Intuitive Surgical reported a drop in robotic system placements in the second quarter because of supply chain challenges and tightening hospital budgets, two trends that may continue this year, the company said.
CEO Gary Guthart said on an earnings call Thursday that the challenging supply chain environment, particularly regarding the availability of semiconductor chips, and hospitals’ tougher economic environment drove the drop in da Vinci system placements in the quarter.
The company placed 279 systems in the second quarter, compared to 328 in the year-earlier period and 311 in the first quarter of 2022.
One contributing factor was a “significant decline” of trade-in transactions, CFO Jamie Samath told investors on the call. There were 56 trade-ins last quarter, compared to 125 in the same quarter a year earlier.
Another factor limiting placements is tighter spending by hospitals amid an economic slowdown and a looming recession risk. Guthart said that while hospitals are managing larger trends like increasing labor costs and inflation pressure on some materials that they purchase, they don’t have a lot of pricing flexibility.
These larger trends are likely to pressure Intuitive in the future, the CEO added.
“I don't think this is a one- or two-quarter resolution answer, it's certainly going to be something longer than that,” Guthart said. He declined give a specific projection for the “depth and duration of hospital pressure.”
The delayed supply of semiconductor chips also is weighing on placements and has forced Intuitive to push back the delivery and installation of systems from June to July for some customers. That affected about 5% of total placements last quarter. Guthart said that the company expects the “choppy” supply timelines to continue in the third quarter and potentially beyond.
BTIG analysts wrote in a note on Thursday that the company missed estimates for placements in the quarter by about 54 units. They added that hospital spending is “worse than feared,” and while Intuitive attributed a decline of about 14 system placements to supply chain issues, the company “would have still missed by ~40 units.”
Intuitive’s net income in the first half of 2022 slid to $683 million from $958.2 million in the year-earlier period.
The company’s shares dropped 5% in morning trading on Friday.
Even with the placement slowdown, procedure volumes climbed 14% in the second quarter, leading the company to raise its forecast for procedures for the full year. Intuitive now expects procedures to grow by a range of 14% to 16.5% in 2022 from the 12% to 16% it forecast earlier.
The growth in procedures came despite COVID-19 lockdowns in China, Intuitive’s second-largest market. Procedure growth in the U.S. gained 11%, while growth outside of the U.S. advanced 22%.