Travis Steed: All right, great. Thanks a lot and congrats.
Gary Guthart: Thank you.
Operator: And we’ll go next to the line of Robbie Marcus, JPMorgan. Please go ahead.
Robbie Marcus: Great. Thanks for taking the question. Congrats on a really good quarter. I’m going to push my luck again. Gary, one of the things we talked about two weeks ago on stage was big data and the potential to integrate it into your systems. Maybe if we think about just philosophically da Vinci 5, is this something we’ll see a lot more software improvements rather than hardware improvements? I realize you’re not giving specific details, but is software and the ability to add future software updates something we can be looking forward to?
Gary Guthart: Yeah, one of the things we talked about in the script is the increase in computational capability of the system, the re-baselining of that system. And one of the reasons for that is future programmability. Some of the things that we’ll be able to bring out of the gate are pretty exciting, but it also gives us the opportunity to build on that base and sequential software releases. So it’s a good pull-through, Robbie. The point you make is a good one, and we do want to pull through software capability. It will not just be software that we bring to market, but it’s a starting point. Just to remind everybody back in the Xi launch period, Xi didn’t have everything that we could possibly do with it at first year of launch either. It’s something that as we build capability and build skill we can add to over time, and we’ve done that for years, we will do the same in dV 5, it is a platform upon which we can build for many years to come.
Robbie Marcus: Great. And maybe one for Jamie. OpEx stepping up with the new product launch, you talked about in the midterm, seeing operating margin expansion, we’re also seeing elevated CapEx this year as you talked about all the manufacturing plants. Maybe addressing them both, how should we think about where all of these expenses are going, particularly in OpEx this year, R&D versus SG&A? And what types of activities in each? And then is three years a good time frame to think about for the midterm when we might see these spending trends moderate? Thanks a lot.
Jamie Samath: Yeah. Let me take CapEx first. In ’23 and ’24, the majority of those capital investments are for manufacturing facilities and to add manufacturing capacity in particular to our Mexicali factory. So a significant portion of the depreciation that comes with that will show up in cost of sales, and that’s reflected in part in the ’24 gross margin guidance. Some of it will show up in OpEx, and that will therefore be reflected in SG&A. If I look at the relative growth in R&D and SG&A in ’24, I think it’s relatively similar. Obviously, innovation in R&D is important to us. But you will have a little bit of an impact in ’24 at least for incremental depreciation. We still see opportunity to leverage some of our enabling functions.
There are some other functions that also can leverage as we scale and grow, and so we’ll look to do that over the next couple of years. With respect to the kind of operating margin expansion opportunity that I described in my prepared remarks. And we said over the medium term, I’d kind of broadly say that’s a three- to five-year horizon. We have a specific set of actions and plans that we need to execute. Those teams have those as goals. There’s some variability, obviously, in terms of how they get executed and there’s some interrelationship between set of actions that need to be completed. So there are dynamics there that can impact the speed at which that gets executed. And of course, we have to run our business in the meantime.
Robbie Marcus: Great. Thanks for the thoughts.
Operator: And we’ll go over to the line of Rick Wise, Stifel. Please go ahead.
Rick Wise: Good evening everybody, and great to see the Gen 5 announcement. Maybe I’m going to go into a slightly different direction. Maybe we can get some updates and more details, more color on Ion and SP. SP, Gary, the strongest quarter ever. I’m just curious your thoughts about ’24 and the next couple of years. What’s next? How are you — what are the team priorities for ’24? And on the Ion side, maybe more for Jamie, you gave us some good color about demand strong and supply constraints continue. How are you thinking and what are you dialing into your thinking for ’24 about resolution of the catheter and the vision probe limitations? When are you hoping that, that gets largely better result?
Gary Guthart: Thanks, Rick. On the SP front, we’re pleased with the step forward they took in ’23. It was good. We’re seeing more focused efforts in our commercial team in the US, which has been good. We’re excited about its entry into Japan, and we’re starting to see a build of activity in Japan, too. So that’s been good. We expect to see it in Europe in ’24, and that’s another nice step. And I think that’s a broader set of clinical indications as it was in Korea and Japan. So it gives us a little more freedom to operate, which is great. In the US, we have trials that had finished accrual and have been submitted or will be submitted soon in thoracic and colorectal that will give our US customers more opportunity to use SP in a multiplatform — multispecialty environment.
So I think SP continues to be a nice build. So that looks good. And team has their marching orders and is working down that set of processes. We have a breast oncology trial that’s ongoing that we’re excited about also that will not make a big impact in ’24, but starts to open additional opportunity for narrow access surgery thereafter. So that’s kind of where we are in SP, so far, so good. I’ll turn it over to Jamie and talk about Ion.
Jamie Samath: Not ready to be particularly specific yet on when the supply chain challenges are behind us. For catheter, you have three dynamics. So we had a specific supply constraint that impacted us. We are, at the same time, transferring a number of catheter lines to Mexicali. And we’re doing that as the business is effectively doubling, so you’re bringing on new staff, you’re having to train them. So that’s a real effort that takes some time. And I think there’s a little bit of variability in terms of when we get to point where that’s behind us. So I’m going to let us have another quarter before we talk about when that’s resolved. The teams are making clear progress, but there’s work still will be done. On the vision probe, I think it’s a relatively simpler problem for us to address.
