Intuitive Surgical, Inc.
Q1 2011 Earnings Call Transcript

Published: 20 Apr 2011

[Operator:]

Ladies and gentlemen, good afternoon. Thank you for standing by, and welcome to the Intuitive Surgical Quarter One Earnings Conference Call. [Operator Instructions] And as a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Director of Financial Planning for Intuitive Surgical, Mr. Calvin Darling. Please go ahead.

[Calvin Darling:]

Thank you. Good afternoon, and welcome to Intuitive Surgical's First Quarter Conference Call. With me today, we have Gary Guthart, our President and CEO; Marshall Mohr, our Chief Financial Officer; and Aleks Cukic, our Vice President of Strategic Planning. Before we begin, I would like to inform you that comments mentioned on today's call may be deemed to contain forward-looking statements. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are described in detail in the company's Securities and Exchange Commission filings. Prospective investors are cautioned not to place undue reliance on such forward-looking statements. Please note that this conference call will be available for audio replay on our website at intuitivesurgical.com, on the Audio Archive section under our Investor Relations page. In addition, today's press release has been posted to our website. Today's format will consist of providing you with highlights of our first quarter's results as described in our press release announced earlier today, followed by a question-and-answer session. Gary will provide present the quarter's business and operational highlights, Marshall will review our first quarter financial results, Aleks will discuss marketing and clinical highlights, then I will provide you with an update to our financial forecast for 2011 and finally, we will host a question-and-answer session. With that, I will turn it over to Gary.

[Gary Guthart:]

Thank you for joining us today. In this first quarter, our team has executed well, and we have had solid performance in procedures, system sales and the financial results that follow. For 2011, we are focused on the following

[Marshall Mohr:]

Thank you, Gary. Our first quarter revenue was $388 million, up 18% compared with $329 million for the first quarter of 2010, and approximately the same as the $389 million reported for the fourth quarter of 2010. First quarter revenues by product category were as follows

[Aleks Cukic:]

Thank you, Marshall. During the first quarter, we sold 120 da Vinci Systems, 89 in the United States, 15 in Europe and 16 in rest of the world markets. As part of the 120 system sales, 13 standard da Vinci Systems were traded in for credit against sales for new da Vinci Si Systems and 19 S systems were traded in for Si Systems. We had a net 88 system additions to the installed base during the quarter, which brings to 1,840, the cumulative number of da Vinci Systems worldwide, 1,344 in the U.S., 330 in Europe and 166 in rest of world markets. 51 of the 120 systems installed represented repeat system sales to existing customers. In total, 110 of the 120 systems sold during the quarter represented da Vinci Si Systems, which included 15 dual console systems. The 31 system sales internationally included five da Vinci systems into Japan, four into Australia and three into the countries of Germany, France and Turkey. Clinically, we had a solid quarter, achieving overall year-over-year procedure growth of approximately 30%. Neurology and thoracic showed particularly solid sequential strength. On a year-over-year basis, the categories of thoracic, head and neck, GYN, colorectal and general surgery displayed the strongest growth. As we previously discussed, Q1 is a seasonally challenged quarter for surgeries that could be classified as discretionary, which causes some early year lumpiness within benign gynecologic procedures. Consistent with Q1 2010 procedure trends, malignant dVH showed greater sequential strength than benign dVH during the quarter. However, on a year-over-year basis, benign dVH is growing at a faster rate than malignant dVH. The overall category of da Vinci GYN surgery grew approximately 40% on a year-over-year basis. We would expect to see normal dVH cycles resume for the remainder of the year. Within urology, our dVP business remains strong and particularly so outside the United States, specifically within Europe. France and Germany are coming up the curb nicely, and Italy remains strong. We described our U.S. dVP business as relatively flat over the past several quarters. However, on a sequential basis, it can fluctuate a bit, and in Q1, it showed sequential strength. Having said that, we believe the greatest opportunity for growth will continue to be fueled from the OUS markets. At last year's European Association of Urology Conference, da Vinci related presentations, abstracts and postgraduate courses dominated the agenda, and the live surgery presentations were projected into standing-room only audiences. And at next month's AUA Conference, over 200 da Vinci-related abstracts have already been accepted. In addition, 16 AUA postgraduate courses will include da Vinci. dVP growth and urology in general remains strong and is certainly a catalyst for many of our OUS system placements. Regarding Japan, as you can imagine, the catastrophic earthquake and subsequent tsunami have caused significant disruptions to the healthcare system and has placed a tremendous burden on all Japanese government resources. The five da Vinci sales in Japan had occurred prior to these tragic events. We would expect uncertainty within Japan to prevail for some time to come and we will share more as it becomes known. During the quarter, over 200 clinical papers were presented at various conferences and/or within peer review journals. But I'll take a moment to highlight just a few. In the recent edition of the journal Gynecologic Oncology, Doctors Lim and Kang et al, published a paper entitled a Comparative Detailed Analysis of the Learning Curve and Surgical Outcome for Robotic Hysterectomy with Lymphadenectomy versus Laparoscopic Hysterectomy with Lymphadenectomy in Treatment of Endometrial Cancer

[Calvin Darling:]

Thank you, Aleks. I will be providing you with an update to our financial forecast for 2011, including procedures, revenues and other elements of the income statement on a GAAP basis. I will also provide estimates for significant noncash expenses to provide you with visibility of our expected future cash flows. Starting with procedures. Our first quarter 2011 procedures grew approximately 30% compared to the first quarter of last year. Based upon our latest projections and consistent with our previous forecast, we continue to expect our total procedures for 2011 to grow approximately 25% to 28% for the year from approximately 278,000 procedures performed in 2010. Moving on to revenues. Our 2011 total revenue forecast also remains unchanged compared to our previous quarter's estimates. Our Q1 2011 revenues increased 18% compared to Q1 of last year. We continue to expect our full year 2011 revenue to grow approximately 16% to 20% for the year. With regard to gross margin. On our last call, we estimated our 2011 gross margin percentage to fall between 72% and 73% of revenue. Our first quarter 2011 gross profit margin of 71.8% was just below this range as system ASPs and product margins were impacted by higher da Vinci S trade-in volume, a factor that we expect to continue going forward. We now anticipate our full year 2011 gross margin percentage to come in at the lower end of the 72% to 73% range forecast on our last call. Moving to operating expense. We continue to invest across multiple areas of our business, particularly our sales force, manufacturing and R&D. Consistent with our last call, we anticipate growing operating expenses between 16% and 20% in 2011 in line with our top line growth. In terms of noncash expenses, we continue to expect 2011 noncash stock compensation to total between $140 million and $145 million, up from $118 million reported in 2010. And we continue to expect 2011 amortization of purchased intellectual property to total between $17 million and $20 million. Other income, which is mainly comprised of interest income, is expected to come in at the higher end of the $17 million to $18 million range forecast on our last call. With regard to income tax driven primarily by lower state income tax estimates, we are now reducing our tax rate forecast to 33% of pretax income from 34% forecast on our last call. We estimate that our diluted share counts for calculating Q2 2011 earnings per share will be approximately 40.3 million shares. We aim to keep the share count around this level throughout the balance of 2011 which is equal to our 2010 average. Finally, regarding our cash flows. Since we're forecasting to report over $157 million in noncash stock compensation and amortization expenses for the year, our full year cash flows will continue to be significantly higher than our reported net income. We believe cash flows generated from operation is a better measure of our actual financial performance than net income. During Q1, we repurchased and retired $12 million of our common stock. Entering Q2, we have $389 million remaining authorized by the board to purchase additional shares. Our repurchase program is active, and we expect to increase our level of repurchases going forward. That concludes our prepared remarks. We will now open the call to your questions.

[Operator:]

[Operator Instructions] Our first question today comes from the line of Bill Andrew (sic) [Ben Andrew], representing William Blair.

[Ben Andrew:]

Thank you for taking the question. I wanted to ask here, if I might, plans for continued hiring. You've been growing the organization very rapidly, trying to scale into some new significant opportunities. How far have you come in that process? And can you give us a thought on maybe how many more quarters we would see this above trend hiring or is this now the new trend?

[Gary Guthart:]

Yes. I think it'll start to temper as a percentage of the base and it already has actually in Q1 from Q4. So we'll continue to hire but not quite at the same percent growth rate. The two barbells that have been commanding most of the hiring has been the clinical side in the field as we try to get territory's balance for the right procedure for rep coverage. And I think our coverage is getting pretty close to where we want it. It's really now just filling open territories as needed, and then a little bit on the R&D and operations side to support programs as we're growing. So I think you'll see a temper. We'll continue to hire but it will start to temper.

[Ben Andrew:]

And then maybe a question for Aleks. If my math is right, did you add 59 de novo systems in the U.S. this quarter?

[Aleks Cukic:]

Give me a second on that.

[Aleks Cukic:]

It should be close to that...

[Aleks Cukic:]

I believe it's 59.

[Gary Guthart:]

That is correct. It is 59.

[Ben Andrew:]

So my question is, as you look at that rate, it has come down a little bit from, say, the Q4 and Q1 were a bit below the trend you had seen in the previous three or four quarters for de novo U.S. placements. How do you think about the pipeline of potential new hospital is flowing in? And you did mention kind of multi-system orders, but just talk a little bit about the flow of potential customers for de novo systems in the U.S. if you would.

[Aleks Cukic:]

So I believe 89 systems in the U.S. represents a new high watermark for us. So the flow of systems into the United States remains very strong. What we probably have a more difficult time assessing on a go-forward basis is at what rate existing customers want to upgrade, either their Standard system or their S System to the Si System. I know it's a little different than the question you asked about the de novo system, but as you look at the activity that the sales organization has to go through to trade out a system and trade up or cultivate a new de novo system, it isn't that there is an enormous difference in the time required to get one done versus the other. So as we look at the overall system placement in the United States, it remains important for us to continue to either get our customers into the Si Systems or cultivate new green field. I don't know that there's a trend that we can point out that says this is going to continue. I think it'll probably oscillate up and down a bit as we go forward, and that's probably the most -- the best visibility we have.

[Ben Andrew:]

Okay. And then as you think about satisfying the needs of the customer across multiple specialties, it sounds like you're seeing some pickup in the number of multi-system orders or hospitals with obviously recurring orders. So is that more important to you, if you will, as developing maybe [indiscernible] -- is that obviously a point of focus for the company, trying to grow that installed base of existing and strong customers, maybe even more important than driving new customer installations?

[Aleks Cukic:]

It's hard to say again and I think you caught yourself in the question, and I think that's probably the way we'd answer it. It's hard to say what is the most important. I would say this, that when you have customers who are coming back and buying second, third, fourth or fifth system, I believe we now have five hospitals that have six systems, and they build very comprehensive programs. That's very valuable for us, both regionally and nationally. And so, I don't want to diminish from that, but at the same time, opening up a new store, if you will, the analogy being same-store sales versus new stores, is also important. The most important element is driving into those stores and keeping the shelves full with procedures. And so that happens both ways. So we're really not going to pick and choose as to which one is a little more valuable or a little less valuable. They're very valuable to us and we'll continue to operate that way.

[Operator:]

Mr. Peterson, your line is open. [JPMorgan Chase]

[Tycho Peterson:]

Thanks for taking the question. Maybe just starting out with ASPs. A little bit obviously some give and takes with mix here. Can you just talk about where you see ASPs maybe on da Vinci progressing for the rest of the year, and maybe talk about -- you talked about the Simulator impacting this quarter. Does that carry over as we go forward?

[Gary Guthart:]

The Simulator impact for the quarter was we had greater demand than we had anticipated going into the quarter, and so there were 32 systems that we did not deliver in the quarter and we've delivered those early in the second quarter. It's about $1.3 million worth of revenue. So that has a $10,000 impact on ASPs for the quarter. And to your question, that does carry over into Q2. But I wouldn't expect ASPs to vary greatly from where we are today.

[Tycho Peterson:]

Okay. And was there any contribution from the Si-e?

[Gary Guthart:]

Si-e, very little. We had three Si-e units in the quarter.

[Tycho Peterson:]

And then on sales, can you just talk about the market opportunity within Europe, what with yearly traction is like? And then any additional color you can provide on what the FDA is asking for here in the U.S.?

[Gary Guthart:]

I'll start with kind of the initial experience, Aleks can talk a little bit about the broader activity. So far, we're starting in cholecystectomy. The first experiences have been great. We've seen good procedure outcomes, low complication rates all been cholecystectomy, good learning curves. So our early opening experience in Europe has been really strong. And the conversation with FDA is really centered around indications per use and the clinical data to support that, so we're collecting additional data and we'll provide it to them per their request, and off we go. Cholecystectomy is clearly the place we're going to start and where it takes us from there will require some procedural development and additional medical research, but I'll let Aleks take...

[Aleks Cukic:]

Yes. I'll just say, Tycho, you've been following us for a while and I think when we go into a procedure category, we tend to be very diligent, very careful as to how we roll out the launch. And so as you can imagine, to Gary's comments, we had a few centers that were up and running. We're really trying to validate the procedure, we're trying to understand sort of the nuances of the procedure and the choreography of the procedure, and then in a very step-wise and thoughtful manner, expanding it a little bit at a time. And so that's really the approach that we have, whether it's Europe or anywhere else. In terms of the overall market, it's way too early for us to really claim what that size might be. I think there's probably an update out there that suggest what the laparoscopic cholecystectomy market is, but that's not what we're saying our opportunity is. We'll figure it out and we'll do it thoughtfully and we'll share more information as it becomes available.

[Tycho Peterson:]

I guess as we think about colorectal, can you talk to some of the momentum coming out of SAGES from the physician community and any additional commentary you can provide coming out of the conference?

[Gary Guthart:]

Yes, I think colorectal in general, if you look at -- again, it's been a very rapid ascent into that market. Now we're dealing off a small base just to level set. But what is very interesting is that each quarter that goes by, we tend to have a greater awareness in the community. And when I say the community, we're talking about the board-certified colon and rectal surgeons, independent of the interest that general surgeons might have with some of them do colorectal procedures. But when you really look at the colorectal specialty, you have to look at the board-certified colorectal surgeons. And the data that was disseminated and the discussions at stages and the general awareness of it in that community is growing pretty rapidly. We've said all along that we think that there are some products that will be required to fully optimize the opportunity, be it stapling, be it a vessel sealing platform and suction/irrigation and so on, but we're very pleased at the rate of growth despite having the perfectly optimized system.

[Tycho Peterson:]

And then just last one on TransOral. Can you just talk as to how interesting that market's becoming? I guess we get a few more questions on the margin on that opportunity lately and if you could just talk to whether it's sleep apnea or other areas that are expanding pretty quickly, that'd be helpful.

[Gary Guthart:]

Where we've set our initial targets is really where we remain today, and that's in the base of tongue in some of the malignant cancers, tonsil cancers -- I should say the base of tongue cancers and some of the benign conditions there resections as well as the tonsil cancers, et cetera. As far as sleep apnea, there's really not a lot that we can share there. I know there have been people that have talked about it, but we're aware of the interest people have there. But our focus is really into the high-value procedures today that we've identified with our customers and we'll continue to drive there.

[Operator:]

And next, we will go to the line of David Lewis with Morgan Stanley.

[Jonathan Demchick:]

This is actually Jon Demchick in for David. First off, on the trade-ins of Si, the former upgrades, I believe there were 19 of them. What was the breakdown between U.S. and EU? And how many S Systems are still out there?

[Gary Guthart:]

I think it was two international trade-ins of which one was a Standard and one was an S. The rest would have been U.S.

[Jonathan Demchick:]

On procedure adoption with Single-Site in Europe and soon to be in the U.S. and then also the stapling and sealing tools in development, can you give us any more clarity on the launch times of these as well as the main procedures that you're targeting with these devices, and how you guys are looking at the adoption curves?

[Aleks Cukic:]

I think there's really not a lot of more detail we can provide on prospective launch dates. I think we, again, I think, label them as either in with the FDA or soon-to-be and/or will at some point be in with the FDA. Beyond that, once it gets into that position, it's difficult to really say. In terms of the opportunities or the market, I think again with the Single-Site System, the initial target is going to be cholecystectomy with respect to the stapler. Staplers are used in a variety of applications ranging from general surgery to colorectal, to lung, to GYN oncology and so on and so forth. So I would envision that following along in parallel to where our procedure efforts are going that require a stapler and I think the same thing could be settled with vessel sealing.

[Jonathan Demchick:]

And lastly, last quarter we saw international placements up around 40, and this year they were, I guess, a little bit above 30. Is the system placements a reflection of the strength in the same countries like Germany, Italy and France, or is it more a result of just broad adoption? Also with the European box trend, is that more of a result of just increased traction or is it easing in austerity?

[Aleks Cukic:]

Yes. I think if you look at the comparison you made, and you can back test this for years, Q4 is the strongest market, assuming the strongest period for system sales outside the United States, and Q1 is traditionally, along with Q3, among the slowest. And so, there's really no surprise to us in terms of 31 systems as opposed to 38, I believe, we did last year -- excuse me, last quarter. So I think we're actually pleased with 31. The market, again, the breakouts, we introduced, I think, for the first time, talking about Australia. We haven't talked about Australia in a while, we haven't talked about Turkey in a while. Those are markets that again are coming on and certainly come on this quarter. And then Germany, and France and Italy remain very important markets to the EU. In terms of austerity measures, there really isn't, I think, a lot more for us to share there. We've seen it oscillate up and down over the past year or perhaps six quarters, and there's really nothing new for us to add there.

[Operator:]

Our next question is from the line of Rick Wise representing Leerink Swann.

[Miroslava Minkova:]

It's Miroslava for Rick tonight. Can we talk a little bit about Japan. I appreciate the commentary that with the tragic situation that we have over there, there's probably going to be little update. But just prior to that, you had a pretty strong quarter. Is there something new that you can share with us on the reimbursement front?

[Gary Guthart:]

Not really anything new we can tell you. We continue to work down the process there, which is a combination of working with our partners and collecting data and working with surgical societies likewise. But I can't give you any update on the time line.

[Miroslava Minkova:]

Okay, no updates. And secondly maybe on the increase in da Vinci S upgrades. It seems to me, if I'm looking at my model at least correctly, it seems like it's a pretty significant step up from what you've done from the nine to 10 upgrades you've done historically to something like 19 this quarter. Is there a reason why -- and you anticipate this continuing. What are the drivers there that you suddenly see this -- we see a bit of a step up there and you expect to see it continuing?

[Aleks Cukic:]

Again, I think in terms of the expectations, we don't really go into a particular quarter or particular time period and say we would expect this many customers to participate in an upgrade program. We try that through the communication with our sales organization, understand what the range might be, if you will. But what the customer ultimately decides to do is really up to the customer, and we will help facilitate whichever transaction they wanted, if they own a Standard and they want to get into an Si, we've got a program to help facilitate that. The same is true with the S. I can't out point at one event-driven activity that has caused an uptick from 10 to 19. But again, we've got a few quarters of this now under our belt and I think you can start to plot it and develop -- some trends are developing there and we just have no reason to think that it's either going to grow materially or decrease materially.

[Miroslava Minkova:]

Okay, thank you. And lastly, there is a study coming up at AUA that some physicians have pointed to us maybe interesting in terms of evaluating watchful waiting versus radical prostatectomy. Do you anticipate any sort of impact from this study? And what could this mean for your prostatectomy rates in the U.S.?

[Aleks Cukic:]

It's really hard to say. If I'm not mistaken, that study has been -- patients have been enrolled in that study from the '90s and there's a long-term follow-up on it, and that's great. I mean, I think you get long-term results. Unfortunately, you have to go through long periods of time. And I would suspect that there are only a few, if any, da Vinci Prostatectomies that are part of that cohort. And so, I think the watchful waiting versus surgery versus radiation debate will be with us for a long time. I don't know that there is anything that we would expect one direction or the other based on that particular study. I'm glad it's being done. I think good science needs to be done in a lot of different areas within prostate cancer, and we'll see what the results say.

[Operator:]

The next question is from David Roman with Goldman Sachs.

[David Roman:]

Thank you for taking the question. I was hoping to come back to gross margins. I know you talked a little bit about ASPs negatively impacting numbers, but if I look at the product gross margin, it looks like that was down from 75.5% in the prior year quarter down to sort of 73.9%. Maybe you could help us sort of understand a little bit more the dynamics on the gross margin anything beyond ASPs. And then maybe a follow-on on the ASPs. As you’re selling repeat systems, are you seeing the ASPs on those systems the same as when you're selling systems to de novo accounts?

[Gary Guthart:]

Yes. So the product gross profit that you mentioned, yes, 74.5% in Q4 down to 73.9%, so we're talking about 0.6 point here. And I think we tried to highlight the biggest factor out there which would be the ASPs for the decline of product margins, specifically the higher volume of S trade-ins which are going to carry a higher customer credit which helps to inform the sales discount. So that's the biggest factor, I think. We talked a little bit about the Simulator, too. And the Simulator, it's being bundled in with a lot of these sales in the quarter, and there's some cost that goes at the Simulator and at the same time, the ASP was steady to down. So the scenario we've set all along that we're going to be investing in our business in areas where we think we can grow procedures and drive adoption of robotic surgery, and I think the Simulator is one of those areas of investment that they kind of see on the gross margin line.

[David Roman:]

And then just on the ASPs, if you look at the centers to which you were selling second, third or fourth systems, et cetera, when you're making a repeat systems sales to any of those hospitals are the -- for the ASP there, are you recognizing something that's close to what you're recognizing on when you're making a new sale to a new hospital?

[Marshall Mohr:]

There's not a significant difference between the ASPs and follow-on systems versus initial system sales.

[David Roman:]

And then lastly, on the procedure volume side, I think in several examples you've talked about prostatectomy sort of flattish and then some seasonal gyrations on the benign hysterectomy side of the business. Would you say that -- does that mean that the vast majority of the sequential growth in procedures really came from outside of your 2 core procedures just on a sequential basis that the incremental procedures are becoming increasingly comprised of head and neck, for example, and some of the non-GYN, non-urological procedures?

[Aleks Cukic:]

I would say that the urologic procedures grew, and this is one of the quarters that we talked about. And I mentioned in my commentary from time to time in the United States. And we've talked about dVP being flattish for several quarters, but there are quarters where you will see some pretty -- some nice sequential strength and Q1 was one of them. So we -- in addition to seeing the OUS growth and specific to Europe, we saw U.S. growth. So there was -- the category of neurology was a decent contributor to the incremental sequential growth. This growing category of Other, I think you're right. I think when you look at the category of Other, it tends to grow at a faster rate, then the blend of the two main line procedures. And so nothing really different there. And I think you highlighted the sequential, or I should say, the seasonal challenge with some of the benign procedures, specifically dVH that you start to see in the early part of the year that tends to sort of correct itself as we get out beyond the first few months.

[Operator:]

The next question is from the line of Tao Levy with Collins Stewart.

[Tao Levy:]

So Aleks, maybe you could mention you could talk a little bit about the benefits of the vessel sealing device that they sent to the FDA, and not only on sort of the types of procedures versus kind of the other vessel sealing products that are readily available to da Vinci users, and also the benefit to the P&L, if any, or the impact?

[Aleks Cukic:]

Well, yes, as far as benefits, I'm going to be very careful. As you know, without having FDA clearance, you're not to be making claims on a particular product, so I'm going to be careful not to make any claims. I think in the category of vessel sealing, what tends to be the target is moving into a larger -- moving into a larger vessel and some of them, again, you're taking significantly larger vessels than you would with traditional bipolar or other forms of elective surgery. That's the target. As you know with the da Vinci instrument, you get articulation and get control, so we look to bring all of those things to the product. But in terms of making benefit claims, I’ll wait and preserve that until we get the product through the FDA and out the market, we can actually make those claims. And as far as the P&L, there's really not much we can comment on there because the product isn't priced and it's not in the market yet. So we do believe that a vessel sealer in some of the complex procedures, which we've become accustomed to operating in will add value. But that's about as far as I think we can really talk about it.

[Tao Levy:]

Okay. And a couple other pipeline products, is the Single-Site experience in Europe, maybe you can comment on the price point of that technology at this point?

[Gary Guthart:]

Right now, it's priced at a slight premium to the manual products in the market and a little bit lower than typical da Vinci instrument kit just directionally.

[Tao Levy:]

Okay, perfect. And then lastly, what are your early thoughts on the Fluorescence Imaging? You're starting to see some press releases out of some of the hospitals with some initial procedures on that technology. Where do you think it potentially could add the most value in that area?

[Gary Guthart:]

Good question. For us, it's a little bit of a platform technology and this is really the first indication for it. So the current clearance is for vascular imaging. So it's being used in partial nephrectomy and some colorectal and allows surgeons to understand profusion. There are other potentials for Fluorescence Imaging that we're working on that will have subsequent follow-on clearances that will have subsequent follow-on clearances that will allow us to take in other directions. So I think generally speaking, directionally, what it does is allow surgeons to see some structures beyond the tissue surface and do more precise dissection than they would otherwise be able to do. I think it'll be a slow build for us as we gain experience, as the publications come out. So far, the early use of it is encouraging, but I think it will take some time to get that built into our procedure packages and into our clinical publications, and we have some follow-on indications we'd like to pursue.

[Operator:]

Our final question today comes from the line of Mimi Pham with Weeden & Co.

[Mimi Pham:]

Do you have any target in terms of Single-Site in Europe? Do you have a target of how many sites you want to be at by the end of the year?

[Aleks Cukic:]

We don't, and I would just say that if the first quarter where we really started to commercialize it and it'd be difficult for us to assess what that number is going to be at the end of the year.

[Mimi Pham:]

Okay. And then in terms of the U.S. mission for Single-Site, I mean, I know you're saying you're -- do you have everything you need to resubmit in the current quarter? Is that something that might take you through year end to get all the FDA -- all the data to the FDA?

[Gary Guthart:]

Some of that data, we're currently collecting now, so I don't know exactly when we'll have it all in our hands but it's not all sitting right now on the dockets. We'll have to do some of the work to get it done.

[Mimi Pham:]

And when you say work, you mean additional clinical work?

[Gary Guthart:]

Yes, there's clinical work to be done.

[Mimi Pham:]

Okay. And then in terms of your procedure growth of being 30% this quarter but you still kept your guidance for the year 25% to 28%, can you just talk about -- do you expect that year-over-year growth through the year to decline throughout the quarters or in terms...

[Aleks Cukic:]

Well, I guess that's implied in the guidance. I mean, mathematically, that has to be the case. If you look at Q4 last year, it was 35%. Now we're in Q1, it was down to 30%, so we know this was seasonally a lighter quarter in some of our benign procedures. But I think still the math is as you described it, I think the year-over-year growth in the outer quarters would be slightly down from here.

[Mimi Pham:]

Okay. So I guess just implied by that, you're not expecting sort of an uptick in the back half of the year from Single-Site to keep that level [indiscernible]?

[Gary Guthart:]

Nothing like that will be built in to the numbers here. As Aleks said, it's just too early to forecast what that maybe.

[Mimi Pham:]

Okay. Thank you for the clarification.

[Gary Guthart:]

Thank you. That was our last question. As we have said previously, while we focus on financial metrics such as revenues, profits and cash flow during these conference calls, our organizational focus remains on increasing patient value by improving surgical outcomes and reducing surgical trauma. I hope the following experience gives you some sense of what this means in the lives of our patients. One experience comes from Jenn in Ohio who had a da Vinci surgery for endometriosis. After several laparoscopies that removed some but not all of the endometriosis, she writes, "In the meantime, I had lost my job. I had to take pain medications throughout each day and it just barely touched my pain. I couldn't drive, cook or clean. Some days I couldn't even drag myself out of bed. I had to rely on my family for everything. I felt absent from my son, my husband and my entire life. Finally, a friend contacted me and told me about Dr. Ross Marchetta and how he helped her after years of being misdiagnosed by several doctors. Thank God she did. He informed me of the da Vinci robotic-assisted surgery and explained that I was a perfect candidate. He was the first doctor who was confident he could help me. In June of 2010, I had my da Vinci robotic-assisted laparoscopy. Using the robot, Dr. Marchetta was able to remove all of my endo lesions, both fibroids and my fallopian tube and cystic ovary. My ovary was growing into my kidney, and if it would've remained untreated much longer, it could have caused serious damage. Dr. Marchetta called my case one of the worst he had ever treated and said he would call it Stage V, if there was such a stage. He was thrilled with the work he was able to accomplish and explained that he never could have achieved this amazing result without the robot. He called my surgery a miracle. It was miraculous. He gave me back my life. I weaned off my pain medication. On the 4th of July, my family and I attended a friend's party, the first fun I had, had all year. I felt like myself again. My pain was completely gone. I returned to my normal everyday life as a mom, wife and writer. On my birthday, I celebrated my health by parasailing, an activity on my bucket list. If people had told me this was possible during those previous dark months, I never would've believed them. Dr. Marchetta and the da Vinci robot saved my life. My family and I will be forever grateful." Patients like Jenn are the strongest advocates for da Vinci surgery and form the very foundation of our operating performance. We have built our company to take surgery beyond the limits of the human hand and I assure you that we remain committed to driving the vital few things that truly make a difference. This concludes today's call. We thank you for your participation and support on this extraordinary journey to improve surgery, and we look forward to talking with you again in three months.

[Operator:]

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.