Where'd the extra revenue come from? Recurring revenues driven by the installed base. During each surgery performed on a da Vinci machine, the surgeon uses surgical instruments that perform different functions. Each machine also requires repair and preventative maintenance.
There are now 1,752 da Vinci machines driving recurring revenue, which made up 54% of total revenue. Procedures grew 35% year over year in the fourth quarter, which drove the instrument growth -- pretty impressive considering the hard time that other medical device makers like Medtronic
It's the same business model as Procter & Gamble's
That high price has led to a slowdown in machine sales during a time when hospitals are a little worried about capital expenditures. But procedure growth can't outpace system sales forever; there's only so much time available in a day to perform surgeries. At some point, the hospital has to buy a second. In the fourth quarter, 40% of customers were repeat buyers.
In order to keep the procedure growth going, Intuitive Surgical will have to move into other types of surgeries. Gynecology makes up nearly half of the procedures performed on a da Vinci, but eventually Intuitive Surgical will saturate that market like it did with prostatectomies. Remember that 35% growth isn't an increase in the number of procedures performed by all doctors; it's the conversion of doctors going from performing traditional surgeries to doing them with the help of a robot.
What will Intuitive Surgical do for an encore? You'll get a chance to ask Intuitive Surgical's CEO Gary Guthart that question and anything else that you'd like to know about the company at a live chat on Wednesday at 2 p.m. ET. Just head to our home page then to join the discussion.