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ISRG News Intuitive Surgical Announces $95.8 Million Third Quarter Revenue, Up 57%

SUNNYVALE, Calif.--(BUSINESS WIRE)--Intuitive Surgical, Inc. (NASDAQ:ISRG), the industry leader in surgical robotics, today reported third quarter 2006 revenue of $95.8 million, increasing 57% from $60.9 million for the third quarter of 2005. Higher revenue was driven by increased da Vinci® Surgical System sales and continued growth in recurring revenue.

Third quarter 2006 system revenue increased 56% to $52.4 million from $33.6 million during the third quarter of 2005. Third quarter 2006 instrument and accessory revenue increased 60% to $29.0 million from $18.1 million during the third quarter of 2005. Third quarter 2006 service and training revenue increased 57% to $14.4 million from $9.2 million during the third quarter of 2005.

Revenue for the nine months ended September 30, 2006 totaled $260.1 million, increasing 68% from $155.2 million for the nine months ended September 30, 2005.

Third quarter 2006 operating income was $25.7 million compared with $21.0 million for the third quarter of 2005. Operating results for the third quarter of 2006 included $6.9 million of stock compensation expense in accordance with the Financial Accounting Standards Board “SFAS” 123R. Excluding the $6.9 million of non-cash stock compensation expense, third quarter 2006 operating income was $32.6 million, up 55% compared with the third quarter of 2005.

Third quarter 2006 net income, including non-cash stock compensation expense, was $17.3 million, or $0.45 per diluted share. Excluding the impact of stock compensation expenses, third quarter 2006 net income was $21.7 million, or $0.57 per diluted share. Net income for the nine months ended September 30, 2006, including non-cash stock compensation expense, was $48.4 million, or $1.27 per diluted share. Excluding the impact of stock compensation expenses, net income for the nine months ended September 30, 2006 was $60.3 million, or $1.58 per diluted share.

Third quarter earnings before interest, taxes, depreciation, amortization, and non-cash stock compensation expenses (EBITDA) was $35.2 million, up 56% compared to $22.6 million for the third quarter 2005. EBITDA for the nine months ended September 30, 2006 was $97.3 million, up 94% compared to $50.2 million for the nine months ended September 30, 2005.

Intuitive ended the third quarter of 2006 with cash, cash equivalents and investments of $292.3 million, up $48.5 million from the end of the previous quarter and up $89.6 million from December 31, 2005.

Commenting on the announcement, Lonnie Smith, Chairman and CEO of Intuitive Surgical, said, “We are pleased with our third quarter revenue growth and the continued adoption of robotic surgery. Our business continues to generate significant free cash flow while funding rapid revenue growth.”

The company will also announce these results at a conference call today at 1:30 pm PDT. The dial-in numbers for the call are 877-909-3508 for participants located in the U.S. and 517-645-6051 for participants located outside the U.S. The passcode is ISRG and the meeting leader is Mr. Lonnie Smith. To access financial information that will be discussed on the call, please visit Intuitive Surgical’s website at www.intuitivesurgical.com.

About Intuitive’s Products:

The da Vinci® Surgical System consists of a surgeon’s viewing and control console having an integrated, high-performance InSite® 3-D vision system, a patient-side cart consisting of three or four robotic arms that position and precisely maneuver endoscopic instruments and an endoscope, and a variety of articulating EndoWrist® Instruments. By integrating computer-enhanced technology with surgeons’ technical skills, Intuitive believes that its system enables surgeons to perform better surgery in a manner never before experienced. The da Vinci® Surgical System seamlessly and directly translates the surgeon’s natural hand, wrist and finger movements on instrument controls at the surgeon’s console outside the patient’s body into corresponding micro-movements of the instrument tips positioned inside the patient through small puncture incisions, or ports.

The Aesop® Endoscope Positioner is a voice-activated robotic arm that automates the critical task of endoscope positioning, providing the surgeon with direct control over a smooth, precise and stable view of the internal surgical field.

The Hermes® Control Center is a centralized system designed to voice control a series of networked "smart" medical devices.

Intuitive®, da Vinci®, da Vinci^® S™ InSite®, EndoWrist®, Hermes®, and Aesop® are trademarks or registered trademarks of Intuitive Surgical, Inc.

About non-GAAP Financial Measures:

To supplement our consolidated financial statements presented in accordance with GAAP, we have presented the following information defined as non-GAAP financial information by the SEC: non-GAAP (pro forma) statements of operations and EBITDA. The presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the tables captioned “Unaudited Reconciliation of GAAP to non-GAAP Condensed Consolidated Statements of Operations” and “Unaudited Earnings Before Interest, Taxes, Depreciation and Amortization Reconciliation” included in this release.

Intuitive’s management believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses that may not be indicative of our core operating results. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing Intuitive’s performance and when planning, forecasting and analyzing future periods.

Intuitive has computed its non-GAAP financial measures using the same consistent method from quarter to quarter. The accompanying tables have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are necessarily estimates reflecting the best judgment of our management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. These forward-looking statements should, therefore, be considered in light of various important factors, including the following: timing and success of product development and market acceptance of developed products; regulatory approvals, clearances and restrictions; guidelines and recommendations in the health care and patient communities; intellectual property positions and litigation; competition in the medical device industry and in the specific markets of surgery in which Intuitive Surgical operates; and unanticipated manufacturing disruptions, delays in regulatory approvals of new manufacturing facilities or the inability to meet demand for products. Words such as "estimate," "project," "plan," "intend," "expect," "anticipate," "believe" and similar expressions are intended to identify forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. We undertake no obligation to publicly update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.