Intuitive Surgical Earnings Call Insights: Benign Hysterectomy Slowdown and Guidance Analysis
Benign Hysterectomy Slowdown
Evan Lodes – JPMorgan: This is Evan Lodes for Tycho. I guess first question was for Gary. Can you disaggregate the slowdown in benign dVH between the seasonal effects that you mentioned such as deductibles and then also the more coordinated efforts that you talked about with regards to the rollout specifically?
Gary S. Guthart, Ph.D. – President and CEO: I think I heard the question, although there’s a little bit of background noise on the call. I think the question was can we disaggregate the benign hysterectomy slowdown. I think there are few things going on there. As we look at multi-port benign hysterectomy in total, we think our market opportunity is really the open surgical market share. There’s still more than 100,000 open benign hysterectomies being done in the U.S. We see three issues impacting benign hysterectomy. First, as we become a larger part of the market, the impact of seasonality plays proportionately bigger role in our performance. Said, simply one of the new technique is a small part of the market, the number of un-served patients is sufficiently large that changes in the total number of patient admissions do not materially impact growth. However, as penetration increases, the sensitivity of the total admission increases with it. Second, several large healthcare organizations are reporting a greater than expected decline in patient admissions in the first quarter. Given that, benign hysterectomy is a large part of our procedure based – that will impact us as well. Third, negative press has some hard to measure impact on benign hysterectomy, although doesn’t appear to be large, it’s also probably not zero.
Evan Lodes – JPMorgan: Then as a second question, you mentioned the international procedure growth was about 14%. Could you help us think about what the growth is in Europe and trends there that you’ve seen recently?
Calvin Darling – Senior Director of Finance: Just numerically, the 14% would be higher on the Asia and Rest of World markets and a bit lower on the European side.
Benjamin Andrew – William Blair: Gary, talk a little bit about the guidance of 20% to 23%, and targeting kind of the low-end of that range. What does it take for you to hit that 20%, does it require a stabilization in benign dVH and again continues that stabilization of prostatectomy, and just maybe walk through how you get to that 20%, because we’re struggling a little bit as we try to plug in the number for Q1 to get there?
Gary S. Guthart, Ph.D. – President and CEO: A couple of things and then, Calvin may help you a little bit with that as well. But as we look out, we’ve seen three quarter in a row with prostatectomy where it’s sort of finding its footing with regard to U.S. We’re assuming that the remains – that trend stays about the same as we go through. General surgery has shown real strength. On benign gynecology, I want to make sure we’re separating out gynecologic procedures from just hysterectomy. There is more in benign gynecology to just hysterectomy, there is myomectomy, cyclocryopexy, both of which were meeting our expectations in this quarter. Quarter’s a little bit hard to interpret just because of the number of operating days and there’s little bit of ambiguity as to how many there were in terms of how the (holidays) played. And we’ll have to see a little bit, impossible to predict the future perfectly we look out and think that our guidance at the low end makes sense giving those kind of three factors together.
Calvin Darling – Senior Director of Finance: As we look at our guidance there are lot of moving parts more and more as you realize, but the key areas of growth are the same as they were entering the year. Specifically the number of new procedures coming from U.S. general surgery, U.S. gynecology at international dVP are going to be still the largest areas of growth. As Gary said based upon customer and surgeon feedback. We have not seen a major impact on the benign dVH procedure demand although we can’t really predict you where that may head in the future. We expect seasonality to play through and will benefit later in the year on some of these things as well. And we do forecast that dVP has bottomed out. So having said that nobody has crystal ball and we’ll take it one quarter at a time…
Benjamin Andrew – William Blair: Two more quick questions Gary. Are you hearing additional chatter or kind of disturbing chatter from either surgeons or hospitals questioning the safety and obviously efficacy of the system I know that maybe hard to quantify, does it feel different now than it did a month ago and were the trends in the quarter something that got your attention?
Gary S. Guthart, Ph.D. – President and CEO: With regard to surgeon feedback on the use of our device the safety and stability of it. But surgeons are the ones who are absolutely closest to it. they work with it every day we have seen very little change in their view point in terms of people who actually know the device, and likewise that’s true with hospitals who are customers. These kinds of questions do come up in conversation, they come up in conversation with sales teams, but we haven’t seen a substantial change in the nature of that conversation say over the last few weeks of the quarter as we go through it.
Benjamin Andrew – William Blair: Then finally, you mentioned something intriguing about SG&A spending topping up in the second quarter. I thought I heard prototyping in the middle of that list. Can you describe that at all?
Calvin Darling – Senior Director of Finance: Yeah, we’ve always said prototypes are going to be lumpy, right. I think if you looked sequentially at operating expenses, they declined from Q4 to Q1 and it was relatively light in the areas that Marshall mentioned in his script then I think you are going to see a pickup in the items that I mentioned including prototypes.
Gary S. Guthart, Ph.D. – President and CEO: Then you had asked a question just to follow-up on surgeon’s view or surgeon’s commentary on it. I’ll tell you one surgeon’s comment with regard to some of the criticisms that’s been out there. He came back and said, hey, open surgery hasn’t gotten any better for patients and laparoscopy hasn’t gotten any easier for surgeons. And I think that’s true.
Benjamin Andrew – William Blair: Now we definitely heard the same thing. Thank you.
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