Thank you for standing by, and welcome to the Intuitive Surgical, Inc.'s First Quarter 2025 Earnings Release. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Dan Connally, Head of Investor Relations at Intuitive Surgical. Please go ahead, sir.

Good afternoon, and welcome to Intuitive's first quarter earnings conference call. With me today, we have Gary Guthart, our CEO; Dave Rosa, our President; 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 January 31, 2025, and Form 10-Q filed on October 18, 2024. Our SEC filings can be found through our website or at the SEC's website. 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 first quarter results as described in our press release announced earlier today, followed by a question-and-answer session. Gary will introduce the call and provide a business overview. Dave will present the quarter's business, operational and clinical highlights. Jamie will provide a review of our financial results and procedure highlights. Then I will discuss our updated financial outlook for 2025. And finally, we will host a question-and-answer session. With that, I will turn the call over to Gary.

Thank you for joining us on the call today. Our business performed well in the first quarter of the year, with physicians using our products at the high end of our expectations, driven by strong procedure growth in core general surgery in the United States, and strong procedures outside the United States. New system placements in the quarter were solid, with particular strength in the U.S. We are pleased with the performance of each of our platforms, with continued adoption of dV5 and multiport, solid results in Ion, and acceleration in procedures using our single-port platform. Given the dynamic changes in trade policy, I'd like to describe our principles for navigating the current environment, rather than detailing any particular scenario. Our first priority is to ensure the supply of our products to our customers globally. We have spent years becoming a trusted provider of great products and services. Our first commitment is to maintaining that status for those who depend upon us. We believe that high-quality minimally invasive care at industrial scale will remain a global need regardless of trade policy, and our long-term opportunity remains robust. We will continue to manage the business for the long-term and invest toward improvements in the quintuple aim. Given potential changes in our costs and our customers' costs across their enterprise, we do not plan reflexive changes to our pricing in the dynamic near-term environment. Our second priority will be to optimize our production costs and rebalance product flows within our existing manufacturing and supply chain footprint as policies begin to stabilize. Finally, we will adjust our supply chain strategy and assess adjustments to our pricing when we see the signs of a durable planning environment for trade. I'll now turn the call over to Dave to take you through our product, services and operating highlights.

Thank you, Gary. Intuitive Surgical was founded in 1995. In this, our 30th year of operations, our global da Vinci installed base in Q1 2025 exceeded 10,000 systems, and over 50,000 surgeons across 70 countries performed procedures in the quarter. Thank you to our customers, employees, and all our stakeholders for your ongoing collaboration and commitment as we continue to advance minimally invasive care. Starting with procedures, da Vinci procedure growth in the quarter was 17%. Areas of strength included general surgery in the U.S. and regional performance in India, Korea, distributor markets in the U.K. In the U.S., after-hours procedure growth accelerated to 36% year-over-year. Jamie will describe procedure dynamics later in the call. Turning to capital, we placed 367 da Vinci systems in the quarter, including 147 da Vinci 5 systems and 19 SP systems. We also installed 49 Ion systems in the quarter. Capital placements were strong in the U.S., with mixed performance outside of the U.S., reflecting stresses in Germany, the U.K. and Japan. System utilization, defined as procedures per installed clinical system per quarter, grew 2% year-over-year for our multiport platforms, 26% for SP, and 5% for Ion. Solid procedure growth and capital performance supported strong revenue growth of 19% in the quarter. Product margins were within our expectations, reflecting increased depreciation from new facilities and a higher mix of newer platforms. Operating expenses were within our expectations. Jamie will take you through our finances in greater detail later in the call. In Q1, our rollout of da Vinci 5 progressed within our expectations with 147 systems placed and over 32,000 procedures performed across a broad set of specialties. We installed our first fully integrated system this month, which now features software to enable the integrated hub and simulator along with a host of other enhancements. Several additional features, including real-time surgical video review, real-time 3D model review, and visual force feedback gauges will be enabled upon 510(k) clearance later this year. We continue to ramp our manufacturing operations and supply chain capabilities to support a broad launch of da Vinci 5 midyear. Broad launch means that we incorporate the latest fully integrated hardware and software and are able to meet customer demand, including trade-ins and dual consoles. As we've discussed previously, we remain in the regulatory process in Japan and expect clearance in Europe near the end of 2025. Through our core features of da Vinci 5, we are starting to see early single institution studies evaluating the impact of force feedback on clinical outcomes and proficiency. In an abstract presented at the North American Robotic Urology Symposium, a team led by Dr. Michael Stifelman, Chair of Urology at Hackensack University Medical Center, studied the return of bowel function in a small cohort of patients. The authors reported a significantly higher rate of recovery of bowel function within 24 hours, suggesting potential reductions in colonic trauma. They note, as robotic-assisted surgery advances, integrating force feedback into routine practice could enhance precision and improved recovery across disciplines. Regarding time to proficiency, a second study evaluated the impact of force feedback technology on the suturing performance of 29 novice surgeons in a randomized preclinical study. This study showed that force feedback technology has the potential to improve novice surgeon performance by significantly reducing tissue trauma and errors during suturing and time to complete suturing. These results are consistent with the core value hypothesis of force feedback technology, and we expect more of these types of studies to publish in 2025 and beyond. Force feedback instruments are in limited supply, and we expect broad availability near the end of 2025. The use of case insights with da Vinci 5 is growing nicely, with case insights delivered on over 22,000 procedures to date. These datasets include video, kinematic energy, and force data, enabling surgeons to easily navigate the procedure video and identify meaningful operational and clinical insights. These insights will form the basis of key performance indicators and help novice and expert surgeons identify objective measures that underpin surgical performance.

Good afternoon. I will describe the highlights of our performance on a non-GAAP or pro forma basis, and we'll also summarize our GAAP performance later in my prepared remarks. A reconciliation between our pro forma and GAAP results is posted on our website. Given that the current global trade environment is relatively dynamic, before we dive into Q1 results, let me address tariffs. In 2024, Intuitive manufactured 98% of our robotic systems in the United States, 70% of our endoscopes in Europe, and approximately 80% of our instruments and accessories in Mexico. We source raw materials and other components from suppliers around the world. The net result is that Intuitive is both a significant U.S. manufacturer and a significant net U.S. exporter. In terms of the impacts of tariffs to Intuitive, broadly, we characterize tariffs into three buckets: First, those tariffs relating to U.S.-China trade. We import into China subassemblies for domestic Xi production and completely finished excise, both of which are expected to incur Chinese tariffs of 125%. We also import components from Chinese-based suppliers into the U.S. to be incorporated into the manufacture of our products, which incur U.S. tariffs of 145%. Our China JV manufactures certain products for our Ion platform that are subject to U.S. tariffs when imported for U.S. procedure demand. Second, imports into the U.S. of procured components from OUS-based suppliers and imports of endoscopes from our factories in Europe are subject to baseline tariffs. Third, while most of our products manufactured in Mexico are certified under the requirements of USMCA, a small portion do not meet the requirements and, therefore, incur tariffs upon import to the U.S. Based on the impacts described, we expect an impact on our income statement for 2025 to be additional cost of sales of approximately 1.7% of revenue, plus or minus 30 basis points. The impact of tariffs will vary with the volume of capital sales in China and the mix of procured components. Given that tariff costs are capitalized into inventory and then recognized in cost of sales, we expect the impact of tariffs to increase each quarter over the year. As a result, we are updating our estimate for pro forma gross margin to be within a range of 65% and 66.5% of revenue. Turning to Q1, core metrics were strong: da Vinci procedures grew 17%, the installed base of da Vinci Systems grew 15% and average system utilization grew 2%. Procedure growth in Q1 was adversely impacted by a lower number of business days compared to the year-ago period. On a day-adjusted basis, Q1 procedure growth was 18.5%. U.S. procedures grew 13%, driven by benign general surgery growth. In the first quarter of this year, we placed 88 systems in Europe, 16 in China, and 10 in Japan. In the first quarter, we placed 367 systems, up 17% compared to the same period last year. U.S. revenue was $2.25 billion, a 19% increase over last year. On a constant currency basis, revenue growth was 20%. Systems revenue grew 25%, driven by a 17% increase in da Vinci system placements and higher system average selling price. Recurring revenue grew 19%, representing 85% of total revenue. Looking forward to the second half of 2025 following the broad launch of da Vinci 5, you should expect higher trading volumes to reflect significantly higher trading credits. Q1 system average selling prices were $1.62 million, as compared to $1.39 million last year, primarily driven by a higher mix of da Vinci 5.

Thank you, Jamie. I will now turn to our financial outlook for 2025. Starting with procedures, we are now increasing our forecast and expect full year 2025 procedure growth within a range of 15% to 17%. The low end of the range assumes growth in China is impacted by trade, environmental and competitive dynamics. The high end of the range also assumes that procedures are not impacted by the current trade environment. With regard to income tax, we continue to estimate our 2025 pro forma income tax rate to be between 22% and 23% of pre-tax income. That concludes our prepared comments. We will now open the call to your questions.

Our first question comes from Travis Steed from Bank of America Securities. Please proceed with your question.

Hi. Thanks for taking the question. First, I’ll ask a question on tariffs. Just the 170 basis point impact in 2025. Just curious how to think about that on an annualized basis, any way to kind of break out how much of that is China versus Mexico and how to think about the cadence over 2025, how much of that impacts in kind of Q4 and in Q3 this year?

Yes. Travis, in terms of the breakout for this year, roughly half of the impact is from U.S.-China trade. About 40% of the impact is imports into the U.S. from OUS-based suppliers and imports of endoscopes from our factories in Europe. The impact of tariffs increases each quarter through the year. So the exit rate in Q4 will be higher than the 1.7%. Going forward, we'd like to see where tariffs stabilize and assess what moves we can make over time.

Great. Thanks for taking the questions. On the procedure volume, it was excellent in the first quarter, and it's rare to see such a big raise after just one quarter. What gave you the confidence to raise this early in the year?

Just some anecdotes back from the road. I think we're perceived as part of the solution, not part of the problem. Customers continue to adopt and see the economic benefits and the patient and outcome benefits.

Just the international growth at 24%. What are the key drivers, and how sustainable are those drivers into the next quarters?

We saw solid procedure growth in the U.S. of 13%, with strong growth in markets like India and Taiwan driven by engagements with key opinion leaders and surgical societies. However, the potential exists for capacity constraints in several key markets.

On the after-hour side, this is driven by customers wanting to provide equal access to quality minimally-invasive surgery for patients who need it in after-hours situations. Our customers are increasingly interested in cardiac surgery, recognizing the benefits of advanced minimally-invasive procedures for these patients.

Can you give us more color on the percentage of DV5 cases that are using force-sensing instruments today? How can that evolve going forward?

Currently, we have six different instruments with force feedback capabilities. Thousands of cases are being performed with force feedback instruments, and this will evolve as we conduct more studies.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.