Intuitive Announces Second Quarter Earnings
Q2 Highlights
- Worldwide
da Vinci procedures decreased approximately 19% compared with the second quarter of 2019, primarily as a result of the significant disruption caused by the COVID-19 pandemic. - The Company shipped 178 da Vinci Surgical Systems, a decrease of 35% compared with 273 in the second quarter of 2019.
- The Company grew its da Vinci Surgical System installed base to 5,764 systems as of
June 30, 2020 , an increase of 9% compared with 5,270 as of the end of the second quarter of 2019. - Second quarter 2020 revenue of
$852 million decreased 22% compared with$1,099 million in the second quarter of 2019. Second quarter 2020 revenue included a $59 million decrease in service revenue relating to our previously announced Customer Relief Program. - Second quarter 2020 GAAP net income was $68 million, or
$0.57 per diluted share, compared with $318 million, or$2.67 per diluted share, in the second quarter of 2019. - Second quarter 2020 non-GAAP* net income was
$132 million , or$1.11 per diluted share, compared with$388 million , or$3.25 per diluted share, in the second quarter of 2019. - Second quarter 2020 GAAP and non-GAAP* net income includes $37 million, or
$0.31 per diluted share, of discrete income tax expense arising from the conclusion of a tax case between an independent third party and theIRS related to charging foreign subsidiaries for shared-based compensation.
Q2 Financial Summary
Gross profit, income from operations, net income, net income per diluted share, and diluted shares are reported on a GAAP and non-GAAP* basis. The non-GAAP* measures are described below and are reconciled to the corresponding GAAP measures at the end of this release.
Second quarter 2020 revenue was $852 million, a decrease of 22% compared with $1,099 million in the second quarter of 2019. Lower second quarter revenue was driven by lower procedures volume and system placements, primarily as a result of the significant disruption caused by the COVID-19 pandemic, as well as a $59 million decrease in service revenue related to service fee credits from the previously announced Customer Relief Program.
Second quarter 2020 instruments and accessories revenue decreased by 20% to
Second quarter 2020 systems revenue decreased by 24% to
Second quarter 2020 GAAP income from operations decreased to $81 million, compared with
Second quarter 2020 GAAP net income was $68 million, or
Second quarter 2020 non-GAAP* net income was
The Company ended the second quarter of 2020 with
Impact of COVID-19 Pandemic
During the first six months of 2020, the Company experienced a significant decline in procedure volume and postponements of system placements, as healthcare systems around the world diverted resources to meet the increasing demands of managing COVID-19. The impact and timing of the COVID-19 pandemic on the Company's business differs by geography. In the
Additional supplemental financial and procedure information has been posted to the Investor Relations section of the Intuitive website at https://isrg.gcs-web.com/.
Instruments Update
Today, the Company introduced its "Extended Use Program" under which the Company plans to introduce select Xi/X instruments possessing 12 to 18 uses compared to the current 10 use instruments. The program will begin in the fourth quarter of 2020. The Extended Use Program instruments represent some of our higher volume instruments and exclude stapling, monopolar, and advanced energy instruments. Instruments included in the program are used across a number of
“Intuitive continues to deliver programs and solutions to meet the clinical and economic needs of our hospital and healthcare system customers," said Intuitive CEO
Webcast and Conference Call Information
Intuitive will hold a teleconference at
About Intuitive
Intuitive (Nasdaq: ISRG), headquartered in
Intuitive brings more than two decades of leadership in robotic-assisted surgical technology and solutions to its offerings and develops, manufactures, and markets the da Vinci Surgical System and the Ion endoluminal system.
For more information, please visit the Company’s website at www.intuitive.com.
Forward-Looking Statements
This press release contains forward-looking statements. These forward-looking statements are necessarily estimates reflecting the best judgment of the Company's 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 include, but are not limited to, statements related to the expected impacts of the COVID-19 pandemic on our business, financial condition, and results of operations, the strength of our long-term fundamentals, the potential decline of procedure volume, our acquisitions, expected new product introductions, procedures and procedure adoption, future results of operations, future financial position, our ability to increase our revenues, the anticipated mix of our revenues between product and service revenues, our financing plans and future capital requirements, anticipated costs of revenue, anticipated expenses, our potential tax assets or liabilities, the effect of recent accounting pronouncements, our investments, anticipated cash flows, our ability to finance operations from cash flows and similar matters, and statements based on current expectations, estimates, forecasts, and projections about the economies and markets in which we operate and our beliefs and assumptions regarding these economies and markets. These forward-looking statements should, therefore, be considered in light of various important factors, including, but not limited to, the following: our ability to obtain accurate procedure volume in the midst of the COVID-19 pandemic; the risk that the COVID-19 pandemic could lead to further material delays and cancellations of, or reduced demand for, procedures; curtailed or delayed capital spending by hospitals; disruption to our supply chain; closures of our facilities; delays in surgeon training; delays in gathering clinical evidence; the evaluation of the risks of robotic-assisted surgery in the presence of infectious diseases; diversion of management and other resources to respond to the COVID-19 outbreak; the impact of global and regional economic and credit market conditions on healthcare spending; the risk that the COVID-19 pandemic disrupts local economies and causes economies in our key markets to enter prolonged recessions; healthcare reform legislation in the
*About Non-GAAP Financial Measures
To supplement its consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in
The Company uses these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. The Company believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding items such as intangible asset charges, share-based compensation (“SBC”) expenses, and other special items. Intangible asset charges consist of non-cash charges, such as the amortization of intangible assets, as well as in-process R&D charges. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing its performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to its historical performance and liquidity. The Company believes these non-GAAP financial measures are useful to investors, because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making, and (2) they are used by institutional investors and the analyst community to help them analyze the performance of the Company’s business.
Non-GAAP gross profit. The Company defines non-GAAP gross profit as gross profit, excluding intangible asset charges, expenses related to SBC, and litigation charges and recoveries.
Non-GAAP income from operations. The Company defines non-GAAP income from operations as income from operations, excluding intangible asset charges, certain acquisition-related items for the re-measurement of contingent consideration, expenses related to SBC, and litigation charges and recoveries.
Non-GAAP net income and EPS. The Company defines non-GAAP net income as net income (loss), excluding intangible asset charges, non-cash impairment charges and recoveries, certain acquisition-related items for the re-measurement of contingent consideration, expenses related to SBC, litigation charges and recoveries, adjustments attributable to noncontrolling interest in joint venture, net of the related tax effects, and tax adjustments, including the excess tax benefits or deficiencies associated with SBC arrangements, the one-time impact of the enactment of the 2019 Swiss tax reform, and the net tax effects related to intra-entity transfers of non-inventory assets. The Company excludes the one-time impact of the enactment of the 2019 Swiss tax reform, because it is discrete in nature, and excludes the excess tax benefits or deficiencies associated with SBC arrangements as well as the tax effects associated with non-cash amortization of deferred tax assets related to intra-entity non-inventory transfers, because the Company does not believe these items correlate with the on-going results of its core operations. The tax effects of the non-GAAP items are determined by applying a calculated non-GAAP effective tax rate, which is commonly referred to as the with-and-without method. Without excluding these tax effects, investors would only see the gross effect that these non-GAAP adjustments had on the Company’s operating results. The Company’s calculated non-GAAP effective tax rate is generally higher than its GAAP effective tax rate. The Company defines non-GAAP EPS as non-GAAP net income divided by non-GAAP diluted shares, which are calculated as GAAP weighted average outstanding shares plus dilutive potential shares outstanding during the period.
There are a number of limitations related to the use of non-GAAP measures versus measures calculated in accordance with GAAP. Non-GAAP gross profit, non-GAAP income from operations, non-GAAP net income, and non-GAAP EPS exclude items such as intangible asset charges, re-measurement of contingent consideration, SBC, excess tax benefits or deficiencies associated with SBC arrangements, and non-cash amortization of deferred tax assets related to intra-entity transfer of non-inventory assets, which are primarily recurring items. SBC has been, and will continue to be for the foreseeable future, a significant recurring expense in the Company’s business. In addition, the components of the costs that the Company excludes in its calculation of non-GAAP net income and non-GAAP EPS may differ from the components that its peer companies exclude when they report their results of operations. Management addresses these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP net income and non-GAAP EPS and evaluating non-GAAP net income and non-GAAP EPS together with net income (loss) and net income (loss) per share calculated in accordance with GAAP.
UNAUDITED QUARTERLY CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
| Three months ended | |||||||||||
2020 |
2020 |
2019 |
|||||||||
| Revenue: | |||||||||||
| Instruments and accessories | $ | 460.8 | $ | 617.5 | $ | 578.5 | |||||
| Systems | 261.0 | 283.3 | 343.8 | ||||||||
| Services (1) | 130.3 | 198.7 | 176.6 | ||||||||
| Total revenue | 852.1 | 1,099.5 | 1,098.9 | ||||||||
| Cost of revenue: | |||||||||||
| Product | 283.8 | 296.7 | 283.4 | ||||||||
| Service | 65.4 | 64.6 | 56.5 | ||||||||
| Total cost of revenue | 349.2 | 361.3 | 339.9 | ||||||||
| Gross profit | 502.9 | 738.2 | 759.0 | ||||||||
| Operating expenses: | |||||||||||
| Selling, general and administrative | 279.1 | 308.1 | 279.2 | ||||||||
| Research and development | 143.2 | 147.1 | 120.8 | ||||||||
| Total operating expenses | 422.3 | 455.2 | 400.0 | ||||||||
| Income from operations (2) | 80.6 | 283.0 | 359.0 | ||||||||
| Interest and other income, net | 26.6 | 25.1 | 32.8 | ||||||||
| Income before taxes | 107.2 | 308.1 | 391.8 | ||||||||
| Income tax expense (benefit) (3) | 37.0 | (8.1 | ) | 75.4 | |||||||
| Net income | 70.2 | 316.2 | 316.4 | ||||||||
| Less: net income (loss) attributable to noncontrolling interest in joint venture | 2.2 | 2.7 | (1.9 | ) | |||||||
| Net income attributable to |
$ | 68.0 | $ | 313.5 | $ | 318.3 | |||||
| Net income per share attributable to |
|||||||||||
| Basic | $ | 0.58 | $ | 2.69 | $ | 2.76 | |||||
| Diluted (4) | $ | 0.57 | $ | 2.62 | $ | 2.67 | |||||
| Weighted average shares outstanding: | |||||||||||
| Basic | 116.8 | 116.4 | 115.4 | ||||||||
| Diluted | 119.7 | 119.8 | 119.3 | ||||||||
| (1) Services revenue includes the effect of the following item: | |||||||||||
| Customer relief program | $ | (58.6 | ) | $ | — | $ | — | ||||
| (2) Income from operations includes the effect of the following item: | |||||||||||
| Intangible asset charges | $ | 12.4 | $ | 13.3 | $ | 10.6 | |||||
| (3) Income tax expense (benefit) includes the effect of the following items: | |||||||||||
| Excess tax benefits related to share-based compensation arrangements | $ | (31.6 | ) | $ | (65.4 | ) | $ | (11.3 | ) | ||
| Discrete tax expense arising from the conclusion of a tax matter | $ | 36.8 | $ | — | $ | — | |||||
| (4) Diluted net income per share includes the effect of the following items: | |||||||||||
| Customer relief program, net of tax | $ | (0.37 | ) | $ | — | $ | — | ||||
| Intangible asset charges, net of tax | $ | (0.09 | ) | $ | (0.10 | ) | $ | (0.08 | ) | ||
| Excess tax benefits related to share-based compensation arrangements | $ | 0.26 | $ | 0.55 | $ | 0.09 | |||||
| Discrete tax expense arising from the conclusion of a tax matter | $ | (0.31 | ) | $ | — | $ | — | ||||
UNAUDITED SIX MONTHS ENDED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
| Six months ended | |||||||
| 2020 | 2019 | ||||||
| Revenue: | |||||||
| Instruments and accessories | $ | 1,078.3 | $ | 1,130.8 | |||
| Systems | 544.3 | 591.3 | |||||
| Services (1) | 329.0 | 350.5 | |||||
| Total revenue | 1,951.6 | 2,072.6 | |||||
| Cost of revenue: | |||||||
| Product | 580.5 | 529.8 | |||||
| Service | 130.0 | 114.2 | |||||
| Total cost of revenue | 710.5 | 644.0 | |||||
| Gross profit | 1,241.1 | 1,428.6 | |||||
| Operating expenses: | |||||||
| Selling, general and administrative | 587.2 | 552.6 | |||||
| Research and development | 290.3 | 264.8 | |||||
| Total operating expenses | 877.5 | 817.4 | |||||
| Income from operations (2) | 363.6 | 611.2 | |||||
| Interest and other income, net | 51.7 | 60.3 | |||||
| Income before taxes | 415.3 | 671.5 | |||||
| Income tax expense (3) | 28.9 | 51.1 | |||||
| Net income | 386.4 | 620.4 | |||||
| Less: net income (loss) attributable to noncontrolling interest in joint venture | 4.9 | (4.4 | ) | ||||
| Net income attributable to |
$ | 381.5 | $ | 624.8 | |||
| Net income per share attributable to |
|||||||
| Basic | $ | 3.27 | $ | 5.42 | |||
| Diluted (4) | $ | 3.19 | $ | 5.23 | |||
| Weighted average shares outstanding: | |||||||
| Basic | 116.6 | 115.2 | |||||
| Diluted | 119.7 | 119.4 | |||||
| (1) Services revenue includes the effect of the following item: | |||||||
| Customer relief program | $ | (58.6 | ) | $ | — | ||
| (2) Income from operations includes the effect of the following item: | |||||||
| Intangible asset charges | $ | 25.7 | $ | 40.8 | |||
| (3) Income tax expense includes the effect of the following items: | |||||||
| Excess tax benefits related to share-based compensation arrangements | $ | (97.0 | ) | $ | (84.0 | ) | |
| Discrete tax expense arising from the conclusion of a tax matter | $ | 36.8 | $ | — | |||
| (4) Diluted net income per share includes the effect of the following items: | |||||||
| Customer relief program, net of tax | $ | (0.37 | ) | $ | — | ||
| Intangible asset charges, net of tax | $ | (0.19 | ) | $ | (0.30 | ) | |
| Excess tax benefits related to share-based compensation arrangements | $ | 0.81 | $ | 0.70 | |||
| Discrete tax expense arising from the conclusion of a tax matter | $ | (0.31 | ) | $ | — | ||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
2020 |
2019 |
||||||
| Cash, cash equivalents, and investments | $ | 6,074.8 | $ | 5,845.2 | |||
| Accounts receivable, net | 508.8 | 645.2 | |||||
| Inventory | 645.5 | 595.5 | |||||
| Property, plant, and equipment, net | 1,450.3 | 1,272.9 | |||||
| 336.8 | 307.2 | ||||||
| Deferred tax assets | 365.5 | 425.6 | |||||
| Other assets | 721.9 | 641.6 | |||||
| Total assets | $ | 10,103.6 | $ | 9,733.2 | |||
| Accounts payable and other accrued liabilities | $ | 965.7 | $ | 1,083.3 | |||
| Deferred revenue | 371.5 | 365.2 | |||||
| Total liabilities | 1,337.2 | 1,448.5 | |||||
| Stockholders’ equity | 8,766.4 | 8,284.7 | |||||
| Total liabilities and stockholders’ equity | $ | 10,103.6 | $ | 9,733.2 | |||
UNAUDITED RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(IN MILLIONS, EXCEPT PER SHARE DATA)
| Three months ended | Six months ended | ||||||||||||||||||
2020 |
2020 |
2019 |
2020 |
2019 |
|||||||||||||||
| GAAP gross profit | $ | 502.9 | $ | 738.2 | $ | 759.0 | $ | 1,241.1 | $ | 1,428.6 | |||||||||
| Share-based compensation expense | 19.2 | 18.0 | 16.0 | 37.2 | 31.1 | ||||||||||||||
| Intangible asset charges | 9.8 | 9.7 | 8.7 | 19.5 | 16.9 | ||||||||||||||
| Non-GAAP gross profit | $ | 531.9 | $ | 765.9 | $ | 783.7 | $ | 1,297.8 | $ | 1,476.6 | |||||||||
| GAAP income from operations | $ | 80.6 | $ | 283.0 | $ | 359.0 | $ | 363.6 | $ | 611.2 | |||||||||
| Share-based compensation expense | 95.9 | 90.6 | 81.6 | 186.5 | 157.7 | ||||||||||||||
| Intangible asset charges | 12.4 | 13.3 | 10.6 | 25.7 | 40.8 | ||||||||||||||
| Litigation recoveries | — | (1.2 | ) | — | (1.2 | ) | — | ||||||||||||
| Acquisition-related items | 4.4 | (1.4 | ) | 4.1 | 3.0 | 7.1 | |||||||||||||
| Non-GAAP income from operations | $ | 193.3 | $ | 384.3 | $ | 455.3 | $ | 577.6 | $ | 816.8 | |||||||||
| GAAP net income attributable to |
$ | 68.0 | $ | 313.5 | $ | 318.3 | $ | 381.5 | $ | 624.8 | |||||||||
| Share-based compensation expense | 95.9 | 90.6 | 81.6 | 186.5 | 157.7 | ||||||||||||||
| Intangible asset charges | 12.4 | 13.3 | 10.6 | 25.7 | 40.8 | ||||||||||||||
| Litigation recoveries | — | (1.2 | ) | — | (1.2 | ) | — | ||||||||||||
| Impairment charges | — | — | (0.8 | ) | — | 0.7 | |||||||||||||
| Acquisition-related items | 4.4 | (1.4 | ) | 4.1 | 3.0 | 7.1 | |||||||||||||
| Tax adjustments (1) | (44.1 | ) | (90.0 | ) | (22.1 | ) | (134.1 | ) | (123.6 | ) | |||||||||
| Adjustments attributable to noncontrolling interest in joint venture | (4.3 | ) | (2.0 | ) | (4.2 | ) | (6.3 | ) | (8.0 | ) | |||||||||
| Non-GAAP net income attributable to |
$ | 132.3 | $ | 322.8 | $ | 387.5 | $ | 455.1 | $ | 699.5 | |||||||||
| GAAP net income per share attributable to |
$ | 0.57 | $ | 2.62 | $ | 2.67 | $ | 3.19 | $ | 5.23 | |||||||||
| Share-based compensation expense | 0.80 | 0.76 | 0.68 | 1.56 | 1.32 | ||||||||||||||
| Intangible asset charges | 0.10 | 0.11 | 0.09 | 0.21 | 0.34 | ||||||||||||||
| Litigation recoveries | — | (0.01 | ) | — | (0.01 | ) | — | ||||||||||||
| Impairment charges | — | — | — | — | 0.01 | ||||||||||||||
| Acquisition-related items | 0.04 | (0.01 | ) | 0.03 | 0.03 | 0.06 | |||||||||||||
| Tax adjustments (1) | (0.36 | ) | (0.76 | ) | (0.18 | ) | (1.13 | ) | (1.03 | ) | |||||||||
| Adjustments attributable to noncontrolling interest in joint venture | (0.04 | ) | (0.02 | ) | (0.04 | ) | (0.05 | ) | (0.07 | ) | |||||||||
| Non-GAAP net income per share attributable to |
$ | 1.11 | $ | 2.69 | $ | 3.25 | $ | 3.80 | $ | 5.86 | |||||||||
(1) For the three months ended
For the six months ended
Contact: Investor Relations
(408) 523-2161
Source: Intuitive Surgical, Inc.