Thank you everyone for standing by. Welcome to the Intuitive Fourth Quarter 2023 Earnings Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. I will now turn the call over to your host, Head of Investor Relations, Brian King. Please go ahead.

Good afternoon and welcome to Intuitive’s fourth quarter earnings conference call. With me today, we have Gary Guthart, our CEO, and Jamie Samath, our CFO. 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 in our Securities and Exchange Commission filings, including our most recent Form 10-K filed on February 10, 2023, and Form 10-Q filed on October 20, 2023. Investors are cautioned not to place undue reliance on such forward-looking statements. Please note that this conference call will be available for audio replay on our website at intuitive.com on the events section under our investor relations page. Today's press release and supplementary financial data tables have been posted to our website. Today's format will consist of providing you with highlights of our full year and fourth quarter results as described in our press release. Gary will present business and operational highlights. Jamie will provide a review of our financial results. Then I will discuss procedure and clinical highlights and provide our financial outlook for 2024. And finally, we will host a question-and-answer session.

Thank you for joining us today. I'll touch on our performance last quarter and for the full year 2023 and share our perspective on 2024. The past year was a good one for Intuitive with use of our platforms growing nicely, hospitals building additional system capacity to support that growth and increased average utilization per system per year for each of our platforms. Our teams have been delivering to meet customer demand, driving quality and availability improvements, running clinical trials and readying new products and services for the market. Starting first with procedures, growth for the full year was 22%. Areas of strength included general surgery in the United States and regional performance in countries including Germany, France, the UK, and Ireland. In the US, general surgery procedure growth was led by cholecystectomy with foregut procedures rising as well. Colon and hernia procedure growth was also healthy for the year. Bariatric procedures grew year-over-year; however, we saw continued deceleration of growth throughout 2023, likely the result of the uptake of GLP-1 drugs for obesity. Procedure growth outside the United States diversified beyond urology with nice growth in categories including gynecology and general surgery. In flexible robotics, ion procedures showed continued strength with 129% growth for the full year. SP procedure growth was accretive in the year with 48% growth over the full year driven by acceleration in the United States. On the capital front, we placed 1,313 multi-port systems in the full year of '23, compared with 1,241 multi-port systems in 2022. Ion placements for the year were 213 versus 192 the prior year, and SP placements were 57 for the full year versus 23 systems in the prior year. Globally, placements were strong in the United States and Japan in the year. The use of flexible financing arrangements was substantial in the quarter, particularly in the United States, as customers seek to build capacity, balance their Da Vinci system portfolios to improve access, and allow flexibility to upgrade to future systems. Jamie will take you through placement dynamics in more detail later in the call. System utilization, defined as procedures per installed clinical system per quarter, grew 9% globally year-over-year for our multi-port platform, reaching a new high as customers adopt a broad mix of procedures on our systems. Utilization grew 15% for SP in the year, while it grew 6% for Ion over 2022. Utilization is an important indicator of customer health because it is correlated to patient demand, care team satisfaction, and hospital financial health. The above performance reported revenue of $7.1 billion for the year, 14% growth over '22. Our capital and operating expenses were on the upper end of our spend guidance, reflecting continued investments in R&D to support growth of our platforms and digital tools, expansion of our manufacturing and commercial footprints, and capital amortization. Product margins were challenged in the full year as a result of higher than expected costs, primarily for our newer platforms. Strength in procedures, growth in the clinical install base, and increased utilization signaled continued belief by our customers that our platforms make a difference in their efforts to pursue the quadruple aim: better outcomes, better patient experiences, better care team experiences, and lower total cost to treat per patient episode. As we look to 2024, I'd like to share with you that we have submitted to FDA our 510(k) application for our next generation multiport platform, da Vinci 5. Our design priorities for our new platforms are as follows. First, we look for opportunities to bring better minimally invasive care to more patients. Second, we work to improve the performance of our platforms and existing procedures. Third, we seek to improve care team satisfaction through product utility, dependability, and usability improvements. And finally, we strive to help lower the total cost to treat per patient episode. Once cleared, we believe da Vinci 5 will make a positive impact on each of these objectives through hundreds of design changes that respond to surgeon and care team inputs and fulfill our design priorities. As just one example, da Vinci 5 possesses four orders of magnitude greater processing power than our Generation 4 products. Given the sophistication of the technologies involved, we plan a phased launch in the first several quarters after clearance, giving us time to mature our supply and manufacturing processes for the new system. da Vinci 5 will join our existing robotic surgical system portfolio alongside multiport systems X and Xi and single port system SP, offering surgeons and hospitals their choice of highly capable proven solutions from Intuitive. We have been in communication with FDA on da Vinci 5 for the past several quarters and have completed a comprehensive multi-center IDE trial. This trial finished accruing patients in May of 2023 and we submitted for our 510(k) to FDA for da Vinci 5 in August of last year. We are currently responding to FDA's questions. The timing of the US launch will depend on the time required to resolve these questions. So far, we believe the questions asked fall within normal expectations for a submission of this type. In addition to FDA, we have initiated conversations on da Vinci 5 with regulators in Japan and Korea and will report our progress toward commercialization in countries outside the United States as we know more. Once FDA cleared, we will communicate features and benefits in greater depth. We started 2023 focused on increased adoption of our priority procedures in countries through outstanding training, commercial and market access execution. We pursued expanded indications and launches for Ion and SP. We focused on excellence in continuity of supply, product quality, and services provision as we emerge from pandemic stresses. And finally, we pursued increased productivity in our functions that benefit from scale. Taken together, our team made good progress against these objectives. As we enter 2024, our company priorities are as follows. First, we'll focus on innovation through expanded indications and launches of our new platforms by region, including our first phase of da Vinci 5 launch once cleared. Second, we'll pursue increased adoption for focused procedures by country through training commercial activities and market access efforts. Third, we will drive quality and gross margin improvements. And finally, we continue to focus on increasing our productivity, particularly in functions that benefit from industrial scale.

Good afternoon. I will describe the highlights of our performance on a non-GAAP or pro forma basis and summarize our GAAP performance later in my remarks. A reconciliation between our pro forma and GAAP results is posted on our website. Q4 and 2023 revenue, procedures, and system placements are in line with our preliminary press release of January 9th. I will briefly review full year 2023 performance before describing our Q4 results in greater detail. 2023 procedures grew by 22% as compared to last year, or 17% on a four-year compound annual growth rate basis. During the year, we placed 1,370 systems with customers, an increase of 8% year-over-year. Excluding trading transactions, net new system placements for 2023 grew by 23% over the prior year, with the US up 26%, driven primarily by customer need for additional capacity. Trading volumes declined by 105 systems to a total of 240 trading transactions for the year. Recurring revenue, which is correlated to ongoing use of our products, represented 83% of total revenue and grew 21% over the prior year. Total revenue of $7.1 billion increased 14%, and for the first time our advanced instrument portfolio of stapler and energy devices exceeded $1 billion in revenue, growing 21% in 2023. During the year, we repurchased $416 million of our stock or approximately 1.7 million shares at an average price of $241 per share. We have a remaining authorization to repurchase our shares of $1.1 billion. Given these results, pro forma earnings per share for 2023 grew 22% as compared to last year. Turning to Q4, our core metrics were strong. da Vinci procedures grew 21%. The installed base of systems grew 14% to 8,606 systems, and average system utilization continued to be above long-term trends, increasing by 9% for the full year of 2023. Higher system utilization reflects both a higher mix of shorter duration benign procedures and the need to address patient backlogs. In Q4, US procedures grew 17% driven by growth in general surgery. OUS procedures grew 29%, driven by strong performance in China, the UK, Germany, and Japan, with notable strength across multiple OUS markets in general surgery, which grew 44% in Q4. We placed 415 systems in the fourth quarter, 12% higher than the 369 systems we placed in the fourth quarter of last year. In the US, we placed 209 systems in Q4, 28 more than last year, driven by capacity expansion for procedure growth and higher greenfield placements at existing IDN customers. We placed 70 systems in Japan, with strengths driven by greenfield placements and customer use of remaining capital budgets. Consistent with last quarter, we have seen delayed tenders and lower system placements in China due to ongoing anti-corruption efforts by the government. We expect system placements in China to be at lower levels at least through the first half of 2024. Globally, there were 51 trading transactions in the quarter as compared to 110 last year. As of the end of Q4, there were approximately 375 systems remaining in the installed base, 60 of which are in the US. Fourth quarter revenue was $1.93 billion, an increase of 17% from last year. On a constant currency basis, revenue growth was also 17%. Additional revenue statistics and trends are as follows. Leasing represented 48% of Q4 placements, compared with 42% last year. The increasing lease mix we have seen over time is primarily driven by customers in the US, particularly those who have acquired systems under usage-based arrangements. These arrangements provide customers greater financial flexibility to expand their robotics programs independent of capital budgets. Q4 system average selling prices were $1.42 million as compared to $1.43 million last year. System ASPs were negatively impacted by regional mix, partially offset by lower trade-ins. We recognized $21 million of lease buyout revenue in the fourth quarter compared with $17 million last quarter and last year. da Vinci instrument and accessory revenue per procedure was approximately $1,800 compared with approximately $1,820 last year. The year-over-year decline in I&A per procedure is primarily a result of procedure mix in the US, given strong growth in cholecystectomy and lower growth in bariatrics and customer ordering patterns, partially offset by the I&A price increase implemented mid-2023. Turning to Ion, there were approximately 16,500 Ion procedures in the fourth quarter, an increase of 108% as compared to last year. In Q4, we placed 44 Ion systems compared to 67 in Q4 of 2022 and 55 last quarter. We experienced supply challenges for our Ion catheter and vision probe and limited Ion system placements during the quarter to ensure customers could effectively launch their programs. There is strong customer demand for Ion, which contributed to backlog growth in the quarter. The installed base of Ion systems is now 534 systems, of which 214 are under operating lease arrangements. Our SP platform continued to make progress in 2023. Fourth quarter SP procedure growth accelerated to 58%. We placed 19 systems in Q4 and 57 for the year, up from 23 placements in 2022. Fourth quarter placements included five in Korea and two in Japan. Average system utilization for our SP platform grew 15% in 2023, reflecting increased usage by US customers. We continue to make progress in expanding the opportunity for SP, including continued work on regulatory submissions for colorectal and thoracic indications. In January, we received clearance for SP in Europe across a broad procedure set and are planning for a measured rollout as we build local KOLs and establish local proctoring and training capabilities. Moving on to the rest of the P&L, pro forma gross margin for the fourth quarter of 2023 was 68% compared with 68.2% for the fourth quarter of 2022. The year-over-year decline in pro forma gross margin reflects increased inventory reserves and a higher mix of new platform revenue that currently carry dilutive gross margins, partially offset by the I&A price increase implemented mid last year. With respect to our manufacturing capabilities and capital investment plans, during the quarter, we initiated local excise system production in China, allowing us to participate in tenders that require a domestically produced system. We also completed the transfer of X system production to our East Coast hub near Atlanta, Georgia. And during 2024, we are planning to transfer Xi system production from California to our East Coast hub. Over the next 18 months, we expect to open new manufacturing facilities for da Vinci 5 and Ion system manufacturing in California and to complete line transfers for Ion and SP I&A to our Mexicali facility. We believe these activities will position Intuitive to serve our customers with best-in-class supply availability, product quality, and product cost. Fourth quarter pro forma operating expenses increased 15% compared with last year, driven by increased headcount and higher variable compensation. In addition, fourth quarter 2023 operating expenses included a $40 million contribution to the Intuitive Foundation. We did not make a contribution in 2022. Pro forma other income was $67.1 million for Q4, higher than $57.9 million in the prior quarter, primarily due to higher interest income. Our pro forma effective tax rate for the fourth quarter was 15.9%, lower than prior quarters, primarily because of the release of certain tax reserves associated with the expiration of related statutes and a favorable earnings mix. Fourth quarter 2023 pro forma net income was $574 million or $1.60 per share compared with $439 million or $1.23 per share for the fourth quarter of last year. I will now summarize our GAAP results. GAAP net income was $606 million or $1.69 per share for the fourth quarter of 2023 compared with GAAP net income of $325 million or $0.91 per share for the fourth quarter of 2022. Fourth quarter GAAP tax expense reflected one-time benefits of $159 million associated with an increase in deferred tax assets associated with a statutory rate increase in Switzerland and receipt of certain tax benefits associated with our Swiss operations. We ended the year with cash investments of $7.3 billion compared with $7.5 billion at the end of Q3. The sequential reduction in cash and investments reflected capital expenditures of $435 million, partially offset by cash generated from operating activities.

Thank you, Jamie. Overall procedure growth for full year 2023 was 22% year-over-year compared to 18% for the full year of 2022. Overall procedure growth was comprised of 19% growth in the US and 27% growth outside of the US. In the US, fourth quarter 2023 procedure growth was 17% year-over-year compared to 18% for the fourth quarter of 2022 and 17% last quarter. Fourth quarter growth was led by procedures within general surgery, with strength in cholecystectomy, colon resection, and foregut procedures. As Gary noted, bariatric procedures continued to grow year-over-year, but growth moderated into the mid-single digits. Looking outside of the US, over the years, we have made investments in countries and international markets to support customers and their adoption of da Vinci procedures. Looking back over the past decade, OUS procedures have grown 20% on a compound annual growth basis and have consistently been accretive to total procedure growth. OUS procedures have grown from about 20% of total global procedures to now about a third. While market maturity and levels of adoption differ by region and country, broad growth now accounts for more than half of OUS growth in categories beyond urology. Focusing on the fourth quarter, OUS procedure volume grew 29% compared with 18% for the fourth quarter of 2022 and 24% last quarter. Growth was led by strength in colon resection followed by growth in hysterectomy and lung resection procedures. Growth in urology continued to be healthy, led by kidney procedures along with continued double-digit growth in prostatectomy. In Europe, fourth quarter growth was led by general surgery and gynecology procedure categories. Germany, the UK, and France procedure performance led the region. In Germany, we saw strong growth in colon resection and kidney procedures, in the UK from growth in hysterectomy and rectal resection and in France from growth in colorectal and lung resection procedures. In Asia, growth in the fourth quarter was led by China, reflecting a benefit from lower procedure volumes in the fourth quarter of 2022 due to COVID. In Japan, our third largest market by procedure volume, procedure growth was healthy and led by prostatectomy and colorectal procedures. We placed 70 systems in Japan, reflecting the continued adoption of robotic surgery for a growing number of procedures and the availability of remaining capital budgets. India, while still in the early stage of adoption, saw continued strength in general surgery and gynecology procedures.

Now, turning to the clinical side of our business. Each quarter on these calls, we highlight certain recently published studies that we deem to be notable. However, to gain a more complete understanding of the body of evidence, we encourage all stakeholders to thoroughly review the extensive detail of scientific studies that have been published over the years. In the fourth quarter, Dr. Nicola de'Angelis from Beaujon University Hospital, along with multiple colleagues from the French Society of Parietal Surgery, Club Hernie, and French Society of Digestive and Visceral Surgery, published a systematic review and meta-analysis describing robotic surgery for inguinal and ventral hernias in surgical endoscopy. In this analysis, authors reviewed publications between September 2014 and July 2022 and published pooled outcomes comparing the robotic-assisted approach for both inguinal and ventral hernia repairs to both laparoscopy and the open approach. With regards to inguinal hernia, when compared to laparoscopy, the robotic-assisted approach was associated with a 46% lower risk of hernia recurrence. Furthermore, subjects undergoing a robotic-assisted approach were associated with a 54% lower rate of opioid use relative to the open approach. For ventral hernia repairs, the robotic-assisted approach had a 49% lower risk of conversion to open and 41% lower risk of intraoperative bowel injuries relative to laparoscopy. When comparing to an open repair for ventral hernias, the robotic-assisted approach was associated with a 3.4-day shorter length of stay, 34% lower risk of 30-day readmissions, 39% lower risk of overall complications, and more specifically, a 53% lower risk of surgical site infections.

I will now turn to our financial outlook for 2024. Starting with procedures. For 2024, we anticipate full year procedure growth within a range of 13% and 16%. Our overall procedure guidance range assumes that growth moderates from last year, given the elevated backlog benefit we experienced in 2023. The low end of the range assumes a modest decline in bariatric procedures along with challenges in China from increasing competition and anti-corruption activities impacting capital placements, and therefore, procedure growth. We also assume there is no impact from patient backlog in the year. At the high end of the range, we assume bariatrics continue at current growth rates, and factors in China do not have a significant impact on our business.

The two primary growth drivers in soft tissue surgery that we've called out are general surgery in the US, which grew 25% in 2023. And for OUS, growth beyond urology that grew 35% in '23. We believe these continue to be growth drivers for the business.

Let me take a moment to address the new multiple system that Gary highlighted. First, since we have not received FDA clearance for da Vinci 5, we cannot provide specificity on launch timing and pricing. Second, we are planning a phased launch period over several quarters. Given that we expect total trading volumes to be lower in 2024 than the prior year. We also expect a higher proportion of Gen 4 systems will be leased as customers seek flexibility to upgrade to da Vinci 5 when supply allows.

I laid out in the script kind of what our design methodology was. I am excited to tell you more about da Vinci 5, but I'll wait for clearance so we can do that with a little more care. We are hopeful that it can be a ‘24 launch. If that goes the way we want, then certainly it's something we'd be excited about in ‘24. But I can't guarantee it because I don't have the clearance yet.

Alright, great. You mentioned that da Vinci 5 has undergone numerous design changes. Can you explain what sets da Vinci 5 apart from da Vinci 4? Is there a chance we could see a system in 2024?

I think some of the improvements that we can bring are going to be interesting and exciting. We are submitted and we're in back and forth with FDA. But, what I'd say based on past experience with them is that we are in a constructive conversation. We look forward to talking more once we get through clearance.

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. Is this something we'll see a lot more software improvements rather than hardware improvements?

Yes, one of the things we've talked about is the increase in computational capability of the system, re-baselining that system. So it gives us the opportunity to build on that base and sequential software releases. It's a good pull-through.

In '23 and '24, the majority of those capital investments are for manufacturing facilities and to add manufacturing capacity. So, a significant portion of the depreciation will show up in cost of sales, which will be reflected in part in the '24 gross margin guidance.

Maybe we can get some updates and more details, more color on Ion and SP. What's next for SP? How are you prioritizing for '24?

On the SP front, we're pleased with the step forward they took in '23. In the US, we have trials that have been submitted or will be submitted soon. SP continues to be a nice build. We expect to see it in Europe in '24, and that's another nice step.

With respect to Ion, we are not ready to be particularly specific yet on when the supply chain challenges are behind us. We are making clear progress, but there's still work to be done.

We think that having a portfolio of choices makes a ton of sense for hospitals. That's really healthy. It gives our customers optionality.

Thank you, everyone, for joining today's conference call. You may now disconnect. Have a good day.