Intuitive Surgical, Inc.
Q3 2011 Earnings Call Transcript

Published: 19 Oct 2011

[Operator:]

Ladies and gentlemen, thank you for standing by. Welcome to the Intuitive Surgical Q3 2011 Earnings Release Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the conference over to our host, Mr. Calvin Darling, Senior Director of Finance. Please go ahead.

[Calvin Darling:]

Thank you. Good afternoon, and welcome to Intuitive Surgical's Third 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 third quarter results, as described in our press release announced earlier today, followed by a question-and-answer session. Gary will present the quarter's business and operational highlights. Marshall will provide a review of our third quarter financial results. Aleks will discuss marketing and clinical highlights. Then I'll provide you with an update to our financial guidance for 2011. And finally, we will host a question-and-answer session. With that, I'll turn it over to Gary.

[Gary S. Guthart:]

Thank you for joining us today. We are pleased with the growth in da Vinci procedures and with the performance of our capital and clinical teams in the third quarter. Overall, the Intuitive team is executing well in our 4 2011 focus areas, which are first, extending the benefits of minimally invasive surgery in gynecology and urology; second, expanding robotic surgery and deepening our organizational capability in Europe and Asia; third, crisp execution in our product development efforts; and finally, enabling emerging procedures in thoracic, transoral, colorectal and general surgery. Total procedures grew approximately 30% over Q3 2010 with strong year-over-year growth in gynecology. Gynecology procedure performance was solid for all of our target procedures, including hysterectomy for malignant and benign conditions, sacrocolpopexy and myomectomy. In urology, da Vinci Prostatectomy continued to grow year-over-year driven by European uptick. dVP was flat in the quarter on a sequential basis, expected given the summer seasonal slowdown in Europe. For follow-on procedures in urology, our penetration into treatment for kidney cancer continues to grow as more total nephrectomies are converting to nephron-sparing partial nephrectomies enabled by da Vinci. Emerging procedures in thoracic surgery and colorectal surgery continued to show strength both sequentially and year-over-year. Transoral robotic surgery grew nicely on a year-over-year basis, however, absolute volumes in TORS are relatively small and quarter-to-quarter variation is significant. Aleks will provide additional procedure commentary later in the call. Operating highlights for the third quarter are as follows

[Marshall L. Mohr:]

Thank you, Gary. Our third quarter revenue was $447 million, up 30% compared with $344 million for the third quarter of 2010, and up 5% compared with $426 million reported for the second quarter of 2011. Third quarter revenues by product category were as follows

[Aleks Cukic:]

Thank you, Marshall. During the third quarter, we sold 133 da Vinci Systems

[Calvin Darling:]

Thank you, Aleks. I will be providing an update to our financial guidance for 2011, including procedures, revenues and other elements of the income statement on a GAAP basis. I will also provide estimates of significant noncash expenses to provide you with visibility of our expected future cash flows. Starting with procedures. Based upon our year-to-date procedure results, we are increasing our guidance for 2011. Our prior forecast was for total 2011 procedures to grow approximately 27% to 29% for the year. We now project procedures to grow approximately 29% to 30% from an estimated 278,000 procedures performed in 2010. Moving onto revenues. We are also raising our 2011 total revenue guidance. On our last call, we had estimated 2011 revenue to grow approximately 19% to 21% above 2010 results. Based upon higher capital and recurring revenue projections, we are now forecasting total 2011 revenue to increase between 22% and 23% for the year. We are also slightly increasing our guidance for 2011 gross margin percentage. Our previous guidance was for full year 2011 gross margin to come in at roughly 72% of revenue. Our year-to-date gross margin percentage now stands at 72.3%. We now forecast our full year 2011 gross profit percentage to be consistent with these year-to-date results within a range of between 72% and 72.5%. Moving to operating expense. We continue to invest across multiple areas of our business, particularly our sales force, manufacturing and R&D. Driven primarily by higher variable expenses associated with our higher revenue forecast, we now anticipate full year 2011 operating expenses to grow between 19.5% and 20.5% above 2010 levels, compared to 18% to 20% growth previously forecast. Our guidance for significant noncash expenses remains unchanged. We continue to expect 2011 noncash stock compensation to total between $135 million and $140 million and amortization of purchases of intellectual property to total between $17 million and $20 million. We are slightly reducing our guidance for other income, which is mainly comprised of interest income. We now expect 2011 other income to total around $15 million, down from the $17 million to $18 million previously forecast. With regard to income tax, we continue to expect our 2011 income tax rate to fall within a range of between 32% and 33% of pretax income, consistent with the guidance provided on our previous call. We estimate that our diluted share count for calculated Q4 2011 earnings per share will be approximately 40.2 million shares. Going forward, we plan to continue to repurchase shares of our common stock to reduce the dilutive effects of stock option grants. Finally, regarding our cash flows. Since our guidance calls for over $150 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 operations is a better measure of our financial performance than net income. And with that, we would like to open the call to your questions.

[Operator:]

[Operator Instructions] And our first question comes from the line of Mr. Ben Andrew with William Blair.

[Ben Andrew:]

Gary, just a couple of questions for you. I guess, first, if you think about the investments that you've been making over the last couple of years, they appear to be paying off in the form of increased productivity and sort of strong sequential growth despite the challenges around seasonality. And I know you talked before about holding the operating margins down to about 40% for a variety of reasons, but primarily to drive long-term penetration, but also for obviously, other obvious reasons. If you think about where do you go from here coming out of the fourth -- the third quarter with a 40% operating margin and a lot of the opportunities you have, what are the kind of the key priorities over the next, maybe, 4 or 5 quarters for additional investments above and beyond what you might have been looking at before?

[Gary S. Guthart:]

Yes. So I think the biggest investment that you've been talking about, at least in that question, I think, is around sales force in the commercial operation. And we've continued to do that, we're investing and we've moderated our investments in the U.S. sales force. Although in Europe and in Asia, we have been investing on the commercial side of the business, and we'll continue to do so. We think that those are good investments. And then this has been a period of substantial product development investment, and we are continuing to do that as well. So I think it's nothing big and surprising. I think it's a little bit of more of the same.

[Ben Andrew:]

Okay. And then 2 quick follow-ups, if I may. Can you update us on sort of a Japanese organization, what you have on the ground there? Where you're making investments today? And if there's any update on regulatory timing -- excuse me, reimbursement timing? And then, second, is it fair to say that da Vinci Hysterectomy is still north of 60% of your sequential procedure growth even in a seasonally weak quarter?

[Gary S. Guthart:]

To the first question on Japan, the first sets of investments have really been kind of back office investments. So we're building an organization that's capable of handling regulatory and logistics kinds of functions and supporting our reimbursement efforts with the Japanese government. We're engaged. We think we're engaged with the right elements of MHLW in Japan. I don't have any additional color for you on timing of those efforts. So that continues. On the procedures side, I don't have the exact splits in front of me. I think I'll look to Aleks to cover that question.

[Aleks Cukic:]

Ben, could you repeat the way you phrased that question? It was on -- it was with hysterectomy, I understand. You were talking about growth on a sequential basis, but I kind of lost it after that.

[Ben Andrew:]

Sure. I mean, if you look at the growth both this quarter, I think, and then over the next couple of years, the key determinant for that sequential procedure growth is likely to be dVH, and we calculated it at about 60% or more. And I'm curious if that was what you saw in the quarter, if that's still sort of a reasonable assumption for the next couple of years?

[Aleks Cukic:]

Well, not commenting on the percentage and certainly over the time frame of a couple of years, but I will say that the sequential hysterectomy, specifically in the benign side, was very strong in Q3.

[Operator:]

And our next question comes from the line of David Lewis with Morgan Stanley.

[Jonathan Demchick:]

This is Jon Demchick in for David. We saw strong system placements this quarter in an environment where many had been a little concerned about capital equipment. Last quarter, you mentioned that there was an increase in customer's financing systems, and I was curious if that was still the case. Also if there where any macro changes in the environment that you could point out either in Europe or in the U.S.?

[Calvin Darling:]

Yes, this is Calvin. I'll comment on the leasing side. You brought up last quarter, we saw a kind of a spike in the percentage of a systems finance up to around the 30% range. What we saw here in the third quarter was a return to the normal rate, I guess, that we've seen over the past few years, which is within the range between 15% and 20% of the systems going through financing. And just to remind everyone, we don't hold any of the paper for those loans. Those are all with third-party vendors. And I'll leave it to Marshall to comment on the environment.

[Marshall L. Mohr:]

So I think you're out pointing specifically to Europe, and I say that we did have a successful capital sales quarter in Europe despite seasonality. But having said that -- and it's driven by dVP growth in the major countries of Germany, France and Italy. Going forward, it's hard to predict what will happen in those is specific economies. But again, I think we had a successful quarter.

[Aleks Cukic:]

Yes. I would only add that if you looked at the second quarter, Germany wasn't particularly strong in Q2, but here you are in Q3 and 6 systems were placed. You had Spain, which, again, has been in the headlines for its own challenges during the past several quarters, which is also participated with 3 systems. So I think it's important to recognize that the underlying stimulus on systems getting placed is the strength of the procedures, and that continues to be the case.

[Jonathan Demchick:]

Got you, okay, very helpful. Another question I wanted to follow up on was prostatectomy procedures given the, I guess, increased focus with PIVOT and watchful waiting and then also the recommendation against PSA. I was wondering if you've seen physicians changing their behavior at all, and how you kind of expect these procedures to trend in 2012. And lastly, if you've heard any insurers talking about altering coverage at all?

[Aleks Cukic:]

So a couple of things. One is with respect to -- you said a few things there, you said, PIVOT, watchful waiting, the recommendation against PSAs, just to separate all of those. So the latest news is from the panel preventive -- the preventive panel, but -- which is different from what you had described earlier. So in general, I think, our view on dVP, and it has been this way for some time, is that we consider it fairly flat in the United States, and it's been that way for a few quarters. And the majority of the growth in dVP should happen outside the United States. In the short period we've had following the panel recommendations and the discussions we've had with physicians, a lot of physicians believe that they will follow the guidelines of the AUA. Now how that unfolds over time is really anyone's guess at this point. And we're not going to speculate what that what might mean. But we believe that the men and women that comprise the AUA are, as I said earlier, in the best position to determine that care and that testing for their patients, and that's what we support. We will see what that leads to in time.

[Operator:]

And our next question comes from the line of Tao Levy with Collins Stewart.

[Tao Levy:]

Can you maybe pry the number of Firefly systems you sold in the quarter?

[Gary S. Guthart:]

Yes. In Marshall's commentary, when we're talking about instrument and revenue -- instrument and accessory revenue per procedure, we've seen that at a level around , let's say, 1,940 to 1,950 level all-in, including stocking orders. That metric was helped in these last few quarters by the new products that we've launched in instruments and accessories, including the thoracic kits, some of new vision instruments, the 0.5 millimeter scope, and now this fluorescence imaging product, which is included in accessories. So the combination of those products has moved that overall metric. And we're encouraged with what we've seen on the fluorescence side in terms of our initial sites. But I don't think we're in the position to say exactly how many are sold, but we think it's positive movement on the new products.

[Aleks Cukic:]

Yes. There's also a few components of that, which makes it a little difficult to sort of piece it out and give you a clean number. In other words, there's scopes, there's die, there's a few sources of revenues, if you will, SKUs that makeup that system.

[Tao Levy:]

Got you. Is it possible to maybe comment on how many Fireflies are out in the field, just in general being used, tested?

[Aleks Cukic:]

I don't have that number. I don't know if Marshall has it.

[Marshall L. Mohr:]

We're not ready to report, Tao.

[Tao Levy:]

And then just maybe on the gross margin side, the service part of that came in higher than expected and probably better than it's been for a while, actually forever. Is that -- how much of that is due to the Si potentially being less of a service-intensive system?

[Marshall L. Mohr:]

I think you've seen that we've built into the systems better quality over time, and that has served to reduce the cost associated with service. I think though on the other hand, the service margins can be a little bumpy because it depends on service part consumption. And in this quarter, we had a lower service part consumption. I don't know that the 65% is necessarily sustainable over a period of time. I think that the rates that you saw over the last few quarters are probably more indicative.

[Operator:]

And our next question comes the line of Tycho Peterson with JPMorgan.

[Tycho W Peterson:]

Just wondering if you could talk a bit about system mix. I know you don't provide data anymore by kind of hospital size, but to what extent are you seeing uptake by the community hospitals and then second and third tier hospitals? And then the repeat systems, are they largely being driven by hospitals wanting to get into new procedures or just pulling a higher volume of patients around dVP or dVH, that would be helpful?

[Aleks Cukic:]

Yes. So this is a reminder. We had 60 of the 133 systems went to existing customers, which means that there were 73 customers that bought for the first time. Within both cohorts, both the existing customers, as well as the new first-time buyers, we've seen a, I'd say, a pretty good mix across various-sized hospitals from fairly, what you might consider smaller hospitals to large hospitals. So I think that continues. I don't know that there's anything remarkably different from one quarter to the next because it ultimately follows the path to the patient. In other words, if the procedures are being performed, procedures like GYN, benign hysterectomy, myomectomies, if they're being performed in smaller hospitals, then it stands to reason that the physicians that are looking to participate in those procedures are going to look toward da Vinci. So it can certainly move into smaller hospitals and it continues to do that. But I don't think there's any new trends to really report on there. As far as the overall number of hospitals that own more than one now, I believe following Q3, there are almost 300 hospitals that have, and in fact, 299 hospitals that own more than one system. You have 5 hospitals that own 6 systems, you have 3 hospitals that own 5, you've got 15 that own 4 and you've got 45 that own 3 and 231 that own 2. So I don't know. Again, that's been fairly consistent. We keep adding to the -- each of those cohorts. So I guess, I'll give the -- summarize this long answer, there really isn't anything remarkable that I think we can point to over the past few quarters in terms of demographics.

[Tycho W Peterson:]

And then going back to the question on dVP. We understand the shortcoming to the task force. I mean the other side of it has been -- there was a JAMA article and the New York Times article, questioning kind of the outcomes. I understand the JAMA article was kind of old data. But to what extent do you see any impact from either of those publications?

[Aleks Cukic:]

Like I said earlier, it's very difficult to say. As long as I've been aware and been in this business, there has been very little consensus around this very topic on PSA screening, watchful waiting. It is constantly being evaluated. It's constantly being studied by different groups. I don't think there's anything that we believe has come out that's been conclusive in terms of the negative here. And I think it's going to be something personally that's going to be debated for some time to come. And -- but I'll be careful not to project expectations based on any of this because it's really anyone's guess at this point.

[Tycho W Peterson:]

And then on single port, can you just talked a little bit about use in Europe? I mean, you talked last quarter I think about general surgery, seeing some signs of adoption, and I think you've got 10 sites or so using SILS over there. And also as we think about getting data back to the FDA here, can you use data from those European sites?

[Gary S. Guthart:]

Yes, so the answer on the first side, most of our Single-Site experience in Europe remains focused on closed cystectomy. As you know, Q3 is a slow quarter for European procedures as a whole. But we're seeing continued use and uptake of the Single-Site product there. We have collected data from Europe and other sources. And we have provided that to FDA and are continuing to answer any questions that they have on that data, so we have supplied that.

[Operator:]

And our next question comes from line of David Roman with Goldman Sachs.

[David H. Roman:]

I was hoping you could provide a little bit more detail on some of the new procedures. Gary, in some of your remarks, you did touch briefly on some of the specific procedures where you were seeing some uptake outside of dVH and dVP. But could you give us maybe some sense to what percentage of the U.S. mix those procedures represent this quarter and maybe how that compares to the last year and the prior quarter sequentially?

[Gary S. Guthart:]

Yes. I don't have the specific breakouts for you. But if you look at what we think of as follow-on procedures in the U.S., so in urology, it's really going from prostate cancer to kidney cancer. So partial nephrectomies, that's been growing nicely for us in the U.S, and then behind that, bladder cancer and cystectomies. Partial nephrectomies are becoming a material part of the business. Cystectomy is a little bit smaller disease state, but continues to rise. On the GYN side, the follow-on procedures then are myomectomy. That has been growing nicely for us. Sacrocolpopexies, pelvic floor reconstruction and endometriosis resection, and those have also started to grow. So taken those categories, the follow-ons have been growing nicely. And then in the case of urology, you're growing faster, of course, than dVP in the U.S.

[Aleks Cukic:]

I'll just add to that. Outside of the categories of GYN and urology, we've talked a little bit about thoracic surgery, we've talked a little bit about colon surgery, and I would say that within, specifically, within colon and rectal surgery, earlier, our focus had really been on the low rectal cancers, the low anterior resections and the AP resections. And we've talked about this in the past where, if successful in these very difficult anatomies, low in the rectum, that the likelihood of surgeons looking at it in the right colon, the left colon, the sigmoid colon, the likelihood of them starting to really evaluate da Vinci's role in there is probably pretty high. And I would say on a sequential basis, if you looked at some of the growth in those areas, it was very strong. The same I think could be said about thoracic surgery. When you look at the lobectomies, wedge and segmental resections, and recognize that neither of these areas is fully optimized yet with the instrument set. But there's a very good core of instruments that'll [Audio Gap] procedure, which they are doing. So I would just say quantitatively, those areas, and through a seasonally challenged quarter like Q3, we're showing very, very promising growth.

[David H. Roman:]

Okay. And then maybe as a follow-up on Japan, you talked -- I think you said you placed 6 systems in the quarter -- sold 6 systems in the quarter in Japan. Can you just kind of update us on what the sort of installed base looks like in Japan right now? And how we can sort of think about the addressable market, both with and without reimbursement?

[Aleks Cukic:]

Well, the installed base specifically, I can give you...

[Marshall L. Mohr:]

We stand at 35 ending in this quarter.

[Aleks Cukic:]

Yes. And I think that the challenge on trying to project what the market looks like in advance of knowing what the reimbursement climate looks like is kind of a dangerous exercise. In other words, we know it is not optimized for mass market distribution. We also know that hospitals that are purchasing it now are purchasing it with the full understanding that they're going to have to go through a manual process to get reimbursement. Some of them have been very successful in getting that reimbursement initially for dVP. So you are still sort of handcuffed in terms of trying to address the broader markets. And until you get the reimbursement and understand what you're being reimbursed for, it's difficult for us to say. But we're encouraged by the fact that there are 35 systems that are in Japan already and the sort of demand that the -- that has built in Japan for robotic surgery, we believe, is strong.

[David H. Roman:]

Maybe last in the P&L. The 40% operating margin that -- at least, over the past couple of years, that's pretty much a high water market. And maybe close to sort of not a peak point for you. It's really the highest we've seen in some time. Can you maybe sort of talk about sort of investment priorities on a go-forward basis? It sounds as though there a lot of the investments in the U.S., there was big step up in sales force, I think, in the end of last year on the hysterectomy side. And that seems to be paying some rewards. But as you look at some of the other markets outside of the United States, obviously, the sales base is somewhat small relative to total. How can we sort of think about a trajectory with respect to investment spending because you're still generating quite a bit of operating leverage even at margins at this level?

[Marshall L. Mohr:]

Yes. So our goal is not to drive operating returns higher than that profile. Investment-wise, as we said earlier, we're really looking at it and the commercial organization keeping pace in the U.S., investing in Japan and Europe and other countries. On the product side, we continue to invest in the products we tell you about and acquiring and developing technologies, we think, are going to have an impact in the long run. But we really believe we're in the early phases of adoption of robotic surgery. And as a result, we're willing to make those investments, both from the commercial organization and in the product development side.

[Operator:]

And we -- our next question comes from Rick Wise with Leerink Swann.

[Frederick A. Wise:]

If we could talk a little bit more about some of the general surgery, I mean, Aleks, I think you said colorectal is doing well. Can you give us any more color on the growth there or the growth relative to the rest of the business? And just related to that, are -- to where it is, I know we're not going to hear precisely, but are the new instrument approvals required to see that next steep acceleration of the growth curve here?

[Aleks Cukic:]

Well, you said it correctly. We're not going to break out the numbers in detail for you. But I think you've heard us over the years, and certainly you have been following us for as long as you've had. In that, we look at early adopters and recognize that early adopters will put up with what we term as fiddle factors, something that is less than optimized. And we saw it with prostatectomy. We saw it with hysterectomy. We've seen with just about everything we've done. And when we look at general surgery, specifically colon and rectal surgery, there is a very good set of instrumentation. There's ways to manage the vessels either by suturing, by using our PK device or our harmonic device and/or stapling through an ancillary port. It's just not optimized in the sense that the surgeon has to break the choreography, have someone else do tasks that they would like to do or should do or believe is in their best interest to do or break scrub and so on and so forth. Now despite all of that, we're seeing very nice trajectories in the growth in both in low anterior resection, in sigmoid resection, in right colon resections, in thoracic surgery. But as you said, we're not going to break those out in detail. I would say that it is very encouraging at an early stage, but it's difficult to tell you much more without really going into the details or the numbers. Is it necessary to have those other instruments? We believe to get the full optimization, you have to optimize the procedure, you have to optimize the instrument set. You'll grow until you get there, but hopefully, if you spec the instruments right, it should be a nice addition to the armamentarium.

[Frederick A. Wise:]

Got you. And to follow up on that, Gary, I know that -- or Marshall, I know that the FDA is particularly opaque now, and there's not much to be gained by making public forecast. But, I mean, should we assume that there's -- that the chances are low, that these new products are approved this year? Does it feel, now just given the pace of things and just the pace of what's going on with everybody at the FDA, that it's more likely to fall into 2012?

[Marshall L. Mohr:]

I can handicap it for you. I guess I'll tell you that we're engaged in constructive discussion. I think that the questions and answers are pretty reasonable and we're working through them. How long that will go on for, I cannot predict.

[Aleks Cukic:]

Yes. I think it's also -- just to the level-set, Rick, and if you replay the tape over the last few quarters, you'd see that we are further along in the Single-Site submission than we are in the vessel sealing and that we are in the stapling. Stapling, we haven't submitted yet. So recognizing that the calendar gets converted to 2012 relatively soon, you should be able to perhaps answer your own question there.

[Frederick A. Wise:]

Okay. And just last, if I could. The European outlook is incredibly confusing on multiple fronts. Are you more concerned now about the next few quarters in Europe, given the political and economic disruption than you have been in the past? Or I mean, just again, I'd be curious to just get your sense of just the general environment. Obviously, you did a great job this quarter.

[Gary S. Guthart:]

Yes. For us, we don't -- there's uncertainty for us as well. We don't have a crystal ball into what the economic winds will bring there. We do feel that the interest in the procedure adoption has been high, particularly in the countries that have most of the population and are really adopting nicely now. And so we think if that's true, ultimately, system sales should follow. It may be lumpy depending on local market conditions, and so we'll see. We had a good quarter this quarter, and we'll see where it carries us next. We have time for just one more question.

[Operator:]

And our last question comes from the line of Lennox Ketner with Bank of America.

[Lennox Ketner:]

Just a few quick ones. First on your guidance for procedure growth has gone from, I think, about 25% to 28% initially to 29% to 30% when a lot of companies are talking about seeing pressure on procedure volumes. I'm just wondering if it's possible to characterize where that upside has come from in that? Is it relative to your initial thoughts? Is it coming -- is the upside coming from 1 or 2 specific procedures?

[Aleks Cukic:]

I don't know that it is one procedure. I think if you look at it in terms of the GYN, GYN is a large bucket and really drives a lot of that growth. In 2009 on the year-over-year basis, GYN has been very strong, and not just hysterectomy, but myomectomy and sacrocolpopexy, endometrial resections. I would say some of the general surgery procedures, i.e., the colon and rectal procedures, even into the thoracic procedures, although they're not as large as some of the other categories we talked about at this stage, growth from a number of procedures adds up pretty well. And the pull through procedures on urology, as well as some of the OUS [ph] dVP business has been strong. So it's really come from a number of places, and I think pretty good performance on our downstream commercial team.

[Lennox Ketner:]

Okay, so more across the board. And then on the Cooley [ph] Single-Site product in Europe, you mentioned you're still seeing good uptick there. But I think last quarter, you said you were at 10 sites. Are you guys -- are you able to give us the number of sites that you're at now? Is it so close to center? Have you rolled that out more broadly?

[Gary S. Guthart:]

We're adding sites, but we're adding them slowly. So I don't have the specific number of sites in front of me right now. But in general, really the first part of our experience in Europe has been to optimize the products and to get feedback on how customers are using it. And we're working on getting its approval in the U.S. That was our last question. As we have said previously, while we focused 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. Lori of Pennsylvania shares the following experience, "I had been suffering with painful periods for almost 2 years. I had already had one endoscopic surgery, and I got very little relief from the pain. After suffering for several more months and having to spend 2 to 3 days in bed each month and everyone telling me I needed to have a hysterectomy, I decided I needed to try something else. A friend and co-worker recommended Dr. Coslett to me. I met with him and started to feel that maybe there was hope for me that didn't require hysterectomy. Dr. Coslett explained the procedure that he would perform and the risks. He said there would be only an 8% chance of the endometriosis recurring. He explained that he would be performing the procedure with the help of a robotic arm. I agreed to the procedure and I am thrilled that I did. That procedure took 1.5 hours. Dr. Coslett removed all of the endometriosis and an endometrioma. I have had 2 periods since the surgery, and I'm amazed at the results. I'm leading a normal life again. I do still have the normal cramping that accompanies most women's periods, but I no longer need to spend several days in bed and take prescription pain relievers. There was very little scarring because the procedure only required 4 small incisions. And the pain I experienced was less than I would do -- than I would experience when I get my period. My only regret is that I didn't find Dr. Coslett sooner. When I compared this procedure to my other endoscopic procedure, the da Vinci procedure was far better. There was less scarring, and I experienced less pain with the da Vinci procedure. I only took 2 pain pills after the procedure and went back to my normal routine in less than a week. I would definitely recommend the da Vinci." Patients like these 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 committing to driving the vital few things that really 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 3 months.

[Operator:]

Ladies and gentlemen, this conference will be available for replay today after 3