OUS total revenue of $12 million for the three months ended June 30, 2024, and 2023, respectively. Foreign currency rate fluctuations, net of the impacts from foreign currency hedging, had an unfavorable impact on OUS total revenue of $27 million and an unfavorable impact on OUS total revenue of $46 million for the six months ended June 30, 2024, and 2023, respectively.

Current wording

We generally sell our products and services in local currencies where we have direct distribution channels. Revenue denominated in foreign currencies as a percentage of total revenue was approximately 24% and 25% for the three and nine months ended September 30, 2024, and 24% and 25% for the three and nine months ended September 30, 2023, respectively. Fluctuations in foreign currency exchange rates had an unfavorable impact on OUS total revenue of $2 million and $29 million for the three and nine months ended September 30, 2024, respectively. Fluctuations in foreign currency exchange rates had a favorable impact on OUS total revenue of $8 million and an unfavorable impact on OUS total revenue of $38 million for the three and nine months ended September 30, 2023, respectively. The impact of fluctuations in foreign currency exchange rates was determined by comparing current period revenue converted to USD using exchange rates that were effective in the comparable prior year period, net of the impacts from foreign currency hedging.