Intuitive Surgical, Inc. (ISRG) Q3 2012 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Intuitive Surgical Q3 2012 Earnings Release Conference Call. [Operator Instructions] Also as a reminder, today's teleconference is being recorded. And at this time, we would like to turn the conference call over to your host, Senior Director of Finance Mr. Calvin Darling. Please go ahead, sir.

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 Intuitive's archives on the Audio Archives 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's 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 an update to our financial forecast for 2012. And finally, we will host a question-and-answer session. With that, I'll turn it over to Gary.

Thank you for joining us today. The third quarter highlighted both market's strengths and headwinds. Our procedure performance came in below our expectations, driven by challenging conditions in Europe and changes in prostate cancer detection and treatment. On the positive side, acceptance of da Vinci surgery in general and gynecologic surgery continues to grow, in complex cancer procedures, benign procedures and in single port robotic surgery. In the third quarter, procedure growth was challenged by a continuing weakness in Europe and acceleration in the decline of our U.S. da Vinci prostatectomies. The prostatectomy decline appears to be driven by a combination of the U.S. Preventive Services Task Force recommendation against PSA testing and a change in treatment recommendations for low-risk prostate cancer away from definitive treatment. European procedure weakness appears to be driven by 3 underlying conditions: broad economic pressure in Europe, sentiment behind the PSA testing recommendation from the U.S. reflecting into Europe and the need for increased depth in our commercial organization. As we have mentioned on prior calls, we expect economic pressure in Europe to persist for the near future. We have been investing in our European commercial organization over the past couple of quarters and anticipate doing so for the next several. Moving to general surgery. We experienced continued strong growth, which was multifaceted, including growth in colon and rectal surgery for cancers, as well as cholecystectomy, the latter following the introduction of Single-Site earlier in the year. Gynecology performance was solid. And like general surgery, gynecology was broad based, including hysterectomy, sacrocolpopexy and myomectomy. Aleks will provide additional procedure commentary later in the call. In Japan, system sales and procedure performance have both continued to growth, led by dVP. Two da Vinci training centers have opened this year, one at Fujita Health and one at…

Thank you, Gary. Our third quarter revenue was $538 million, up 20% compared with $447 million for the third quarter of 2011 and up slightly compared to the $536 million last quarter. Third quarter revenues by product category were as follows. Third quarter instrument and accessory revenue was $218 million, up 24% compared with $176 million for the third quarter of 2011 and down 3% compared with $224 million in the second quarter of 2012. The year-over-year increase in I&A was driven by procedure growth of approximately 22% in sales of our new instrument and accessory products, including Single-Site, Vessel Sealer and Firefly. The year-over-year procedure growth was led by U.S. gynecologic procedures and U.S. general surgery growth, partially offset by lower growth in Europe and a decrease in U.S. dVPs. Third quarter 2012 U.S. dVP procedures decreased 20% compared to the prior year. The decrease in I&A revenue compared to last quarter was primarily driven by the timing of stocking and distributor orders. Instrument and accessory revenue realized per procedure, including initial stocking orders, was approximately $1,980 per procedure, which is higher than the $1,950 realized in the third quarter of 2011, though lower than the $2,020 realized in the second quarter of 2012. The sequential decrease was driven by the timing of instrument and accessory stocking orders associated with new system sales and the timing of distributor orders. Third quarter 2012 systems revenue of $232 million increased 17% compared with $199 million for the third quarter of 2011 and increased 1% compared with $229 million for the second quarter of 2012. We sold 155 systems in the third quarter of 2012 compared with 133 systems in the third quarter of 2011 and 150 systems in the second quarter of 2012. Our third quarter average sales price per system…

Thank you, Marshall. During the third quarter, we sold 155 da Vinci systems, 114 in the United States, 13 into Europe and 28 into rest of world markets. As part of the 155 system sales, 8 Standard da Vinci systems and 26 da Vinci S Systems were traded in for credit against sales for new da Vinci Si Systems. We had a net 121 system additions to the installed base during the quarter, which brings to 2,462 the cumulative number of da Vinci systems worldwide, 1,789 in the U.S., 400 in Europe and 273 in rest of world markets. 79 of the 155 systems installed during the quarter represented repeat system sales to existing customers. In total, 139 of the 155 systems sold represented da Vinci Si or Si-e Systems, which included 20 dual console systems. The 41 system sales internationally included 16 into Japan, 4 into Australia and 3 into Belgium. The 16 systems placed in Japan establishes it as our second largest da Vinci market worldwide with 70 placements. With the exception of Europe, our da Vinci system performance remained very solid. Clinically, we do not meet our procedure expectations for the quarter, achieving year-over-year procedure growth of approximately 22%. The shortfall can be attributed to 2 factors: a larger-than-expected decline in our U.S. dVP business and procedure underperformance in Europe. The pressure we face within our U.S. dVP business can be traced to both conservative PSA screening protocols and a change in treatment recommendations for low-risk cancer patients away from definitive treatment. Our EU procedure business shortfall is a bit more complex to define as it appears to be both macroeconomic and structural in nature, as Gary stated. With the exception of these 2 areas, procedure performance was solid. Growth during the quarter was led by the…

Thank you, Aleks. I will be providing you with an update to our financial forecast for 2012, 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 into our expected future cash flows. Starting with procedures. On our last call, we forecast procedures to grow approximately 25% to 27% from the base of approximately 360,000 procedures performed in 2011. Three quarters through 2012, our procedure growth stands at approximately 25%. During the third quarter, we saw further pressure on our U.S. dVP both volumes and upon our overall European procedure business. As a result, we now forecast full year 2012 da Vinci procedure volume to grow approximately 24% above our 2011 total. Moving on to revenues. On our last call, we forecast 2012 revenues to grow between 20% and 23% above our 2011 revenue of $1.76 billion. As we enter the fourth quarter, we are now able to refine our guidance to the upper half of this range. Now turning to noncash expenses. We continue to expect noncash stock compensation to fall within a range of between $152 million and $156 million for the year. Through 3 quarters of this year, $115 million of stock compensation has been recognized, and all of the quarterly timing differences related to our revised 2012 employee grant process have cycled through. The Q4 portion of total 2012 option expense should follow historical patterns. Now turning to other income. On our last call -- operating income. On our last call, we forecast operating income to fall within a range of between 39% and 40% of net revenue. Now based upon the impact of recent material cost reductions and expense timing, we expect operating income to come in…

[Operator Instructions] We'll take our first question in queue from the line of David Lewis with Morgan Stanley.

Gary or Aleks or anyone for that matter, just thinking about the third quarter kind of from the macro perspective, it looks like the third quarter is a lot like the second quarter. We saw significant Japan strength and U.S. de novo system strength offset by Europe, and we saw dVP U.S. and OUS weakness offset, obviously, by dVH, as well as some general surgery improvements. So do you have sort of any sense the fourth quarter guidance sort of implies stable trends on procedures with the third quarter? Do you have any sense of the balance of these positive and negative forces? How many quarters do you think this could persist?

It’s Gary. It's pretty hard to call U.S. prostatectomy. That's, as you know, more an issue of medical management and watchful waiting than it is a change in da Vinci Surgery versus other kinds of surgery. So we don't have a crystal ball as to where that procedure is going to go over time. The data we look at is probably pretty similar to the data that you look at in terms of where PSA testing is taking us. On the upside, I think the things that are growing, we can measure good interest from our customers. We can measure sales force activity that tends to be a little bit more on our camp versus out in the world. So on the downside, pretty tough to call. On the upside, we can look at the activities that we can influence and feel pretty confident about the things that we can do.

Gary, just following up on one of those key catalysts, which, obviously, is single incision. I don't know if I caught it on the call, but could you sort of confirm whether sales has sort of moved into your third largest procedure for the company?

We have talked about before that cholecystectomy has a total procedure of all types, multiport and single-site. Together, combined, is the third. Single port on its own is not.

It's important to note that, as a reminder, of course, it's a distant third. I mean, you have hysterectomy, you have prostatectomy and you have cholecystectomy. And so you have other procedures that are sort of in the general neighborhood procedures such as a partial nephrectomy and sacrocolpopexy and others. So it is indeed third, but as a reminder, it is a distant third.

There's one more difference that's worth pointing out, is that unlike prostatectomy and hysterectomy, cholecystectomy can be an entry point into a clinical pathway for somebody who wants to end somewhere else. And so those procedures can be a little bit more volatile.

And then, Gary, just one quick one. I apologize for 2, 3 questions. But you talked about an increase in spending for both U.S. general surgery. And potentially, I would imagine if you're going to go after Europe and change structurally how you're selling that it could be increased expense. Could you help us sort of frame those relative expenses versus other very significant sales investments you've made, perhaps the 2010 significant investment in the U.S.?

This won't quite be the same scale. It's a little bit more targeted. So in Europe, it's really filling open headcount in the field and investing a little bit more in the back office in terms of clinical trials and other types of marketing investments, economic analyses and so on. So that's kind of what the European side looks like on the general surgery side. It will be general-surgery focused expertise and depth.

Our next question in queue will come from the line of Ben Andrew with William Blair. Ben Andrew - William Blair & Company L.L.C., Research Division: Gary, can you break down the procedure growth for us between the U.S., Europe and ROW?

I'll turn it to Calvin.

Right. So the procedure growth -- let me find that. Go ahead.

Total procedure growth quarter -- year-over-year was 22%. And then what we said was that the procedure growth outside of the U.S. year-over-year was 9%. Ben Andrew - William Blair & Company L.L.C., Research Division: Okay. So was the U.S. close to around 30%? It wouldn't be that high?

Yes, I mean, you could probably back into it on your models there. But again, worldwide, we're looking at about 22% for Q3, 25% on a year-to-date basis. And included in those numbers would be a decline in the U.S. dVP volume that Marshall mentioned of 20% on a quarter basis and 14% on a year-to-date basis. And so I think kind of what it implies is that if the U.S. stayed flat from year to year, the worldwide growth would have been about 26% in Q3 and 28% on a year-to-date basis. Ben Andrew - William Blair & Company L.L.C., Research Division: Right. I guess what I'm getting at is dVP is down 20% in the U.S. If you were on a base of, say, 75,000 cases for '11, if that's down 20% full year, you're talking something in the low 60,000 cases, negative 15,000 at the most, 12,000 to 15,000. If dVH has grown 60,000 and chole is adding 10,000 and all the other stuff is adding another 30,000, 40,000, 50,000, you end up with robust procedure growth in the United States. And the real evidence of the problem is obviously Europe, which is macro, and some concern about, obviously, dVP. But at some point, dVP has to bottom. And so the question becomes, is there sort of a structural level of prostatectomy that we can think about where this will shake out over the course of, call it, 6, 8 quarters and we’ll end up at maybe a the rate of 50,000 dVPs in the U.S.? Does that make sense?

The flow of your argument makes sense. I think that Calvin may argue with you about some of the numbers. Just to make sure that you're tie them out right. But the flow, generally speaking, the flow makes sense. Calling that number of kind of what the baseline number of prostatectomies in the U.S. is hard to do. We've seen some analysis out there that's probably similar to the kinds of analysis that you've seen, and I think we're just going to have to see where that base establishes itself. I mean, I think there are a couple of things that argue for a base. One of them is that prostate cancer, the highest cure rate will come from surgery, not from medical management. And the other thing that we know is that over time, watchful waiting patients, some fraction of them, usually a majority of them, will convert to definitive treatment over time. So I think both of those things will argue for finding a floor, and what exactly that floor level is, we're just going to have to wait and see.

Yes. But I think, Ben, the central theme of your thesis there is accurate. And that is if you look outside of those 2 areas, U.S. dVP and the European weakness, the remainder of the procedure business was very strong year-to-date and for the quarter. Ben Andrew - William Blair & Company L.L.C., Research Division: Okay. And I'll sneak in one more as well, if you look at Japan, we've done some calls recently, and it sounds as though the Japanese government has authorized funding for about 150 systems. And our sources were sort of indicating that, that could come into play by the end of '13, and certainly 16 in the third quarter goes a long way towards that. Is that consistent with sustaining this sort of 16 or pretty substantial rate? And is that a reasonable target for an installed base kind of going out of '13?

Yes. I don't think we're ready to size the total market opportunity. And I think that system sales by themselves are going to be lumpy quarter-to-quarter, and I would expect some lumpiness. Long term, we're really excited about the Japanese market opportunity. The key opinion leaders, the people we talked to on the ground are excited about robotic surgery. And we think it will build, and that's another area of investment. But again, kind of calling the specifics is not something we're prepared to do.

Yes, I think there's just one caveat that's worth mentioning, is as a reminder, we have one national reimbursement, which is prostatectomy. There are ways for it, as evidenced by the activities prior to that national reimbursement, that hospitals can go through that's, call them, a one-off basis or a checklist basis where they can apply for certain levels of reimbursement on other procedures. But from a national perspective, we are really in this environment where we are working within prostatectomy primarily. And then there may be a few other procedures that get worked in on a one-off basis. So that's the environment we're in for a little while.

Yes. The next scheduled pass, that procedure being added to the reimbursement list would be April of 2014 for a general system-wide reimbursement.

Based on the way that MHLW runs the review.

Our next question in queue will come from the line of Tycho Peterson with JPMorgan. Tycho W. Peterson - JP Morgan Chase & Co, Research Division: First question maybe on chole, wondering if you could just give us a little bit of a breakdown as to how much of the chole uptake is single-site versus multi-arm. And are you starting to see chole drive system placements?

I think we're not prepared to break out what that mix is. And honestly, I think the important message here is that -- is to just really look at this structurally. You have general surgeons who don't have a lot of robotic experience going in. And so they are going to work through various procedures to some level to make sure that they have a good understanding of the Xs and Os of the system. And then what is today a general multiport cholecystectomy, the expectation is that those move in to single-site. So there will be a relationship, and I think trying to call it at any given time is probably -- I don't know how meaningful that is. But collectively, as we said, it is the third largest procedure. Now we -- I think the way we would categorize the importance of procedures as they relate to new system placements, it's hard to tease out what is cholecystectomy and what is general surgery because to Gary's earlier comments, sometimes cholecystectomy is not the endpoint which the general surgeons are trying to get to. And so it becomes one of many procedures that they see in our armamentarium over time. And so it's really hard to say what evidence we have at this point that it's chole specific that is driving the system. But there's definite evidence that general surgeons are becoming more and more important to system placements. Tycho W. Peterson - JP Morgan Chase & Co, Research Division: And then in your commentary, you talked about additional indications for Single-Site, benign hysterectomy and nephrectomy, can you just talk about how you think about those opportunities and then how much you want to push through Single-Site versus -- at some point, is it logical to introduce a new system?

Yes. On the first side, we think that hysterectomy is a patient population that sets up well for a single port robotic approach. And we've gotten good feedback from customers in Europe and the U.S. that that’s something worth pursuing, and so that's been our next procedure, that and nephrectomy. We'll see in terms of what happens next after Single-Site. We'll continue to invest in instrumentation that makes sense in that platform and in indications. I don't think that will be the last stopping point in terms of an indication for Single-Site as we go forward. And as always, we continue to invest in technologies that can make things more capable, and we invest in tissue interaction technologies. We invest in patient access, smaller ports in different ways to get into the body. And with regard to Single-Site, we'll continue to do that.

Yes. I think the way we think about, for example, the Single-Site in GYN or benign hysterectomy is if you think about the way we've always described the market, there is a level of complexity that was inherent in our target for hysterectomy, both benign, complex benign, as well as malignant. And so there's a subsegment of the market that is by definition, if you will, relatively less complex or simple. It seems like a very good area for us to apply some resources and see if this is indeed something we can access with new technology, which is the approach. Tycho W. Peterson - JP Morgan Chase & Co, Research Division: And then just one last one because I'm sure we'll all get the question. In terms of the stapler, I mean, based on your actions with FDA, are you still thinking this could come by year end? Or should we think about SAGES next year? Just how do we think about timing there?

It's always hard to predict exactly timing on these things, and so I won't -- we've had a healthy conversation with FDA. We've understood their questions. I think that we have provided answers that make sense, and we'll let you know what happens thereafter.

Our next question in queue will come from the line of Lennox Ketner with Bank of America Merrill Lynch.

First question, it sounds like you're seeing a lot of good momentum in Japan. I'm wondering if you could just comment on what Japan contributed to either overall procedure growth in the quarter or to the 9% international growth.

Just in a broad brush, it's growing nicely, out from a very small base. So in-country, we're delighted with the growth rate. In terms of total contribution to the overall, it's probably not a material contribution at this time.

Okay. And then just to go back to Europe, Gary, you talked about the fact that it's partly the macro environment and partly structural, which it sounds like you're working to address on the structural issues. But I'm wondering if you could just give a little more detail on what those structural issues are. From my conversations with some European physicians, it sounds like 2 of the challenges over there are, one, that in some countries, there are per diem reimbursement systems. To me, it makes the length of stay reduction less valuable upfront, but then also, just the fact that there's less competition among hospitals. Are those kind of the 2 main structural issues? Or is there something I'm missing there that you guys are working to address?

I think there are a couple of things. One of the structural things is just open territories on our side and making sure we have the right number of salespeople in the various countries, and we can run that against internal metrics. So it's pretty simple one. And the solution there is to make sure that we're fully staffed. The second thing, or more along the lines you've discussed, although I described it a little bit differently. I think it is not really that a single-payer system is not capable or interested in adopting da Vinci Surgery. We've seen Japan single-payer system that's been moving pretty quickly. Sweden as a single-payer system has moved quickly. So it isn't the act of being a single payer. It's more of making sure that the conversations with government-run hospitals around both economy value and clinical data are put into forms that they can accept and we can match their time lines. You're absolutely right with regard to systems that are using per diem, but that's a real challenge for hospitals to adopt da Vinci Surgery. We see per diem systems being challenged in favor of DRGs in a lot of different places, not only for da Vinci. I think the trend is away from per diem, not towards it. And so I don't see that as systemic across all of Europe but really in pockets.

Our next questions in queue will come from line of Lawrence Keusch with Raymond James. Lawrence S. Keusch - Raymond James & Associates, Inc., Research Division: Just to pick up on that question. Could you talk a little bit about perhaps where you are seeing some of the procedure pressures within Europe? Is it more directed at Southern Europe? And just really trying to get a sense of whether anything is changing out there.

You see capital pressure in Southern Europe, absolutely. Procedure pressure is a little bit less targeted directly with Southern versus Northern, and so it moves around a little bit.

So if you looked at -- and again, I think it almost takes even a little, perhaps, a derivative deeper. So if you looked at environments like public hospitals in France, let's say, versus clinics in France and/or private clinics in other parts of Europe, it becomes, probably, more akin to those comparisons than it does just individual countries. And we've had strength in Germany over -- not this particular quarter, but in the past 2 years, we've called out Germany as having a lot of strength. This is the first time we've called out Belgium in probably a few -- probably 1.5 years. So it seems like it's rotating through various countries, but it's probably more consistent with the public versus private. Lawrence S. Keusch - Raymond James & Associates, Inc., Research Division: Okay, that's helpful. And just 2 other quick ones. As you noted, benign hysterectomy and oophorectomy for Single-Site, how dependent -- in getting into those procedures, how dependent then is it on the need for new instrumentation? And if so, what might be the timing on that? And then lastly, you utilized cash this quarter to buy back stock. You still have a lot. So again, if you could just remind us of the general uses of cash.

On the issue of Single-Site, as we've said before, we've just submitted and received our first round of questions from FDA on the extension of our indications for Single-Site into hysterectomy and oophorectomy. I think there that we have, as you know, good momentum in hysterectomy, I think it goes into a set of surgeons who are interested in robotic surgery and towards the segment of the patient population that would be interested in [indiscernible] and return to full function. So we're excited about that. I think it will make some sense. We're in the early stages of our interactions with FDA. How long that will take, it's very tough to predict, and so we won't.

Yes. As far as the instruments, Larry, I would say the -- which is pretty consistent with the way we've approached new markets and new procedure targets, where we have a good base of instruments, but we're not exactly optimized for perfect performance, if you will, in terms of ease of use and having all of the right instruments. But think of it in terms of adding a few instruments rather than creating a whole new category of instruments. And I think that will be -- that's been consistent and will be consistent as we go into new procedure targets.

With regard to uses of cash, I'll turn that to Marshall.

Yes. So we bought back 343,000 shares this quarter. We have 383 million still authorized by the board. We'll continue to program. We'll buy back stock when it makes sense. It's not a absolutely certain amount every day. Beyond that, the cash is there for investment back into the business over time, particularly if there were to be an extended or deepened economic issue on a macro basis, as well as for investment into IP if the opportunities come up.

Or other technologies.

Yes.

Our next question in queue will come from David Roman with Goldman Sachs.

I was hoping if I could focus a little bit on the spending side of the equation. Obviously, you had guided to the $20 million sequential uptick this quarter versus the second quarter. But if I just look to the income statement, SG&A still being down as a percentage of sales year-over-year. So if you take out of the options grant this quarter, can you maybe talk about your spending priorities? It sounds like you have a lot on deck here in terms of investing in new procedure categories, trying to fend off the assault on dVP, rebuilding your Europe presence, yet SG&A is still growing slower than revenue. That's -- and then I have a follow-up.

Yes. We'll talk just on the numbers side, and I'll hand it over. We've guided towards about $20 million increase in operating expenses quarter-to-quarter. It came in closer to $17.5 million. So a little bit less than that. And I think it had a little bit to do with the timing here. We called out R&D projects last quarter. Some of those you're going to see probably spilling into future quarters. And then I think the timing on SG&A that you alluded to, David, we're starting on some things that we thought we might be -- it might have been a little further along here in Q3 in terms of building the organization and the training capacities and so on. So in terms of the numbers, that, I think, the grow -- you're going to see some growth in the OpEx going forward into Q4, and that's inherent in the 40% operating income guidance we gave.

I think we've laid out for you the things that we think are deserving of differential or additional investment. We've typically been thoughtful about how we invest. And we don't trend to mad dash one direction or another. And so we'll be building it out, but we'll build it out against the plan.

Okay. And then Japan, which has obviously been very successful for you particularly since you got the reimbursement in April, can we maybe talk about the sustainability of that business you referenced, I think, in your prepared remarks that there is some spillover of the dVP concerns of the U.S. into Europe? And obviously, Japan has had a much more nascent stage in its ramp, so you probably wouldn't have seen it at this point. But any concerns on that transpiring Japan? And how we should think about growth in that business over the next 12 months or so?

On the dVP side, actually the uptick has been significant in terms of dVP in Japan relative to the number of prostatectomies that they do. We do dominate it in prostatectomies based on what they've been doing there. We haven't heard a reflection of this set of concerns into Japan. It's not to say that it might not happen in the future, it might. In general, I think that Japanese surgeons have expressed interest in da Vinci for a pretty broad variety of procedures. So even where that's to be pressured over time, I don't know that it would dampen enthusiasm for a long period for other procedures as we go. Quarter-to-quarter performance can be lumpy there.

Sure. And then maybe just one really quick clarification question. From an EPS perspective, this quarter, the $4.46 you reported includes the tax benefit that you discussed. Are you pointing people toward the non-GAAP number or the GAAP $4.46 in terms of the ongoing earnings number for the quarter?

So we give you the $4.46, which is the GAAP number. But we also said that if you excluded that, we would have been at $3.54. So we're trying to provide you with all the information so that you can do your own comparisons.

Our next question in queue will come from the line of Jeremy Feffer with Cantor Fitzgerald. Jeremy Feffer - Cantor Fitzgerald & Co., Research Division: I wanted to come back to your comments on this sales with simulators, Firefly, dual consoles. It seemed like sequentially, those were down even though total da Vinci sales were up sequentially. Is there anything to read into that? Are some customers looking at more defeatured units? Or is that just a complete coincidence?

Yes, it's definitely trended down. I think on the Firefly side though, it's pretty similar. We've been saying about the last 3 quarters that about 1/2 of the U.S. systems have gone out with Firefly configuration, and that held through in Q3. As it relates to the dual console and the simulator, those kind of go together in some respects as they're, in large part, training tools and applications. And a slow downward trend there is something that we would have predicted internally here as maybe a fair number of sites have invested in these technologies for training. And then as you know, a lot of systems we sell now are to existing customers, and some of those existing customers already have simulators and dual consoles. So it's maybe less obvious value in those situations. So a little downward trend there is probably something we would expect, but very gradual. Jeremy Feffer - Cantor Fitzgerald & Co., Research Division: Okay. And quick follow-up on revenue per procedure. I heard the comments on timing of stocking and distributor orders. Is this a run rate that we should be expecting now going forward? Obviously, you've been trending up with a lot of the new instruments. But with a lot of those now in there, is this more of a comfortable run rate?

Yes. I mean, we've been seeing the run-up, as you say, in recent quarters due to the impact of the new products. And what we've been saying, there are a lot of factors that can serve to move that metric up or down. And in this particular quarter, as Marshall called out in his commentary, we saw some of the timing of those initial stocking orders with system sales and distributor orders kind of serve to drive it slightly down here. But I'd say going forward, it could go up or down, depending -- we also some of the product -- the procedure mix, right? So the more Single-Sites and benign hysterectomies have a lower revenue per procedure for us, kind of pushes it down. So again, I'd say going forward, it could probably go either way from where we are right now.

That was the 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. We hope the following experience from Susan of Ohio gives you some sense of what this means in the lives of our patients. "I was diagnosed in August of 2011 with adenocarcinoma. I'm a mom of 5, grandma of 11 and 52 years old. I quit smoking years ago. Wow, I had a lot to think about when, by God's grace, I was introduced to a super surgeon. At the time, he thought I would be a really great candidate for the da Vinci robotic-assisted surgery. I figured it sounded really great. We did the surgery in December of 2011. At first, when I started reading about it on websites and talking with people, it sounded really scary. But after reading testimonies like mine, I realized it was the only way to go. And so we removed the top lobe of my left lung in December of 2011. I was home in 2 days. The nurses at the hospital could not believe the type of surgery I'd had. Wow, how the robot changed my life. In no time, I was back to a normal life. My surgeon is one of the best around and I am living proof. He saved my life, saved me from a grueling recovery and saved me from a horrific scar. I had a few little holes and a small incision where they removed the lung. While they were in there, they took lymph nodes, which, by the way, are great. No cancer and a 20% chance that this cancer comes back. If you're considering this type of surgery, I urge you to really think positively about this. Just absolutely amazing what modern medicine is all about. I would welcome the chance to have the surgery versus the old-fashioned way. Recovery was 2 weeks, and I was back to work in 3. It's a miracle that they can do these things with a robot, but they do." Patients like these are our strongest advocates for da Vinci Surgery and form the very foundation of our operating performance. We've 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 3 months.