Intuitive Surgical said fourth-quarter earnings were curbed by higher costs and after the company placed fewer of its flagship robotic da Vinci Surgical Systems.
The company had forewarned investors that sales would fall short of analyst estimates earlier this month even as it kept details of its costs under wraps until the release of its earnings results on Tuesday.
“Our expenses landed at the higher end of our spend guidance reflecting continued R&D investments that support the growth of our platforms and digital products, expansion of our manufacturing and commercial capabilities and capital amortization driven by expansion of our global footprint,” Intuitive CEO Gary Guthart told investors on a conference call. “Structurally, we have been increasing our own capital expenditures as we continue to build the company to supply the globe at industrial scale.”
Total operating expenses increased 22% in the quarter, driven by a 33% jump in spending on R&D. The rise in investment in innovation comes as Intuitive tries to maintain its dominant position in the robotic surgery market in the face of competition from companies including Johnson & Johnson and Medtronic.
DaVinci system installs slow
Intuitive placed 369 of its flagship robotic da Vinci Surgical Systems in the quarter, 4% fewer than a year earlier, even as the installed base of da Vinci systems rose to 7,544 systems as of December 31, 2022, an increase of 12% compared with a year earlier.
Worldwide procedures using da Vinci grew about 18% from the year-earlier quarter, while the resurgence of COVID-19 in China reduced procedure volumes there. The fourth quarter of 2021 also reflected COVID-19 disruptions later in the period in the U.S. and Europe, which cut the number of procedures. Still, the company said compound annual growth between the fourth quarter of 2019 and the fourth quarter of 2022 was about 14%.
Spending spree to continue
Intuitive plans to keep increasing its spending. Guthart said the extra investment is needed to boost Intuitive’s ownership of imaging pipelines, create new instruments and accessories, add digital products and build a more robust supply chain.
“While we are slowing our hiring pace and pursuing leverage in our enabling functions, we are planning for balanced growth in operating expenses in 2023 given the opportunity to advance our next-generation robotics capabilities and the relatively earlier stage of our investments in Ion, SP and digital. In 2023, we expect a significant increase in expenses related to clinical trials,” Intuitive CFO Jamie Samath said on the call.
Intuitive plans to almost double capital expenditures this year, boosting its outlay from $532 million to the $800 million to $1 billion range. Two-thirds of the money will go toward manufacturing expansions as Intuitive seeks to consolidate production into larger centralized hubs. The investment will continue in 2024.
Shares in Intuitive fell 6%, or $15.44, to $242,54 in early trading on the Nasdaq on Wednesday.