SEC Filings

10-K
INTUITIVE SURGICAL INC filed this Form 10-K on 02/02/2018
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by a higher number of system placements under operating lease arrangements and lower da Vinci Surgical System average selling price ("ASP").
During 2017, a total of 684 systems were shipped compared with 537 systems in 2016. By geography, 417 systems were shipped into the U.S., 108 into Asia, 122 into Europe, and 37 into other markets, compared with 338 systems shipped into the U.S., 96 into Asia, 79 into Europe, and 24 into other markets in 2016. During 2017, 108 of the 684 systems were shipped under operating lease arrangements compared with 62 of 537 systems shipped during 2016. The increase in systems shipments was primarily driven by procedure growth and the need for hospitals to expand or establish capacity.
Operating lease revenue was $25.9 million for the year ended December 31, 2017, compared with $16.6 million for the year ended December 31, 2016. Revenue from Lease Buyouts was $39.5 million for year ended December 31, 2017, compared with $38.2 million for the year ended December 31, 2016.
The da Vinci Surgical System ASP, excluding the impact of systems shipped under operating leases, was approximately $1.47 million and $1.52 million for 2017 and 2016, respectively. The lower 2017 ASP was driven by a higher proportion of systems sales into price sensitive market segments. ASPs fluctuate period to period based on geographic and product mix, product pricing, systems shipped involving trade-ins, and changes in foreign exchange rates.
2015-2016
Product revenue increased by 14% to $2.2 billion during the year ended December 31, 2016, from $1.9 billion during the year ended December 31, 2015.
Instrument and accessory revenue increased by 17% to $1.4 billion for the year ended December 31, 2016, compared with $1.2 billion for the year ended December 31, 2015. The increase in instrument and accessory revenue was driven by an approximate 15% increase in procedure volume, reflecting approximately 13% U.S. procedure growth and 24% OUS procedure growth, and higher sales of our advanced instruments, partially offset by customer buying patterns.
Systems revenue increased by 10% to $791.6 million during the year ended December 31, 2016, compared with $721.9 million during the year ended December 31, 2015. Higher systems revenue was driven by higher system shipments, higher number of Lease Buyouts, and higher revenue from our Integrated Table Motion product. Revenue from Lease Buyouts was $38.2 million for year ended December 31, 2016, compared with $9.4 million for the year ended December 31, 2015.
The da Vinci Surgical System ASP, excluding the impact of systems shipped under operating leases, was approximately $1.52 million and $1.54 million for 2016 and 2015, respectively.
Service Revenue
Service revenue increased by 13% to $581.8 million for the year ended December 31, 2017, compared with $517.0 million for the year ended December 31, 2016. Service revenue increased by 11% to $517.0 million for the year ended December 31, 2016, compared with $464.8 million for the year ended December 31, 2015. Higher service revenue in 2017 and 2016 was primarily driven by a larger installed base of da Vinci Surgical Systems producing service revenue.
Gross Profit
Product gross profit increased by 18% for the year ended December 31, 2017, to $1.8 billion, representing 70.4% of product revenue, compared with $1.5 billion, representing 69.7% of product revenue, for the year ended December 31, 2016. The higher 2017 product gross profit was primarily driven by higher product revenue.
The slightly higher product gross profit margin for the year ended December 31, 2017, as compared with the year ended December 31, 2016, was due to manufacturing efficiencies and product cost reductions on some of our newer products, partially offset by a $7.8 million litigation settlement charge related to a license and supply agreement recognized in cost of revenue during the first quarter of 2017, and a $7.1 million MDET refund in 2016. In December 2015, the Consolidated Appropriations Act, 2016 (the “Appropriations Act”) was signed into law. The Appropriations Act included a two-year moratorium on MDET such that medical device sales in 2016 and 2017 were exempt from the excise tax. New legislation was passed in January 2018 such that MDET will be delayed until January 1, 2020.
Product gross profit for the year ended December 31, 2016, increased by 20% to $1.5 billion, or 69.7% of product revenue, compared with $1.3 billion, or 66.3% of product revenue, for the year ended December 31, 2015. The higher 2016 product gross profit was primarily driven by higher product revenue and higher gross profit margin. The higher product gross profit margin for the year ended December 31, 2016, as compared with the year ended December 31, 2015, was driven by product cost reductions and manufacturing efficiencies on our da Vinci Xi System and other newer products, and favorable product mix, including higher sales of our da Vinci Xi Integrated Table Motion product. Product gross profit also included a $7.1 million MDET refund for the year ended December 31, 2016, while product gross profit for the year ended December 31, 2015, included $17.0 million of MDET expense, representing approximately 0.9% of total product revenue.

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