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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission file number 000-30713 
Intuitive Surgical, Inc.
(Exact name of Registrant as specified in its Charter)
Delaware 77-0416458
(State or Other Jurisdiction of
Incorporation or Organization)
 (I.R.S. Employer
Identification No.)
1020 Kifer Road
Sunnyvale, California 94086
(Address of principal executive offices) (Zip Code)
(408) 523-2100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareISRGThe Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerxAccelerated filer¨
Non-accelerated filer¨Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  x
The Registrant had 358,956,511 shares of Common Stock, $0.001 par value per share, outstanding as of April 19, 2022.




INTUITIVE SURGICAL, INC.
TABLE OF CONTENTS

  Page No.
PART I. FINANCIAL INFORMATION
PART II. OTHER INFORMATION

2


PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTUITIVE SURGICAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
in millions (except par values)March 31,
2022
December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents$1,103.1 $1,290.9 
Short-term investments2,882.5 2,913.1 
Accounts receivable, net906.1 782.7 
Inventory653.0 587.1 
Prepaids and other current assets258.5 271.1 
Total current assets5,803.2 5,844.9 
Property, plant, and equipment, net1,968.2 1,876.4 
Long-term investments4,416.2 4,415.5 
Deferred tax assets485.4 441.4 
Intangible and other assets, net662.2 633.2 
Goodwill343.2 343.6 
Total assets$13,678.4 $13,555.0 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$128.1 $121.2 
Accrued compensation and employee benefits219.8 350.1 
Deferred revenue386.0 377.2 
Other accrued liabilities378.3 301.3 
Total current liabilities1,112.2 1,149.8 
Other long-term liabilities409.3 453.7 
Total liabilities1,521.5 1,603.5 
Contingencies (Note 8)
Stockholders’ equity:
Preferred stock, 2.5 shares authorized, $0.001 par value, issuable in series; no shares issued and outstanding as of March 31, 2022, and December 31, 2021
  
Common stock, 600.0 shares authorized, $0.001 par value, 358.9 shares and 357.7 shares issued and outstanding as of March 31, 2022, and December 31, 2021, respectively
0.4 0.4 
Additional paid-in capital7,354.6 7,164.0 
Retained earnings4,858.0 4,760.9 
Accumulated other comprehensive income (loss)(110.7)(24.2)
Total Intuitive Surgical, Inc. stockholders’ equity12,102.3 11,901.1 
Noncontrolling interest in joint venture54.6 50.4 
Total stockholders’ equity12,156.9 11,951.5 
Total liabilities and stockholders’ equity$13,678.4 $13,555.0 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).
3


INTUITIVE SURGICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended March 31,
in millions (except per share amounts)20222021
Revenue:
Product$1,238.4 $1,074.6 
Service249.3 217.5 
Total revenue1,487.7 1,292.1 
Cost of revenue:
Product397.3 319.3 
Service80.7 70.2 
Total cost of revenue478.0 389.5 
Gross profit1,009.7 902.6 
Operating expenses:
Selling, general and administrative391.1 326.0 
Research and development210.5 159.8 
Total operating expenses601.6 485.8 
Income from operations408.1 416.8 
Interest and other income (expense), net(5.7)32.0 
Income before taxes402.4 448.8 
Income tax expense33.0 13.6 
Net income369.4 435.2 
Less: net income attributable to noncontrolling interest in joint venture3.8 8.9 
Net income attributable to Intuitive Surgical, Inc.$365.6 $426.3 
Net income per share attributable to Intuitive Surgical, Inc.:
Basic$1.02 $1.20 
Diluted$1.00 $1.17 
Shares used in computing net income per share attributable to Intuitive Surgical, Inc.:
Basic358.4 354.2 
Diluted366.7 364.0 
Other comprehensive loss, net of tax:
Change in unrealized gains on hedge instruments$1.0 $6.1 
Change in unrealized losses on available-for-sale securities(90.7)(10.0)
Change in foreign currency translation gains (losses)3.5 (9.5)
Change in prior service cost for employee benefit plans0.1 0.1 
Other comprehensive loss(86.1)(13.3)
Total comprehensive income283.3 421.9 
Less: comprehensive income attributable to noncontrolling interest4.2 9.1 
Total comprehensive income attributable to Intuitive Surgical, Inc.$279.1 $412.8 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).
4


INTUITIVE SURGICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31,
in millions 20222021
Operating activities:
Net income$369.4 $435.2 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and loss on disposal of property, plant, and equipment77.7 64.8 
Amortization of intangible assets6.1 6.9 
Gain on sale of business(3.8) 
Loss (gain) on investments, accretion, and amortization, net26.0 (12.6)
Deferred income taxes(14.4)44.7 
Share-based compensation expense120.8 103.2 
Amortization of contract acquisition assets6.6 4.9 
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable(123.4)(14.3)
Inventory(120.1)(41.2)
Prepaids and other assets(21.7)(73.2)
Accounts payable(1.9)23.7 
Accrued compensation and employee benefits(130.3)(40.2)
Deferred revenue11.4 6.8 
Other liabilities20.6 (31.1)
Net cash provided by operating activities223.0 477.6 
Investing activities:
Purchase of investments(1,187.3)(1,833.1)
Proceeds from sales of investments 72.0 
Proceeds from maturities of investments1,067.7 1,231.4 
Purchase of property, plant, and equipment and intellectual property(95.1)(58.6)
Acquisition of businesses, net of cash (8.7)
Net cash used in investing activities(214.7)(597.0)
Financing activities:
Proceeds from issuance of common stock relating to employee stock plans80.0 84.0 
Taxes paid related to net share settlement of equity awards(172.2)(178.3)
Repurchase of common stock(106.5) 
Payment of deferred purchase consideration(1.2)(7.9)
Net cash used in financing activities(199.9)(102.2)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash3.8 0.8 
Net increase (decrease) in cash, cash equivalents, and restricted cash(187.8)(220.8)
Cash, cash equivalents, and restricted cash, beginning of period1,306.0 1,638.5 
Cash, cash equivalents, and restricted cash, end of period$1,118.2 $1,417.7 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).

5



In this report, “Intuitive Surgical,” “Intuitive,” the “Company,” “we,” “us,” and “our” refer to Intuitive Surgical, Inc. and its wholly and majority-owned subsidiaries.
NOTE 1.    DESCRIPTION OF THE BUSINESS
Intuitive Surgical, Inc. (“Intuitive” or the “Company”) develops, manufactures, and markets the da Vinci® Surgical System and the Ion® endoluminal system. The Company’s products and related services enable physicians and healthcare providers to improve the quality of and access to minimally invasive care. The systems consist of a surgeon console or consoles, a patient-side cart, a high-performance vision system, and proprietary instruments and accessories.
NOTE 2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements (“Financial Statements”) of Intuitive Surgical, Inc. and its wholly and majority-owned subsidiaries have been prepared on a consistent basis with the audited Consolidated Financial Statements for the fiscal year ended December 31, 2021, and include all adjustments, consisting of only normal, recurring adjustments, necessary to fairly state the information set forth herein. The Financial Statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and, therefore, omit certain information and footnote disclosure necessary to present the Financial Statements in accordance with United States (“U.S.”) generally accepted accounting principles (“U.S. GAAP”). These Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which was filed with the SEC on February 3, 2022. The results of operations for the first three months of 2022 are not necessarily indicative of the results to be expected for the entire fiscal year or any future periods.
The Financial Statements include the results and balances of the Company’s majority-owned joint venture (“Joint Venture”) with Shanghai Fosun Pharmaceutical (Group) Co., Ltd. (“Fosun Pharma”). Chindex Medical Limited (“Chindex”), a subsidiary of Fosun Pharma, has been its distribution partner for da Vinci Surgical Systems in China. The Company holds a controlling financial interest in the Joint Venture, and the noncontrolling interest is reflected as a separate component of the consolidated stockholders’ equity. The noncontrolling interest’s share of the earnings in the Joint Venture is presented separately in the Condensed Consolidated Statements of Comprehensive Income.
Common Stock Split
Shares issued pursuant to the three-for-one stock split (the “Stock Split”) of the Company's issued and outstanding common stock, par value $0.001 per share, were distributed on October 4, 2021, to stockholders of record as of September 27, 2021. All share and per-share information presented in the Financial Statements have been retroactively adjusted to reflect the Stock Split.
Risks and Uncertainties
The Company is subject to additional risks and uncertainties due to the COVID-19 pandemic. The extent of the impact on the Company’s business is highly uncertain and difficult to predict. In certain regions, the Company’s customers continue to divert resources to treat COVID-19 patients and defer some elective surgical procedures, both of which may impact the Company’s customers’ ability to meet their obligations, including to the Company. Furthermore, economies worldwide have been negatively impacted by the COVID-19 pandemic, and it is possible that the impact could cause an extended local and/or global economic recession. Such economic disruption could have a material adverse effect on the Company’s business as hospitals curtail and reduce capital and overall spending. Policymakers around the globe have responded with fiscal policy actions to support the healthcare industry and their economies. However, the magnitude and overall effectiveness of these actions remains uncertain.
The severity of the impact of the COVID-19 pandemic on the Company’s business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company’s customers, all of which are uncertain and cannot be predicted. The Company’s future results of operations and liquidity could be materially adversely affected by delays in payments of outstanding receivables, supply chain disruptions, including shortages and inflationary pressure, uncertain or reduced demand, and the impact of any initiatives or programs that the Company may undertake to address financial and operational challenges faced by its customers.
In particular, the Company has experienced increased difficulties in obtaining a sufficient supply of a number of component materials used in its products, such as semiconductor components as well as a range of other materials including, but not limited to, metals and polymers, as global supply has become significantly constrained due to increased demand for certain materials. Additionally, prices of such materials have increased due to the increased demand and supply shortage. The Company is engaged in activities to seek to mitigate supply disruptions by, for example, increasing its communications with its
6


suppliers and modifying its purchase order coverage and inventory levels, but the Company has experienced a reduction in its safety stock levels. Moreover, the global supply chain shortages are likely to remain a challenge for the foreseeable future.
The Company has also experienced challenges in logistics, as certain shipping routes have been impacted by port closures. Such global shortages in important components and logistics challenges have resulted in, and will continue to cause, inflationary cost pressure in the Company’s supply chain. To date, the inflationary cost pressure has been more pronounced in the Company’s logistics costs, but these supply chain challenges have not materially impacted the Company’s results of operations or ability to deliver products and services to its customers. However, if shortages in important supply chain materials in the semiconductor or other markets or logistics challenges continue, the Company could fail to meet product demand, which could result in deferred or cancelled procedures. Additionally, if inflationary pressures in logistics or component costs persist, we may not be able to quickly or easily adjust pricing, reduce costs, or implement countermeasures, all of which would adversely impact its business, financial condition, results of operations, or cash flows.
Increased labor shortages globally, including staff burnout and attrition, could also impact the Company’s ability to hire and retain personnel critical to its manufacturing, logistics, and commercial operations. The Company is also highly dependent on the principal members of its management and scientific staff. Attracting and retaining qualified personnel is critical to its success, and competition for them has become more intense. The loss of critical members of the Company’s team, or its inability to attract and retain qualified personnel, could significantly harm its operations, business, and ability to compete.
In addition, hospitals are experiencing financial and operational pressures as a result of staffing shortages, the supply chain environment, and resulting inflation that could impact their ability to provide patient care, defer elective surgeries, and impact their profitability. In addition, the rising interest rate environment has made access to credit more expensive. To the extent that hospitals continue to face financial pressures, reductions in government spending, or higher interest rates, it is likely that hospitals’ spend on capital equipment will be adversely impacted. As of the date of issuance of these Financial Statements, the extent to which the COVID-19 pandemic, supply chain environment, inflationary pressures, and labor shortages may materially adversely affect the Company’s financial condition, liquidity, or results of operations is uncertain.
Recently Adopted Accounting Pronouncements
Business Combinations
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which creates an exception to the general recognition and measurement principle in ASC 805 by requiring companies to apply ASC 606 to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination. The guidance additionally clarifies that companies should apply the definition of a performance obligation in ASC 606 when recognizing contract liabilities assumed in a business combination. The Company has early adopted ASU 2021-08 as of January 1, 2022, on a prospective basis. The impact of the adoption of ASU 2021-08 cannot currently be determined, as it is dependent on future business combinations that the Company may enter into.
Significant Accounting Policies
There have been no new or material changes to the significant accounting policies discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, that are of significance, or potential significance, to the Company.
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NOTE 3.    FINANCIAL INSTRUMENTS
Cash, Cash Equivalents, and Investments
The following tables summarize the Company’s cash and available-for-sale marketable securities’ amortized cost, gross unrealized gains, gross unrealized losses, allowance for credit loss, and fair value by significant investment category reported as cash and cash equivalents, short-term investments, or long-term investments as of March 31, 2022 and December 31, 2021 (in millions):
Reported as:
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Allowance for Credit LossFair
Value
Cash and
Cash
Equivalents
Short-
term
Investments
Long-
term
Investments
March 31, 2022
Cash$579.4 $— $— $— $579.4 $579.4 $— $— 
Level 1:
Money market funds491.6 — — — 491.6 491.6   
U.S. treasuries3,599.5 0.9 (71.8) 3,528.6 12.0 1,329.3 2,187.3 
Subtotal4,091.1 0.9 (71.8) 4,020.2 503.6 1,329.3 2,187.3 
Level 2:
Commercial paper581.3    581.3 16.2 565.1  
Corporate debt securities2,554.6 0.3 (53.3)(1.1)2,500.5 3.9 770.0 1,726.6 
U.S. government agencies541.3  (13.5) 527.8  140.0 387.8 
Municipal securities196.9 0.1 (4.4) 192.6  78.1 114.5 
Subtotal3,874.1 0.4 (71.2)(1.1)3,802.2 20.1 1,553.2 2,228.9 
Total assets measured at fair value$8,544.6 $1.3 $(143.0)$(1.1)$8,401.8 $1,103.1 $2,882.5 $4,416.2 
Reported as:
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Allowance for Credit LossFair
Value
Cash and
Cash
Equivalents
Short-
term
Investments
Long-
term
Investments
December 31, 2021
Cash$572.3 $— $— $— $572.3 $572.3 $— $— 
Level 1:
Money market funds696.6 — — — 696.6 696.6   
U.S. treasuries3,429.1 6.3 (15.4) 3,420.0 17.0 1,100.3 2,302.7 
Subtotal4,125.7 6.3 (15.4) 4,116.6 713.6 1,100.3 2,302.7 
Level 2:
Commercial paper717.7    717.7  717.7  
Corporate debt securities2,485.6 2.7 (11.9) 2,476.4 5.0 886.7 1,584.7 
U.S. government agencies526.1 0.2 (2.9) 523.4  137.8 385.6 
Municipal securities213.4 0.7 (1.0) 213.1  70.6 142.5 
Subtotal3,942.8 3.6 (15.8) 3,930.6 5.0 1,812.8 2,112.8 
Total assets measured at fair value$8,640.8 $9.9 $(31.2)$ $8,619.5 $1,290.9 $2,913.1 $4,415.5 
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The following table summarizes the contractual maturities of the Company’s cash equivalents and available-for-sale investments (excluding cash and money market funds), as of March 31, 2022 (in millions):
Amortized
Cost
Fair
Value
Mature in less than one year$2,924.3 $2,914.6 
Mature in one to five years4,549.3 4,416.2 
Total$7,473.6 $7,330.8 
Actual maturities may differ from contractual maturities, because certain borrowers have the right to call or prepay certain obligations. Realized gains and losses recognized on the sale of investments were not material for any of the periods presented.
The following tables present the breakdown of the available-for-sale debt securities that have been in a continuous unrealized loss position deemed to be temporary, aggregated by investment category, as of March 31, 2022, and December 31, 2021 (in millions):
March 31, 2022
Less than 12 monthsMore than 12 monthsTotal
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
U.S. treasuries$2,807.4 $(59.6)$303.5 $(12.2)$3,110.9 $(71.8)
Commercial paper6.9    6.9  
Corporate debt securities1,935.7 (49.2)78.5 (4.1)2,014.2 (53.3)
U.S. government agencies506.9 (12.9)10.9 (0.6)517.8 (13.5)
Municipal securities165.2 (4.4)  165.2 (4.4)
Total$5,422.1 $(126.1)$392.9 $(16.9)$5,815.0 $(143.0)
December 31, 2021
Less than 12 monthsMore than 12 monthsTotal
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
U.S. treasuries$2,596.3 $(15.4)$ $ $2,596.3 $(15.4)
Commercial paper4.0    4.0  
Corporate debt securities1,687.9 (11.9)  1,687.9 (11.9)
U.S. government agencies412.5 (2.9)  412.5 (2.9)
Municipal securities156.0 (1.0)  156.0 (1.0)
Total$4,856.7 $(31.2)$ $ $4,856.7 $(31.2)
The Company’s investment portfolio at any point in time contains available-for-sale debt securities including investments in U.S. treasury and U.S. government agency securities, taxable and tax-exempt municipal notes, corporate notes and bonds, commercial paper, non-U.S. government agency securities, cash deposits, and money market funds. The Company segments its portfolio based on the underlying risk profiles of the securities and has a zero loss expectation for U.S. treasury and U.S. government agency securities. The basis for this assumption is that these securities have consistently high credit ratings by rating agencies, have a long history with no credit losses, are explicitly guaranteed by a sovereign entity, which can print its own currency, and is a currency that is routinely held by central banks, used in international commerce, and commonly viewed as a reserve currency. The Company regularly reviews the securities in an unrealized loss position and evaluates the current expected credit loss by considering factors such as historical experience, market data, issuer-specific factors, and current economic conditions. For the three months ended March 31, 2022, the credit losses related to available-for-sales debt securities were not material.
The Company determined these unrealized losses to be temporary. Factors considered in determining whether a loss is temporary included the length of time and extent to which the investment’s fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, the extent of the loss related to credit of the issuer, the expected cash flows from the security, the Company’s intent to sell the security, and whether or not the Company will be required to sell the security before the recovery of its amortized cost. As of March 31, 2022, the Company did not intend to sell any of the debt
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securities included in the table above, and it is not more likely than not that the Company will be required to sell any of these securities before recovery of the unrealized losses, which may be at maturity.
Equity Investments
The Company holds equity investments with readily determinable fair values and equity investments without readily determinable fair values. The Company generally recognizes equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.
The following table is a summary of the activity related to equity investments (in millions):
Reported as:
December 31, 2021
Carrying Value
Changes in Fair Value (1)
Sales/Purchases
March 31, 2022
Carrying Value
Prepaids and other current assetsIntangible and other assets, net
Equity investments with readily determinable value (Level 1)$26.9 $(17.2)$ $9.7 $9.7 $ 
Equity investments without readily determinable value (Level 2)$15.6 $(0.1)$20.0 $35.5 $ $35.5 
(1) Recorded in Interest and other income (expense), net.
In September 2021, Broncus Holding Corporation (“Broncus”) completed an initial public offering (“IPO”) of common shares on the Stock Exchange of Hong Kong. Upon completion of its IPO, the Company’s preferred shares of Broncus were converted into common shares, which have a readily determinable value (Level 1). The Company was restricted from selling these shares for a period of six months. For the three months ended March 31, 2022, we recognized an unrealized loss on this investment of $17.2 million reflected in changes in fair value for Level 1 equity investments, which was reflected in Interest and other income (expense), net.
There were no decreases in fair value reflected in net income due to impairments.
Foreign Currency Derivatives
The objective of the Company’s hedging program is to mitigate the impact of changes in currency exchange rates on net cash flow from foreign currency-denominated sales, expenses, intercompany balances, and other monetary assets or liabilities denominated in currencies other than the U.S. dollar (“USD”). The terms of the Company’s derivative contracts are generally twelve months or shorter. The derivative assets and liabilities are measured using Level 2 fair value inputs.
Cash Flow Hedges
The Company enters into currency forward contracts as cash flow hedges to hedge certain forecasted revenue transactions denominated in currencies other than the USD, primarily the Euro (“EUR”), the British Pound (“GBP”), the Japanese Yen (“JPY”), and the Korean Won (“KRW”). The Company also enters into currency forward contracts as cash flow hedges to hedge certain forecasted expense transactions denominated in EUR and the Swiss Franc (“CHF”).
For these derivatives, the Company reports the unrealized after-tax gain or loss from the hedge as a component of accumulated other comprehensive income/(loss) in stockholders’ equity and reclassifies the amount into earnings in the same period in which the hedged transaction affects earnings. The amounts reclassified to revenue and expenses related to the hedged transactions and the ineffective portions of cash flow hedges were not material for the periods presented.
Other Derivatives Not Designated as Hedging Instruments
Other derivatives not designated as hedging instruments consist primarily of forward contracts that the Company uses to hedge intercompany balances and other monetary assets or liabilities denominated in currencies other than the USD, primarily the EUR, GBP, JPY, KRW, CHF, Indian Rupee ("INR"), Mexican Peso ("MXN"), Chinese Yuan ("CNY"), and New Taiwan Dollar ("TWD").
These derivative instruments are used to hedge against balance sheet foreign currency exposures. The related gains and losses were as follows (in millions):
Three Months Ended March 31,
20222021
Recognized gains/(losses) in Interest and other income (expense), net$6.8 $7.4 
Foreign exchange gains/(losses) related to balance sheet re-measurement$(10.1)$(7.1)
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Additionally, in January 2021, the Company settled a collar contract previously entered into to hedge its equity investment in Teladoc Health, Inc. For the three months ended March 31, 2021, a loss of $7.5 million was recognized in Interest and other income (expense), net.
The notional amounts for derivative instruments provide one measure of the transaction volume. Total gross notional amounts (in USD) for outstanding derivatives and the aggregate gross fair value at the end of each period were as follows (in millions):
Derivatives Designated as Hedging InstrumentsDerivatives Not Designated as Hedging Instruments
March 31,
2022
December 31,
2021
March 31,
2022
December 31,
2021
Notional amounts:
   Forward contracts$186.0 $181.2 $330.0 $318.8 
Gross fair value recorded in:
   Prepaids and other current assets$6.9 $5.7 $6.8 $6.9 
   Other accrued liabilities$0.4 $0.5 $1.9 $0.8 
NOTE 4.    BALANCE SHEET DETAILS AND OTHER FINANCIAL INFORMATION
Balance Sheet Details
The following tables provide details of selected balance sheet line items (in millions):
As of
InventoryMarch 31,
2022
December 31,
2021
Raw materials$261.3 $214.6 
Work-in-process113.8 96.4 
Finished goods277.9 276.1 
Total inventory$653.0 $587.1 
As of
Prepaids and other current assetsMarch 31,
2022
December 31,
2021
Prepaid taxes$12.8 $4.3 
Equity investments9.7 26.9 
Net investment in sales-type leases–short-term110.2 110.3 
Other prepaids and other current assets125.8 129.6 
Total prepaids and other current assets$258.5 $271.1 
As of
Other accrued liabilities–short-termMarch 31,
2022
December 31,
2021
Taxes payable$113.3 $54.1 
Current portion of deferred and contingent purchase consideration7.6 12.0 
Other accrued liabilities257.4 235.2 
Total other accrued liabilities–short-term$378.3 $301.3 
As of
Other long-term liabilitiesMarch 31,
2022
December 31,
2021
Income taxes–long-term$281.7 $316.6 
Deferred revenue–long-term38.4 36.8 
Other long-term liabilities89.2 100.3 
Total other long-term liabilities$409.3 $453.7 

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Supplemental Cash Flow Information
The following table provides supplemental non-cash investing and financing activities (in millions):
Three Months Ended March 31,
20222021
Equipment transfers, including operating lease assets, from inventory to property, plant, and equipment$60.9 $73.5 
Acquisition of property, plant, and equipment in accounts payable and accrued liabilities$53.5 $27.6 
NOTE 5.    REVENUE AND CONTRACT ACQUISITION COSTS
The following table presents revenue disaggregated by types and geography (in millions):
Three Months Ended March 31,
U.S.20222021
Instruments and accessories$550.6 $500.8 
Systems248.3 202.7 
Services165.9 144.0 
Total U.S. revenue
$964.8 $847.5 
Outside of U.S. (“OUS”)
Instruments and accessories$259.7 $205.1 
Systems179.8 166.0 
Services83.4 73.5 
Total OUS revenue
$522.9 $444.6 
Total
Instruments and accessories$810.3 $705.9 
Systems428.1 368.7 
Services249.3 217.5 
Total revenue
$1,487.7 $1,292.1 
Remaining Performance Obligations
The transaction price allocated to remaining performance obligations relates to amounts allocated to products and services for which revenue has not yet been recognized. A significant portion of these performance obligations relate to service obligations in the Company’s system sale and lease arrangements that will be satisfied and recognized as revenue in future periods. The transaction price allocated to the remaining performance obligations was $1.80 billion as of March 31, 2022. The remaining performance obligations are expected to be satisfied over the term of the system sale, lease, and service arrangements, which are generally up to 5 years.
Contract Assets and Liabilities
The following information summarizes the Company’s contract assets and liabilities (in millions):
As of
 March 31, 2022December 31, 2021
Contract assets$50.9 $46.9 
Deferred revenue$424.4 $414.0 
The Company invoices its customers based on the billing schedules in its sales arrangements. Payments are generally due 30 to 60 days from date of invoice. Contract assets for the periods presented primarily represent the difference between the revenue that was recognized based on the relative standalone selling price of the related performance obligations satisfied and the contractual billing terms in the arrangements. Deferred revenue for the periods presented primarily relates to service contracts where the service fees are billed up-front, generally quarterly or annually, prior to those services having been performed. The associated deferred revenue is generally recognized over the term of the service period. The Company did not have any significant impairment losses on its contract assets for the periods presented.
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During the three months ended March 31, 2022, the Company recognized $193 million of revenue that was included in the deferred revenue balance as of December 31, 2021. During the three months ended March 31, 2021, the Company recognized $154 million, of revenue that was included in the deferred revenue balance as of December 31, 2020.
Intuitive System Leasing
The following table presents revenue from Intuitive System Leasing arrangements (in millions):
Three Months Ended March 31,
20222021
Sales-type lease revenue$35.6 $17.3 
Operating lease revenue*$83.2 $59.0 
*Variable lease revenue relating to usage-based arrangements included within operating lease revenue$24.9 $13.5 
Trade Accounts Receivable
The allowance for doubtful accounts is based on the Company’s assessment of the collectibility of customer accounts. The Company regularly reviews the allowance by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay. For the three months ended March 31, 2022, and 2021, bad debt expense was not material.
The Company’s exposure to credit losses may increase if its customers are adversely affected by changes in healthcare laws, coverage, and reimbursement, economic pressures or uncertainty associated with local or global economic recessions, disruption associated with the current COVID-19 pandemic, or other customer-specific factors. Although the Company has historically not experienced significant credit losses, it is possible that there could be a material adverse impact from potential adjustments of the carrying amount of lease and trade receivables as hospital cash flows are impacted by their response to the COVID-19 pandemic and deferral of elective surgical procedures.
NOTE 6.    LEASES
Lessor Information
Sales-type Leases. Lease receivables relating to sales-type lease arrangements are presented on the Condensed Consolidated Balance Sheets as follows (in millions):
As of
March 31, 2022December 31, 2021
Gross lease receivables$409.7 $404.0 
Unearned income(12.4)(11.4)
Subtotal397.3 392.6 
Allowance for credit loss(3.5)(3.6)
Net investment in sales-type leases$393.8 $389.0 
Reported as:
Prepaids and other current assets$110.2 $110.3 
Intangible and other assets, net283.6 278.7 
Total, net$393.8 $389.0 
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Contractual maturities of gross lease receivables as of March 31, 2022, are as follows (in millions):
Fiscal YearAmount
Remainder of 2022$91.8 
2023110.4 
202497.1 
202567.5 
202635.9 
2027 and thereafter7.0 
Total$409.7 
The Company enters into sales-type leases with certain qualified customers to purchase its systems. Sales-type leases have terms that generally range from 24 to 84 months and are usually collateralized by a security interest in the underlying assets. The allowance for loan loss is based on the Company’s assessment of current expected lifetime losses on lease receivables. The Company regularly reviews the allowance by considering factors such as historical experience, credit quality, age of the lease receivable balances, and current economic conditions that may affect a customer’s ability to pay. Lease receivables are considered past due 90 days after invoice.
The Company manages the credit risk in net investment in sales-type leases using a number of factors, including, but not limited to the following: size of operations; profitability, liquidity, and debt ratios; payment history; and past due amounts. The Company also uses credit scores obtained from external providers as a key indicator for the purposes of determining credit quality. The following table summarizes the amortized cost basis by year of origination and by credit quality for the net investment in sales-type leases as of March 31, 2022 (in millions):
20222021202020192018PriorNet Investment
Credit Rating:
High$13.9 $126.7 $57.9 $21.1 $4.7 $2.2 $226.5 
Moderate24.1 72.2 41.2 13.3 7.2 1.4 159.4 
Low 2.5 8.5  0.4  11.4 
Total$38.0 $201.4 $107.6 $34.4 $12.3 $3.6 $397.3 
For the three months ended March 31, 2022, and 2021, credit losses related to net investment in sales-type leases were not material.
NOTE 7.    GOODWILL AND INTANGIBLE ASSETS
Acquisitions
There were no material acquisitions for the three months ended March 31, 2022, and 2021.
Goodwill
The following table summarizes the changes in the carrying amount of goodwill (in millions):
Amount
Balance as of December 31, 2021$343.6 
Acquisition activity 
Translation and other(0.4)
Balance as of March 31, 2022$343.2 
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Intangible Assets
The following table summarizes the components of gross intangible assets, accumulated amortization, and net intangible asset balances as of March 31, 2022, and December 31, 2021 (in millions):
March 31, 2022December 31, 2021
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Patents and developed technology$219.3 $(176.9)$42.4 $219.3 $(173.2)$46.1 
Distribution rights and others25.9 (20.3)5.6 26.3 (19.4)6.9 
Customer relationships31.4 (15.3)16.1 31.8 (14.3)17.5 
Total intangible assets$276.6 $(212.5)$64.1 $277.4 $(206.9)$70.5 
Amortization expense related to intangible assets was $6.1 million and $6.9 million for the three months ended March 31, 2022, and 2021, respectively.
The estimated future amortization expense related to intangible assets as of March 31, 2022, is as follows (in millions):
Fiscal YearAmount
Remainder of 2022$17.4 
202318.8 
202414.8 
20259.6 
20262.8 
2027 and thereafter0.7 
Total$64.1 
The preceding expected amortization expense is an estimate. Actual amounts of amortization expense may differ from estimated amounts due to additional intangible asset acquisitions, measurement-period adjustments to intangible assets, changes in foreign currency exchange rates, impairments of intangible assets, accelerated amortization of intangible assets, and other events.
NOTE 8.    CONTINGENCIES
From time to time, the Company is involved in a variety of claims, lawsuits, investigations, and proceedings relating to securities laws, product liability, intellectual property, insurance, contract disputes, employment, and other matters. Certain of these lawsuits and claims are described in further detail below. It is not possible to predict what the outcome of these matters will be, and the Company cannot guarantee that any resolution will be reached on commercially reasonable terms, if at all.
A liability and related charge to earnings are recorded in the Financial Statements for legal contingencies when the loss is considered probable and the amount can be reasonably estimated. The assessment is re-evaluated each accounting period and is based on all available information, including the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to each case. Nevertheless, it is possible that additional future legal costs (including settlements, judgments, legal fees, and other related defense costs) could have a material adverse effect on the Company’s business, financial position, and future results of operations.
Product Liability Litigation
The Company is currently named as a defendant in a number of individual product liability lawsuits filed in various state and federal courts. The plaintiffs generally allege that they or a family member underwent surgical procedures that utilized the da Vinci Surgical System and sustained a variety of personal injuries and, in some cases, death as a result of such surgery. Several of the filed cases have trial dates in the next 12 months.
The cases raise a variety of allegations including, to varying degrees, that plaintiffs’ injuries resulted from purported defects in the da Vinci Surgical System and/or failure on the Company’s part to provide adequate training resources to the healthcare professionals who performed plaintiffs’ surgeries. The cases further allege that the Company failed to adequately disclose and/or misrepresented the potential risks and/or benefits of the da Vinci Surgical System. Plaintiffs also assert a variety of causes of action, including, for example, strict liability based on purported design defects, negligence, fraud, breach of express and implied warranties, unjust enrichment, and loss of consortium. Plaintiffs seek recovery for alleged personal injuries and, in many cases, punitive damages. The Company disputes these allegations and is defending against these claims.
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The Company’s estimate of the anticipated cost of resolving the pending cases is based on negotiations with attorneys for the claimants. The final outcome of the pending lawsuits and claims, and others that might arise, is dependent on many variables that are difficult to predict, and the ultimate cost associated with these product liability lawsuits and claims may be materially different than the amount of the current estimate and accruals and could have a material adverse effect on the Company’s business, financial position, and future results of operations. Although there is a reasonable possibility that a loss in excess of the amount recognized exists, the Company is unable to estimate the possible loss or range of loss in excess of the amount recognized at this time.
Patent Litigation
On June 30, 2017, Ethicon LLC, Ethicon Endo-Surgery, Inc., and Ethicon US LLC (collectively, “Ethicon”) filed a complaint for patent infringement against the Company in the U.S. District Court for the District of Delaware. The complaint, which was served on the Company on July 12, 2017, alleges that the Company’s EndoWrist Stapler instruments infringe several of Ethicon’s patents. Ethicon asserts infringement of U.S. Patent Nos. 9,585,658; 8,479,969; 9,113,874; 8,998,058; 8,991,677; 9,084,601; and 8,616,431. A claim construction hearing occurred on October 1, 2018, and the Court issued a scheduling order on December 28, 2018. On March 20, 2019, the Court granted the Company’s Motion to Stay pending an Inter Partes Review to be held at the Patent Trademark and Appeals Board to review patentability of six of the seven patents noted above and vacated the trial date. On August 1, 2019, the Court granted the parties’ joint stipulation to modify the stay in light of Ethicon’s U.S. International Trade Commission (“USITC”) complaint against Intuitive involving U.S. Patent Nos. 8,479,969 and 9,113,874, discussed below. There is currently no trial date scheduled for this matter.
On August 27, 2018, Ethicon filed a second complaint for patent infringement against the Company in the U.S. District Court for the District of Delaware. The complaint alleges that the Company’s SureForm 60 Staplers infringe five of Ethicon’s patents. Ethicon asserts infringement of U.S. Patent Nos. 9,884,369; 7,490,749; 8,602,288; 8,602,287; and 9,326,770. The Company filed an answer denying all claims. On March 19, 2019, Ethicon filed a Motion for Leave to File a First Amended Complaint, removing allegations related to U.S. Patent No. 9,326,770 and adding allegations related to U.S. Patent Nos. 9,844,379 and 8,479,969. On July 17, 2019, the Court entered an order denying the amendment, without prejudice, and granting the parties’ joint stipulation to stay the case in its entirety in light of the USITC investigation involving U.S. Patent Nos. 9,844,369 and 7,490,749, discussed below. There is currently no trial date scheduled for this matter.
Based on currently available information, the Company is unable to make a reasonable estimate of loss or range of losses, if any, arising from these matters.
On May 30, 2019, Ethicon filed a complaint with the USITC, asserting infringement of U.S. Patent Nos. 9,884,369 (“’369”); 7,490,749 (“’749”); 9,844,379 (“’379”); 9,113,874 (“’874”); and 8,479,969 (“’969”). On June 28, 2019, the USITC voted to institute an investigation (No. 337-TA-1167) with respect to the claims in this complaint. The accused products include the Company’s EndoWrist 30, EndoWrist 45, SureForm 45, and SureForm 60 Staplers, as well as the stapler reload cartridges. In March 2020, Ethicon dismissed its claims concerning the ’749 patent. The evidentiary hearing took place in February 2021. On June 8, 2021, the Chief Administrative Law Judge issued an Initial Determination concluding that (1) the accused products do not infringe the asserted claims in the ’874 or ’969 patents; (2) the asserted claims in the ’874 and ’969 patents are invalid; (3) the accused SureForm staplers and associated reload cartridges infringe two claims of the ’369 patent; (4) the accused SureForm staplers and associated reload cartridges infringe two claims of the ’379 patent; and (5) the Company was estopped from contending that the asserted claims in the ’379 patent are invalid. Ethicon has not challenged the Initial Determination with regard to the findings that absolve Intuitive of any liability regarding the accused EndoWrist staplers and associated reload cartridges. On October 14, 2021, the USITC issued its Opinion in which it made the following rulings: (1) the USITC absolved Intuitive from any liability regarding the ’874, ’969, and ’369 patents; and (2) the USITC found that, while the SureForm staplers and their associated reload cartridges infringe the asserted claims in the ’379 patent, it has suspended the imposition of any remedial order pending an opinion from the Federal Circuit Court of Appeal of whether the Patent and Trademark Office correctly found the asserted claims in this patent to be invalid. The Company and Ethicon have filed Notices of Appeal regarding the USITC Opinion. A lifting of the suspension of any remedial order by the USITC could result in a prohibition on importing the accused SureForm products into the U.S. or necessitating workarounds. Based on currently available information, the Company does not believe that any losses arising from this matter would be material.
Commercial Litigation
On February 27, 2019, Restore Robotics LLC and Restore Repair LLC (“Restore”) filed a complaint in the Northern District of Florida alleging anti-trust claims against the Company. On May 13, 2019, Restore filed an amended complaint alleging anti-trust claims relating to the da Vinci Surgical System and EndoWrist service, maintenance, and repair processes. On September 16, 2019, the Court partially granted and partially denied the Company’s Motion to Dismiss the amended complaint.
On September 30, 2019, the Company filed an answer denying the anti-trust allegations and filed a counterclaim against Restore. The Company filed amended counterclaims after the Court partially granted and partially denied Restore’s Motion to
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Dismiss the counterclaim. The amended counterclaims allege that Restore violated the Federal Lanham Act, the Federal Computer Fraud and Abuse Act, and Florida’s Deceptive and Unfair Trade Practices Act and that Restore is also liable to the Company for Unfair Competition and Tortious Interference with Contract. On January 7, 2020, the Court denied Restore’s Motion to Dismiss the amended counterclaims.
On April 11, 2022, the Court granted in part and denied in part the parties’ Motions for Summary Judgment and ordered the parties to confer and advise the Court of available times for a case management conference and to schedule the case for trial. On April 13, 2022, the Company filed a Motion for Reconsideration to the Court's Summary Judgment Order based on 1) a recently-issued U.S. Food and Drug Administration (“FDA”) decision concluding that alterations made by Restore’s licensor on the EndoWrist instruments in question required review and clearance by the FDA before the instruments could be used, and 2) recently received documents from the government pursuant to a Freedom of Information Act request filed in 2020. While the Court has not yet acted on the Company’s Motion for Reconsideration, it has set a case management conference for April 27, 2022. Based on currently available information, the Company is unable to make a reasonable estimate of loss or range of losses, if any, arising from these matters.
On September 28, 2020, Rebotix Repair Inc. (“Rebotix”) filed a complaint in the Middle District of Florida alleging anti-trust claims against the Company relating to EndoWrist service, maintenance, and repair processes. The complaint was formally served on the Company on October 6, 2020. On March 8, 2021, the Court partially granted and partially denied the Company’s Motion to Dismiss the complaint. The Company filed an answer denying the anti-trust allegations and filed counterclaims against Rebotix. The counterclaims allege that Rebotix violated the Federal Lanham Act and Florida’s Deceptive and Unfair Trade Practices Act and that Rebotix is also liable to the Company for Tortious Interference with Contract.
Motions for Summary Judgment have been filed by the Company and Rebotix. On April 1, 2022, the Court stayed this case based on Rebotix’s representation that the FDA would soon be issuing a decision on whether Rebotix’s services require 510(k) clearance. On April 11, 2022, Rebotix filed a Notice of FDA Decision, which included correspondence from the FDA concluding that Rebotix’s activities constituted remanufacturing and would require FDA review and clearance. On April 13, 2022, the Court issued an Order directing the parties to confer and file a joint status report by May 4, 2022, on how the FDA’s decision impacts this case and how the parties wish to proceed. Based on currently available information, the Company is unable to make a reasonable estimate of loss or range of losses, if any, arising from this matter.
Similar to the claims asserted in the Restore case, on May 10, 2021, Surgical Instrument Service Company, Inc. filed a complaint in the Northern District of California Court alleging anti-trust claims against the Company relating to EndoWrist service, maintenance, and repair processes. The Court denied the Company’s Motion to Dismiss, and discovery has commenced. Based on currently available information, the Company is unable to make a reasonable estimate of loss or range of losses, if any, arising from this matter.
Three class action complaints were filed against the Company in the Northern District of California Court alleging anti-trust allegations relating to the service and repair of certain instruments manufactured by the Company. A complaint by Larkin Community Hospital was filed on May 20, 2021, a complaint by Franciscan Alliance, Inc. and King County Public Hospital District No. 1 was filed on July 6, 2021, and a complaint by Kaleida Health was filed on July 8, 2021. The Court has consolidated the Franciscan Alliance, Inc. and King County Public Hospital District No. 1 and Kaleida Health cases with the Larkin Community Hospital case, which is now captioned on the Larkin docket as “In Re: da Vinci Surgical Robot Antitrust Litigation.” A Consolidated Amended Class Action Complaint has been filed on behalf of each plaintiff named in the earlier-filed cases. On January 14, 2022, Kaleida Health voluntarily dismissed itself as a party to this case. On January 18, 2022, the Company filed an answer against the plaintiffs in this matter, and discovery has commenced. Based on currently available information, the Company is unable to make a reasonable estimate of loss or range of losses, if any, arising from these matters.
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NOTE 9.    STOCKHOLDERS’ EQUITY
Stockholders’ Equity
The following tables present the changes in stockholders’ equity (in millions):
Three Months Ended March 31, 2022