And gentlemen, good afternoon. Thank you for standing by, and welcome to the Intuity Surgical Quarter 1 2013 Earnings Release Conference Call. At this time, all lines are in a in only mode. Later, there will be an opportunity for your questions and instructions will be given at that time. If you should require any assistance today, please and AT and T operator will assist you.
And as a reminder, today's conference is being recorded. I would now like to turn the conference over to our host, Senior Director of Finance, Mr. Kelvin Darling. Please go ahead.
Thank you. Good afternoon, and welcome to Intuitive Surgical's 1st quarter earnings conference call. With me today, we have Gary Goodhart, our President and CEO Marshall Moore, our Chief Financial Sir and Alex Soukich, our Vice President of Strategic Planning. Before we begin, I would like to inform you that comments mentioned on today's call may be deemed to contain forward looking statements. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties.
These risks and uncertainties are described in detail undue reliance on such forward looking statements. Please note that this conference call will be available for audio replay on our website at intuitivesurgical.com on the audio archive section under our Investor Relations page. In addition, today's press release has been posted to our website. Today's format will consist of providing you with highlights of our first quarter results as described in our press release to now earlier today, followed by a question and answer session. Gary will present the quarter's business and operational highlights Marshall
will provide
a review of our first quarter financial results. Alex will discuss marketing and clinical highlights then I will provide an update to our financial forecast for 2013. And finally, we will host a question and answer session. With that, I'll turn it over
make a few comments regarding current events. As you know, we are in the midst of a concerted effort by critics of robotic surgery to challenge the benefit it brings to patients. The evaluate brings to the medical community and the quality of our organization. While taking these allegations very seriously, we remain deeply committed to developing and providing benefits provided by our systems, demonstrated in numerous large scale population studies, comparing da Vinci surgery to open for several Cheron Da Vinci will find ample evidence of the benefit it brings to patients, surgeons, hospitals, and the medical community large. To date, over 1,000,000 patients chose a da Vinci minimally invasive surgery, surgery that would have otherwise been performed an open incision.
Turning to our performance in the quarter. We experienced strong growth in General Surgery, slower growth in gynecology and a return to stability in urology. This resulted in an 18% procedure growth over 2012. The first quarter of 2013 had 1 fewer surgery days than 2012, taking this into account, normalized procedure growth improves to approximately 20%. General Surgery growth was led by single site colon cystectomy and colon and rectal procedures.
Connecologic procedures for benign indications are typically seasonally slow in the first quarter. However, we experienced slower than expected growth in benign hysterexion in this first quarter of 2013. Worldwide urology procedures experienced solid growth aided by the stabilizing of prostatectomy procedures in the United States. Considering the above, procedure growth for the quarter came in at the lower range of our expectations. Alex will provide additional procedure commentary later in the call.
Turning to markets outside of the United States, our first quarter of SI system sales to Japan went well, with encouraging early customer demand for the system. We are supporting Surgical and their efforts to obtain national reimbursement for procedures beyond prostatectomy. In Europe, procedures and system sales fall seasonal trends and showed development over the past few quarters. Overall, operating highlights for the first quarter are as follows. Procedures grew 18% over the first quarter of 2012.
Adjusting for the number of procedure days in the quarter, normalized growth was approximately 20%. We sold 164 Diminci surgical systems, up from 140 during the first quarter of last year. Total revenue was 611 dollars, up 26% over Q1 of 2012. Total recurring revenue grew to $356,000,000, up 23% from prior year and comprising 58 percent of total revenue. We generated an operating profit of 2 $85,000,000 before noncash stock option expense, up 27% from the first quarter of last year.
Net income was $189,000,000, up 32% over the last year. Earnings per share for the quarter were $4.56, compared to $3.50 in the first quarter of 2012. We ended the quarter with cash and investments, up $196,000,000 30. We repurchased 146,000,000 worth of our shares in the quarter. Our product development teams continued to make good progress.
This quarter, we in the installations at a measured pace through the year. Early surgeon and patient interest in single site for hysterectomy is cases with our da Vinci stapler. As we have mentioned previously, our first stapling product is focused on colorectal surgery, Early clinical results and surgeon feedback on use of the stapler are very encouraging. Given the subtleties involved in the use and manufacturer of surgical staplers or roll plan for the stapler will be conservative for the year. Turning to system and imaging developments.
We continue to invest in expanding indications for Fireflies for Residence Imaging and in deepening our product offerings in supportive system training, We are currently is to allow surgeons to image the common bile duct in real time during colon's detect knee. On the simulation front, have added new surgical skill modules to our simulator through our development partnerships. Our medical research team is working with academic centers worldwide on face, content, and construct validity studies of the da Vinci skill simulator. Early publications of these validations are positive. Lastly, we are initiating is our system for remote Procterin.
Remote Procterin uses internet based conferencing technology to allow a distant surgeon to participate in the da Vinci case with a surgeon on an SI console through video, voice, and demonstration. Is intended to augment surgical proctoring by lowering the time, distance, and cost barriers to expert participation during a surgeon's learning period. We are investing of our training center at our California headquarters and a second new facility in Atlanta to serve our customers in the East. As we enter new surgical markets and drive into new product us, we continue to invest in building our team and expanding partnerships and acquiring those technologies that can make a difference to robotics This quarter, we added 118 people to our team predominantly in sales, manufacturing and R and D, bringing our total team to 20 480 employees. I'll now pass the time over to Marshall, our Chief Financial Officer.
Thank you, Gary. Our first quarter revenue was $611,000,000, up 23% compared with $495,000,000 for the first quarter of 2012 and roughly equaled the $609,000,000 last quarter. 1st quarter revenues by product category were as follows: 1st quarter instrument and accessory was $261,000,000, up 26% compared with $208,000,000 for the first quarter of 2012 and up 3% compared with $254,000,000 in the fourth quarter of 2012. The year over year increase in instrument and accessory revenue was driven by procedure growth of 18 percent, sales of new products, including single site, vessel sealer, and firefly and higher stocking orders associated with system unit sales. 2012, reflecting leap year.
Excluding the impact of leap year, procedure growth would have been approximately 20%. Procedure growth also reflects seasonality associated with benign hysterectomies, which was more pronounced in 2013 compared with 2012, as we achieved deeper penetration in this market. The year over year procedure growth is led by U. S. General surgery and gynecology procedures, partially off by lower U.
S. DVPs of approximately 11%. And 12. The sequential increase in instrument and accessory revenue compared with the last quarter was driven by the timing of customer orders and new product revenues associated
with the
approximately $2.10 per procedure, which is higher than $19.90 realized in the first quarter of last year in the by the timing of 4% compared with $207,000,000 for the first quarter of 2012, with $265,000,000 for the fourth quarter of 2012. Our higher systems revenue compared to the first quarter of last year was driven by higher unit sales, and a higher average selling price. We sold 164 systems in the first quarter of 2013 compared with 140 in the first quarter of system sales included 25 systems into Japan, where we launched the da Vinci S I at the start of this year. We sold 7 systems into Japan during the first quarter of 201210 last quarter. Our first quarter average selling price per system was $1,550,000 compared with $1,470,000 realized in the first quarter of 2012 and the 1,490,000 realized last quarter.
ASPs include all da Vinci models, all simulators, and Fireflies when configured with the system and exclude upgrade. Our higher first quarter 2013 ASP was driven by a higher proportion of dual full configurations and a favorable geographic mix. 48 with $25,000,000 of $140,000,000 last year and $32,175,000,000 last quarter. 15 of the 25 units sold in Japan during the first quarter were dual console models. We sold 97 during the quarter, mostly in conjunction with new system sales compared with 102 last year and 115 last quarter.
39 of our first quarter 2013 system sales involving trade in comprised of 30 da Vinci assets and 9 standard model. 46 of our first quarter 2012 sales involve trade ins and 52 of our fourth quarter 2012 sales involve trade ins. Service revenue increased to $94,000,000, up 17% compared with $81,000,000 last year and up 4% compared with 91 dollars last quarter. The growth in service revenue was primarily driven by a larger system installed base. Comprised of instrument, accessory and service revenue increased to $356,000,000, up 23% compared with first quarter of 8% of total 1st quarter revenue compared with 58% in the first quarter of last year and 57% last quarter.
International results were as follows. 1st quarter revenue outside of the United States was 153,000,000 dollars compared with revenue of $105,000,000 in the first quarter of last year and up 17% compared with revenue of 131,000,000 the fourth quarter of 2012. Our year over year and quarter over quarter international revenue growth was driven by higher da Vinci system sales into the Japanese market. First quarter 2013 international procedure volume was approximately 14% higher than the first quarter of 2012. 10% outside of the U.
S, compared with 35 in first quarter of 2012 in 42 last quarter. We sold 16 systems in Europe this quarter compared with 14 in first quarter of 2012 and 24 last quarter. Moving on to the remainder of the P and L. Gross margin in the first quarter of 2013 was 71% compared with 71.9% during both the 1st and 4th quarter of 2012. Our lower first quarter 2013 gross margin percentage resulted primarily from the impact of system ASPs and higher service margins.
Our first quarter 2013 cost of sales included 6,500,000 related to the medical device excise tax. 1st quarter 2013 operating expenses of $183,000,000 were up 13% compared with primarily driven by headcount additions. The sequential decrease in operating expenses was driven by lower variable compensation expense and the timing engineering projects and other expenses. First quarter 2013 operating income was 2 $51,000,000 or 41 percent of sales compared with $193,000,000 or 39 percent of sales last year. $248,000,000 or 41 percent of sales for the fourth quarter of 2012.
1st quarter 2013 operating income reflected 38,000,000 dollars tax rate for the first quarter was 26% compared with 27% for the first quarter of 2012 quarter. As anticipated, our first quarter 2013 income tax expense included a discrete benefit of approximately $7,500,000 for the reinstate of the 2012 R and D tax credit, which became effective January 1st this year. Otherwise, our tax rate would have been 29%, Our tax provision for the first quarter of 2012 included a one time benefit associated with domestic manufacturing tax credit. And otherwise, our tax rate in that quarter would have been 32%. Our net income was 189,000,000 or $4.56 per dollars or $4.25 per share for the fourth quarter of 2012.
Now moving to cash flow. We ended the 1st quarter with cash and investments of $3,100,000,000, up $196,000,000 compared with December 31, 2012. The increase was driven by $258,000,000 of cash flows from operations, plus $89,000,000 from the exercise of stock options, partially offset by $146,000,000 in stock buybacks and $17,000,000 of capital and IP purchases. During the first quarter, we bought back 299,000 shares an average price of $487 per share. As recently announced, our Board of Directors has increased our share buyback authorization by 1,000,000,000.
Including this latest authorization, we ended the quarter with approximately 1,200,000,000 of authorized share buybacks. And with that, I'd like to turn it over to Alex who'll go over our sales, marketing and clinical highlights.
Thank you, Marshall. During the first quarter, we sold 164 Da Vinci systems, 115 in the United States, 16 into Europe and 33 in Tourestor World markets. As part of the 164 system sales, 9 Standard da Vinci systems and 30 da Vinci S systems were traded in for credit against sales for new da Vinci Si systems. We finished the quarter with a net 125 system additions to the installed base. Bringing to 2710, the cumulative number of da Vinci systems worldwide, 1957 in the United States 4.30 in Europe and 323 in Rest of World Markets.
75 of the 164 systems installed during quarter represented repeat system sales to existing customers. Presented da Vinci Si or SIE systems, which included 48 dual console systems. The 49 systems system sales internationally included 25 into Japan, 4 into France and 3 into Turkey. Clinically, Q1 year over year procedure growth was approximately 18% led by the category of general surgery followed by GYN. General surgery growth was paced by Colas stectomy followed by colon rectal resections.
As Gary stated, procedure growth reflected seasonality, the reduction of selling days and a slower a topic extensively discussed appears to be flattening out. U. S. DBP was once again up on a sequential base with a reduced rate of decline as compared to last year. Showed solid growth both on a sequential and on a year over notably single site where customer feedback has been positive and sales have remained strong.
Through Q1 twenty thirteen, we've sold single site instrument and accessory kits to approximately 630 U. S. Customers. Our recently launched vessel sealer product has picked up clinical momentum with most of the interest coming from the specialties of colorectal, advanced general surgery and GYN. The customer adoption for both da Vinci simulator and Fire continues to expand with 97 customers purchasing a da Vinci simulator and 69 customers purchasing Fireflies systems as part of their initial system purchase this quarter.
Directomy products. These rollouts will be expanded in a measured fashion, so we do not expect them to contribute materially to 2013 revenue. During the quarter, several 100 robotic abstracts and papers representing a variety of surgical specialties were published within various peer reviewed journals. Quarterly clinical conferences produced several live da Vinci procedure transmissions postgraduate robotic courses, podium presentations, and clinical poster sessions. As many of you know, surgeon support we received at this conference thus far has been positive.
Much of the critical press we received has been directed toward the cost efficacy of da Vinci within the specialty of GYN and more specifically within its use to treat benign conditions. To be clear, we believe strongly that one of our greatest growth opportunities consists of converting open hysterectomy to DVH. Da Vinci has shown itself is a very capable and who would otherwise have undergone an open surgical procedure. Open hysterectomy is where we focus. Open hysterectomy represents the largest component of our target market growth.
Open hysterectomy conversions is where we deliver high patient value. Unfortunately, most of the media as well as the ACOG commentary were focused on da Vinci's economic profile versus either vaginal surgery or simple For decades, the popularity of vaginal and laparoscopic approaches to hysterectomy paled in comparison to the number of open hysterectomy being performed within the United States, which clearly explains In a recent addition of the journal Gynecologic Surgery, a European study discussed this very issue. The study emanated out of Court University Maternity House in Cork, Ireland, an extremely cost sensitive market with national austerity measures in place. In the analysis Cork U computed and compared hysterectomy specific hospitalization costs between their hospital and a similarly sized reference hospital with a similar hysterectomy treatment mix. The hysterectomy treatment mix in these hospitals included open midline incision, lower transverse incision, LAVH and vaginal hysterectomy.
They determined that on average, and open hysterectomy performed through a midline incision required in 8 day hospitalization 6 days for a hysterectomy performed through a lower 3 days for an LABH and 3 days for vaginal hysterectomy. They computed cost for a day of hospitalization to be approximately 5 34. Court University acquired their da Vinci system in 2008, whereas the reference hospital did not. Following the inclusion of da Vinci, Cork University discovered that their DVH patients were spending only 2 days in the hospital and GYN beds were being consumed for fewer days. They also reported that following the introduction of DVH and is projected to represent only 5% of the total hysterectomies performed during the final year of the study.
As compared to 35 When comparing the current mix and extrapolating over an annual basis, 280 hysterectomies, the bed day rate is reduced from 11 34 days to 7 56 days when incorporating da Vinci, which represents a potential annual savings of over 200,000 euros. In the author's comments, they stated and I quote in 2009, the American Congress of Obstetricians And Gynec College released the statement recommending vaginal hysterectomy as the approach of choice for benign hysterectomies due to reduced operating times when compared to the laparoscopic approach. However, they note that laparoscopic surgery is an alternative to vaginal hysterectomy is not when lab vaginal hysterectomy is not feasible or indicated. Increasing the rate of vaginal surgery decreases the cost of surgery compared to the open approach due to reduced length of stay, consideration must be given to the fact that not all surgeries are amenable to the vaginal approach. 1 could argue that the same commentary would pertain to the laparoscopic approach and that it too has remained in the minority due to clinical and or technical challenges.
The authors concluded their paper by stating, robotic surgery is associated with reduced hospital stay compared with open surgery. While the initial outlay is expensive, the increase number of patients amenable to this minimally Davinci colorectal resections have been expanding rapidly over the past several quarters. The uptake has been driven by surgeons seeking to offer patients a less invasive alternative to open colorectal surgery. While laparoscopic colorectal surgery has been proven to be safe and effective, and has for years been available within several leading institutions throughout the world. It has nonetheless remained largely under penetrated within the United States.
In a recent addition of the journal Surgical Endoscopy, a study entitled Total Mesorectal Excision, a comparison of oncologic and functional results between robotic and laparoscopic rectal surgery was published. The study conducted in Rome was based on 100 patients who had undergone minimally invasive anterior rectal resections with total mesorectal excision or TME. 50 consecutive robotic rectal anterior resections with TME were compared to the 1st 50 consecutive laparoscopic rectal resections with PME. The authors made several comparisons, which included operating time, conversion rate, lymph node yields, circumential margins, length of stay and sexual function scores. They reported that the operative times were similar between the two groups.
With da Vinci holding only a slight advantage. Lymph node yields were greater using da Vinci 16.5 versus 13.8. Conversions to open surgery scopic cohort. The circumferential margins less than 2 millimeters were 0 using da Vinci as compared to 12% for the lab group. In the author's conclusion, they wrote and I quote robotic TME is oncologically safe and adequate for rectal cancer treatment.
Showing better results than laparoscopic TME in terms of circumferential margins, conversions and hospital length of stay. Better recovery in voiding and sexual function is achieved with the robotic a major single center comparative analysis with strong finding lays the foundation for larger and more comprehensive comparative studies. We would expect this trend to continue within the field of colon rectal surgery. This concludes my remarks and I'll now turn the time over to
Thank you, Alex. I will be providing you with an update to our financial forecast for 2013, including procedures, revenues and other elements of the income statement on a GAAP basis. Future cash flows. 23% from the base of approximately 450,000 procedures performed in 2012. Now based upon 1st quarter procedure trends, we expect our full we forecasted full year 2013 revenue growth of between 16% 19%.
Based upon favorable new instrument and accessory product sales and utilization, we now expect full year 2013 revenue growth at the higher end of reflecting a high and overall systems ASP to return towards historical 2012 levels. Now turning to operating income. We continue to expect full year operating income to fall within a range of between of 41% reflected favorable system pricing and timing of operating expenses. In Q2, we would expect operating expenses to increase at least $15,000,000, reflecting higher variable compensation prototype headcount, stock compensation and legal expenses. We continue to expect 2013 stock compensation to total $184,000,000 $192,000,000 for the year.
Timing and recognition should follow a quarterly pattern similar to 2012. Amortization of purchased intellectual property, which is mostly recorded as R And D expense, is still expected come in between $28,000,000 $30,000,000 in 20.13. In 2013. With regard to income tax, as Marshall described, our Q1 tax rate reflected the benefit related to the reinstatement of the 2012 R and D tax credit. For the rest of this year, we continue to anticipate our tax rate to fall within a range of between 28 30% of pretax income.
Our share count for calculated EPS in Q1 20 team was approximately 41,400,000 shares. Going forward, our share count will depend upon the magnitude and timing of share buyback We will continue to be thoughtful in our us. That concludes our prepared remarks. We will now open the
you. Our first question today comes from the line of Tycho Peterson representing JP Morgan. Please go ahead. Hi guys. It's Evan Lotison 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 talked about with regards to the robot specifically?
I think I heard the question, although there's a little bit of background noise on the call. The question was can we disaggregate the benign hysterectomy slowdown? I think there's a few things going on there. As we look at multiport benign hysterectomy in total, we think our market opportunity is really the open surgical market There's still more than 100,000 open, benign hysterectomies being done in the U. S.
We see 3 issues impacting benign history. First, as we become a larger part of the market, the impact of seasonality plays up proportionally bigger role in our performance. Said simply when a new technique is a small part of the market, the number of unserved patients is sufficiently large that changes in the total number of the are reporting a greater than expected decline in patient admissions in the first quarter. Now given that benign hysterectomy is a large part of our procedure base, that'll impact us as well. 3rd, negative press has some hard to measure impact on benign hysterectomy, although it doesn't appear to be large, it's also probably not
Thank you very much. And then as a second question, you mentioned the international procedure growth was about 14%. Could you us think about what the growth is in Europe and trends there that you've seen recently? Thank you.
Yes. I mean, just numerically, the 14% would be higher on the Asia And Rest of World markets and a bit lower on the European side.
The next question comes from the line of Ben Andrew with William Blair. Please go ahead.
Hi, good afternoon. Can you hear me?
Hi, Ben. We can.
Okay. Gary, talk a little bit about the guidance of 20 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, continued stabilization of prostatectomy, and just maybe walk through how you get to that 20% because struggling a little bit as we try to plug in the number for Q1 to get there.
A couple of things and then Calvin may help you little bit with that as well. But, as we look out, we've seen three quarters in a row with prostatectomy where, it's sort of finding putting with regard to, the U. S. So we're assuming that that remains, that trend stays about the same as we go through. General Surgery has shown real strength on, on gynecology.
But on gynecology, I want to make sure we're separating out procedures from just hysterectomy. There's more in benign gynecology and the just hysterectomy. There's omectomy and cyclical pepsi both of which were meeting our expectations in this quarter. Quarter is a little bit hard to interpret just because of the number of operating days and there's a little bit of ambiguity as to how many were in terms of how the holidays late. And we'll have to see a little bit, impossible to predict the future perfectly.
We look out and think that the our guidance at the low end makes sense, giving those kind of 3 factors together.
Yes. And as we look at our guidance, there are a 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 And International DBP are going to be still the largest areas of growth. As Gary said, based upon customer and surgeon feedback, have not seen a major impact on the benign DVH procedure demand, although we can't really predict where they have that in the future. We expect seasonality to play through and we'll benefit later in the year on some of these things as well. And we do forecast that DBP has bottomed out.
So I think that's having said that, nobody has a crystal ball and we'll take it 1 quarter time.
Okay. And 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. And I know that's maybe hard to quantify, but does it feel different now than it did a month ago and where the trends in the quarter something that got your attention?
With regard to it's interesting. With regard to surgeon feedback on the use of our device, the 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 viewpoint in terms of people who actually know the device.
And likewise, that's true with hospitals who are our 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. Okay.
And then finally, you mentioned something speaking about SG and A spending popping up in the 2nd quarter. I thought I heard prototyping in the middle of that list. Can you describe that at all?
Yeah. We've always said prototypes are going to be lumpy, right? As if you look sequentially at operating expenses, they declined from Q4 to Q1 and it was relatively light in the areas that Marshall mentioned in his script, and I you're going to see a pickup in the items that I mentioned, including prototypes.
Okay. Thank you.
And then you had asked a question just to follow-up on kind of a surgeon's view, a surgeon commentary on it. And I'll tell you one surgeon's comment to me. And, with regard to some of the criticism that's been out there, he came back and said, Hey, open surgery hasn't gotten any better for and laparoscopy hasn't gotten any easier for surgeons. And I think that's true.
No, we've definitely heard the same thing. Thank you.
Our next question today comes from the line of Lennox Ketner, representing Bank of America. Please go ahead.
Great. Just a few questions. First, and sorry if I missed it, but I think you said that the DVP was down about 11% year over year. But last last quarter you had provided, I think the overall growth rates for for both general surgery and gynecology as well, is that something you'd be willing to break out this time?
We do that. We did that on an annual basis and not quarterly.
Okay. Had to try. And then, on the stapler, I was a little surprised to hear you say that people shouldn't be expecting any meaningful contribution from that product this year, just given that it's on the market for 6 months or so now. Arbside has been approved at least for 6 months or so now. Could you maybe just, give us a little more color in terms of why the launch of that product is expected to be so, you know, so measured.
Are there additional features that need to be added to the stapler to make it more effective or Is it really just wanting to make sure that the initial customer experiences are good? If you can maybe just give
people a little bit more
of an explanation as to why that launch is expected to take so long or why it's takes a long to see a meaningful contribution?
Yes. So, for starters, while we had the approval last year, the first clinical cases are happened in this quarter. And really the reason for it is twofold. 1 is we want to have outstanding first customer experiences with it. So far, we have the second thing is the supply chain for the surgical stapler is a long one.
It's a it's a full system that has, electronics in it, software in it, motor packs, and, and single use sterilizable products. So we want to make sure that that side of the supply chain is exceptionally stable ready, as we, as we move to scale. And it's really working those 2 things in parallel to make sure we get a great result. Stapling is a, a subtle product, there are a lot of things about it in terms of both its manufacturing and its use that you want to make sure you get right. And so we'll be doing that.
And that as we start to see that stability, then we'll start to ramp the release.
Okay. So, folks, on a feature standpoint, you feel confident that the version that you have now has all of the features that it needs to ultimately be successful?
It does. Now remember, we've talked in the past that we're focusing this 1st stapler on the colorectal market. And so the size the staple loads, both in terms of their length and the size of the staples that go in these little cartridges are optimized for colorectal In time, we'll start to add different, size cartridges and different leg line staples to allow us to do other things. So, this is really just the 1st step in a multi process. But it's not the lack of a particular feature for colorectal that has us moving in pace.
We're moving.
Okay. That's helpful. And then last one just on the, the buyback authorization I mean, I think it was obviously a much larger authorization that you guys have done in the past, which I think people are happy to see, but how should we think about the timing of that going forward? In the past, you guys have done pretty measured buybacks over time. Should we expect this one to, to occur any more quickly than the others, or is it going to continue to be at the same pace as the others despite being a larger overall authorization?
Yes, I
think you've somewhat characterized how we've approached it. We not been mechanical. We've been very thoughtful about what we've done and we'll continue to be thoughtful. So you shouldn't look for any particular, standard pattern, if you will, we'll look for the right opportunities to buyback over time.
Next we'll go to the line of David Roman with Goldman Sachs. Please go ahead.
Good afternoon. Thank you for taking the question. I was hoping you could talk a little bit more about any efforts you are undertaking or look to undertake to address the weakness in DVH? I mean, obviously, the
seasonal piece and
macro dynamics are what they are. But maybe any sort of impact you've had from the recent noise in the marketplace What is your plan to sort of start to stem that and then how long do you think it might take before we start to see some positive return from those efforts?
On the first comment of, what do we think there is in terms of an opportunity in the 90H? First of all, we look out and say, open procedures that are still being done through a laparotomy or great opportunity for us. We look the country to see where those are and our ability to serve the those patients. That's our primary opportunity. You implied in your discussion that the negative press is having a fair impact, in this.
It's not clear that's true. Right now, separating out how much of this is seasonality, how much is just a total inpatient admission and how much is specific to Intuitive is actually a hard thing to tease apart. Having said that, I think the strength of, eventually surgery has been in its clinical outcomes. And so that's where we start. Relative to open surgery, both in the publications and in the education of our sales team and the interaction with hospitals, it's that set of data.
And so we've done that and we'll continue to do that in terms of, supplying them the data and the resources they need to, to approach those patients. Over a little bit different marketplace. And that's, again, not looking so much at open procedures, but looking at those patients who'd rather have a single incision than multiport. And that as we get to the close of the year, might, to start, give us an opportunity to access the different group of patients.
That's helpful. And I know a lot of the questions on this call regarding, market recent noise or marketplace concerns have been focused on gynecology, but it's Is it fair to say that, that, that hasn't sort of trickled into the other parts of your business? Some of the newer categories like general surgery that continues to be to be fairly robust and your ability to attract new users, train new users? I mean, any change in sort of size of your training class's interest level? I mean, any other metrics that you could help us to gauge this sort of looming question around noise versus reality?
We have not seen a change a desire for people to be trained. And we haven't seen anything that I can point to in the general surgery marketplace that would indicated a real impact.
Yes. And again, I think evidence of that that we have that helps us make that statement are the actual procedure numbers, the number of people who are accessing Proctors and training. And just as a level set, GYN, if you look at things like cyclical perplexity and myomectomy and endometriosis GYN is a and hysterectomy for malignant conditions. It is a very robust category. And, while PVH benign is is certainly the largest individual segment of that category.
As we look out overall at GYN, we remain very encouraged.
Okay. And maybe the last question, just to follow-up on the share repurchase authorization. You've, in the past, I think you've either used share repurchase to kind of offset the impact of options being exercised and it's sort of been not a top use of cash, but sort of something that you've done to manage options dilution. Anything different in terms of prioritization to think about this $1,000,000,000 authorization or it's just the cash balance has gotten to where it is stock price is where it is. So you need more to offset the impact of options exercised?
I think number 1 is the authorization reflected confidence in the business, but I think that it's also in to be a return to shareholders. We're talking about $1,000,000,000 that more than offsets any stock option dilution that we've created during the year.
Our next question today comes from the line of Larry Keusch. Please go ahead.
Gary, there's been obviously a lot of discussion focused on procedures and the impact from the critics over the last several months. But I'm wondering if we can perhaps shift towards system sales, obviously quite strong this quarter. But I'm wondering if you're seeing anything change in the selling cycle or there have been some speculation that hospitals may hold back on purchasing while there's all this noise out there. So any color would be helpful.
All I can speak to is the first quarter and looking at the first quarter, we haven't seen any meaningful impact of negative press on capital sales. In fact, the capital side was pretty strong, as you mentioned, not only in systems as a whole, but and the attachment of some of the products we've added to SI. So dual console sales, simulator sales, firefly demand have continued to be strong. Again, don't have a crystal ball as to what happens in the future, but, so far, the conversations have been pretty straightforward.
Okay, great. And then, this also has come up over the last several calls. You've expressed some need to work on the European organization. So I'm just curious kind of take your temperature a little bit on where we are in that process?
I think that we've been making a good progress. I think that it's been, measured, but we've been adding, adding resources in a few places. Some of it has been, leadership resources. Some of it has been, in the sales force experienced, people into the sales force and some of it is in, areas such as regulatory and reimbursement. We've made some great hires there.
They're integrating well. And as we've said in the past, this is something that will happen over quarters, not over days, but but we're pleased with our partners.
Okay. And then lastly, just on the uses of cash, obviously, share repurchase remains out there. But what are the latest thoughts around potentially using cash for some M and A opportunities?
I think there's our eyes are always open for opportunities for a few things. And some of it has been, as you know, in the past, looking for technologies that we think fit really well with robotics surgery and advancing the ability of surgeons in the system to do more. We continue to be looking for and able to acquire those things, we think make a difference. We also think that investments in markets not in the United States are really important. You've seen us do that in the past and we continue to do so in terms of investing into existing organizational frameworks in Japan and in Korea and also positioning ourselves for success in other markets OUS and having cash helps us do that as well.
Okay, terrific. Thank you.
And we have a question from the
line of David Lewis with Mark Stanley. Please go ahead.
Hello. This is actually John in for David. So we had few questions. 1, just while procedures were a bit slower than expected, instrument revenue is still strong. And I guess that was more related to the revenue procedure being higher.
And I was wondering if you could maybe break that out and how much of that was related to stocking versus how much of that was some of the more advanced tools You mentioned thoughts on the system ASP as the normalized down a bit. Any thoughts to where revenue procedure should go throughout the year?
We've actually seen a bit of an uptick in the what we call the base. So if you parse out the, the stocking orders associated with new system purchases, we see a little uptick in the base and that reflects the new products. So that reflects usage of firefly, usage of vessel ceiling and, So I think it was also, benefited the quarter was also benefited by the timing of purchases of INA through distributors and other customers where they're entering their new fiscal year and so they may have bought more. So I think it was a little bit higher than maybe we expect going forward, but it was, it's definitely being benefited by the new products.
Yes. And we've always talked. There's a lot of moving parts in this overall instrument and accessory purpose. Year. We've talked have talked in the past about a natural trend downward as the impact of stocking orders becomes less on a larger installed base and procedure mix moving towards a simpler mix may move it downwards.
But now what we're seeing, the impact of the new products, even beyond the initial stocking products. So if you've talked before, we're talking about utilization of products like seizures, which getting those procedures utilized those products used in procedures, it's allowing us really to capture larger core of the hospital's procedure spend through the da Vinci platform. And so directionally, we probably see that winning the day at least for the balance of this year.
Thank you. They're very helpful. And had a quick follow-up on single say it's Coley's. First, I was more curious too if you could break out how much single site coley is out of all coley's. And then also just seeing kits increase each year on the single site side.
And I was wondering if you can maybe discuss how much of those are repeat buyers, how much of those are new adopters, and just what you'd see in there.
Yeah. At this point in time, the single site COLI, it's really moving from an initial introduction into more key element of our business here and a lot more mature status. We've talked about the number of customers who bought single site products. We may move away from that. I think as it becomes part of the the portion that's single site versus multi port that's always transitioning as most people are aware, the multi port site is part of generally part of training pathway to move towards single port.
But I think the multi port side is really just that it's an avenue to move towards the ultimate destination of single port. So it's probably not as important at that point. At any point in time, how many
of those are. Just a qualitative remark on the reorder rate. We we have been watching it and we've been pleased so far. Reorder rate has has been, has been positive for us.
Okay. Thank you very much.
And next we'll go to
the line of Aman Hazen with SunTrust. Please go ahead.
Thanks very much. Thought maybe I'd first ask about single site for DVH. I think I was a little bit surprised in kind of thinking back in your traction with single site for COLI and what that did in 2012 essentially its 1st year in your comments that you thought it might not have much of an impact this year. So I thought maybe you could explain the differences between the rollout here versus the rollout for COLI's and why it might why it's going to take a little bit longer?
Well, again, as you know, I mean, we've we're pretty measured in our approach with all of these various procedures. And I think when you look at single incision rectomy, you're looking at products that are required to be made, which we're doing, and then we know how to do that. And then you're looking at really understanding the physicians are looking at really understanding procedure choreography. How do I do this? How do I do that?
How do I close the cuff? Do I take the Adnexa, etcetera? And so, it's difficult to try to assign a reasonable timeline to how the choreography will go in addition to the general issues of manufacturing new products, getting your supply chain down, etcetera. So we're being pretty cautious about that. Now if it turns out that, that changes in time, we'll certainly let you know.
But I think there's a I think there are a number of surveys that people have done and we've done ourselves where there's a real excitement for it from the customer And so we just want to make sure you take this into consideration and not work that into your expectations because it's really, too early to call.
Okay. And then on the system side, just the comment you made about system mix and ASPs, maybe not holding through the whole year. Just wondering if that's more product mix related or is that your geography related and if it's on the product side, just specifically what you're thinking in terms of the products that might not be there later in the year that you've been selling?
Yes. It's primarily product mixing. We had 48 of the 100 and 64 units were dual console systems in the first quarter. And that's by far and away the highest proportion that we've had. We'd see that attach rate returning to more vehicle levels and as such, the ASP would be less than we saw here in the first quarter, maybe more in line with what we saw throughout 2012.
Okay. And then last one for me. I realize with regard to the FDA Medson survey, I guess only nine people. So maybe it's not even a survey or definitely not a government probe as maybe some would call it. But, hey, you guys talk to any of the doctors involved in that kind of inquiry or do you know anything about the report that might be coming out or what you might be anticipating?
As far as we know, it was a computationally run survey. And so we have no, nothing to share on that front.
Okay. Thanks very much guys.
I think we have time for one more question.
Thank you. Our final question today will come from the line of Rick Wise with Stifel. Please go ahead.
Hi, it's actually Miraflava for Rick today. Let me start with asking a question on Japan. Could not help note is the significant number of systems you placed there this quarter and it was coincided with the SI approval in Japan. Was the SI what what you needed to help unlock this market to some extent? And related to that, should we expect this kind of rate to continue or was this do you view this as an anomaly as you launch DSI?
I think that they were Happy to get a SI approval, and I think it's been well received. I think that there's some amount of, early excitement having do with that side. Long term, as you look at that market, procedure reimbursement is going to be the thing that is the long and sustained, growth path And so I think system sales in Japan are going to be lumpy, until additional procedures are reimbursed. And that's something that we're working with, search societies on on sporting and helping them complete that activity.
Okay. And, One
last question, please.
And going back to, just, you know, the, quote, concerted effort by the critics of surgery, I was wondering if you have any plans to highlight some of your data, on the outcomes and perhaps the economics of your procedures and it goes back to what was asked earlier, but maybe if I could ask it a little bit differently, has your conversation with your customers changed any way as a result of the negative press?
There's two questions in there. On the first one, do we have plans to share our data? Yes, we do. And we have been, and we will continue to do so. In terms of, the kinds of conversations that occur with customers over this in a sense, the conversations with customers are amongst the and the data.
And we're happy to and well conditioned, well positioned to have those conversations. We'll continue to do so. And as a additional data comes out, we were happy to share it with you. Thank you. That was our last question.
In closing, da Vinci Surgery has proven safety, efficacy, economic, and ergonomic benefits when compared to the open surgical procedures is replacing. We are steadfast in our conviction in the value that da Vinci pass and will bring to medicine and we thank you for your support in helping intuitive expand the benefits of minimally invasive surgery. We'll look forward to speaking to you again in 3
Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and using AT and T executive teleconference. You may now disconnect.