Intuitive Explains Away Sorry Financials

Intuitive Surgical has posted its most recent quarterly figures and they don’t pain a particularly happy picture. The company explains that revenue 24 percent off the equivalent period a year ago at $465 million vs $611 million is a result of deferral of capital expenditure, but procedure growth also appears to be slowing.

Background

At face value, Intuitive’s quarter looks little short of disastrous, with the company blaming several happenings for such a steep sales drop off. One factor is clearly the introduction of the daVinci®Xi™ system, which has of necessity been accompanied by trade-out costs. But even without that, sales would have been 20% down, so what’s occurring? Well, it seems like the biggest hole lies in system sales, revenue of $106 million being less than half the prior year’s $256 million, representing 87 units vs 164. It seems the U.S. market is the main culprit, with procedure growth slower than anticipated, and hospitals generally sitting on their hands when it comes to splashing the cash on capital projects. And the Affordable Care Act is also getting the blame due to its impact on healthcare prioritisation, robotic surgery seemingly not being top of the list.

Any good news? Well, the ever-increasing number of systems out there is naturally accompanied by a steady increase in servicing revenue, the quarter showing a 10 percent increase compared with a year ago. As far as good news goes, from a financial perspective at least, that looks like it’s about it.

Further down the income statement, unsurprisingly, net income declined from $189 million to $44 million, although it does appear that the company is swallowing a big pill this quarter in the form of a $67 million litigation accrual as well as that $26 million revenue deferral associated with the daVinci Xi trade-out.

When it comes to the balance sheet, all these ugly numbers are carried through into a reduction in accounts receivables and an increase in accounts payable, compared with the picture one quarter ago.

The net effect of all of this bad news was a 10% decline in the company’s share price, mostly because it fell short even of analysts’s expectations. Whether that all spells trouble or a hiccup rather depends on whether the company’s analysis of its revenue issues being short term, proves to be the case.

Full release here.

Source: Intuitive Surgical, Inc.

 

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