Intuitive Surgical, Inc. (NASDAQ:ISRG) Q3 2023 Earnings Call Transcript

Anthony Petrone: Maybe one on China and one on pricing on instruments. When we think about the quota size that National Health Commission in China put out, its new quota is 559 systems. Just wondering on anticorruption, could that shift that number over time whether it be that just fewer capital dollars going to projects or just from a timing element, because things are getting elongated. And then the pricing question would be on instruments and accessories. The company put a 5% price increase in their first one in 14 years. Chairman Powell came out and said, look, inflation is going to be persistent and elevated for quite some time. If inflation stays high, could another 5% price increase beyond the table for 2024? Thanks.

Gary Guthart: With regard to the capital side in China, I’ll jump into that. I think demand for our systems and for the procedures they support in China, raw demand is really high. So it’s really being limited or titrated by policy. I don’t see – I haven’t heard anything that says people want to go back and revisit or lower the quota, I think that would be resisted by customers who are looking for purchases. So, I think it’s more around delay and a kind of a timing thing and how long it is hard to predict, but months, not weeks. On the pricing side, I’ll speak to a general principle rather than projecting ’24. What we try to do is a couple of things. One is be an outstanding manufacturer, really get high quality at low cost, and make sure that we can invest in manufacturing prowess to do that.

I think that’s really powerful for us, gives us enormous flexibility to meet the customers’ needs, kind of where they are. With regard to pricing, we look at a couple of things, certainly price to us, cost to us, but also price elasticity, what the customer can do and achieve and that varies by market. And I think, we’ve become increasingly sensitive to and sophisticated at understanding pricing. So raw material pricing and core inflation to us is an input to our pricing. That’s why we took price up this last year, but it’s not the only thing, and you shouldn’t expect us to be purely algorithmic tracking inflation on its own.

Anthony Petrone: Thanks.

Operator: And we’ll go to the line of Michael Polark of Wolfe Research. Please go ahead.

Michael Polark: Good afternoon. Thank you for taking the questions. I have big picture one modeling long-term. There’s an investor presentation out earlier this year and it – Intuitive identified 6 million procedures globally for multi and single port for which you currently have line of sight. And on that same slide, identified that there’s 20 million soft tissue surgery procedures overall. And if I look at where you’re today, you’re approaching 40% of that 6 million. And so my question is the delta between the 20 and the six to 14 kind of – how do you expand the six towards the 20? And what are the major unlocks that you expect over the next three to five years that will move the six towards the 20 and kind of your feel for the pace of addressing more of the global procedure pie?

Gary Guthart: Yes, it’s a good question. I think the general tools that we use to get from six to 20 are kind of three buckets. Some of them are clearances in new markets. So making sure that a market we can address has access to the technologies that we already have. So when you think about something like Ion, for example, Ion is not yet available in all the markets in which we operate as it operates that it starts to open what we can do. That’s kind of one bucket. New indications are another one that some of the work that Myriam described earlier. That starts to open a new opportunity for us as we broaden the applicability of our platforms to new types of surgery and intervention. The third bucket or another bucket is reimbursement.