Calvin Darling - Gary S. Guthart - Chief Executive Officer, President and Director Marshall L. Mohr - Chief Financial Officer, Principal Accounting Officer and Senior Vice President Aleks Cukic - Vice President of Strategy

Spencer Nam - ThinkEquity LLC, Research Division Tycho W. Peterson - JP Morgan Chase & Co, Research Division Ben Andrew - William Blair & Company L.L.C., Research Division David R. Lewis - Morgan Stanley, Research Division Lennox Ketner - BofA Merrill Lynch, Research Division Frederick A. Wise - Leerink Swann LLC, Research Division Michael Matson - Mizuho Securities USA Inc., Research Division

Ladies and gentlemen, thank you for standing by. Welcome to the Intuitive Surgical First Quarter Earnings Release Call. [Operator Instructions] I would now like to turn the conference over to our host, Mr. Calvin Darling, Senior Director of Finance for Intuitive Surgical. Please go ahead.

Thank you. Good afternoon, and welcome to Intuitive Surgical's First Quarter Conference Call. With me today, we have Gary Guthart, our President and CEO; Marshall Mohr, our Chief Financial Officer; and Aleks Cukic, our Vice President of Strategic Planning. Before we begin, I would like to inform you that comments mentioned on today's call may be deemed to contain forward-looking statements. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are described in detail in the company's Securities and Exchange Commission filings. Prospective investors are cautioned not to place undue reliance on such forward-looking statements. Please note that this conference call will be available for audio replay on our website at intuitivesurgical.com on the Audio 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 first 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 first quarter financial results. Aleks will discuss marketing and clinical highlights. Then, I will provide an update to our financial forecast for 2012. And finally, we will host a question-and-answer session. With that, I will turn it over to Gary. Gary S. Guthart: Thank you for joining us today. In this first quarter, our team has executed well and we have experienced strong performance in procedures, encouraging acceptance of our new products and the financial results that follow. For 2012, Intuitive is focused on the following: first, continuing our growth in gynecology and urology worldwide through outstanding execution in the field; second, disciplined execution of our Single-Site and vessel sealing launches focused on outstanding early customer experiences; third, building robust clinical programs with leading customers in emerging procedures and general surgery, thoracic surgery and transoral surgery; and finally, strengthening our capabilities in the international markets, particularly Europe, Japan and Korea. With regard to procedures, we experienced strong growth in general surgery and gynecology, leading to a year-over-year procedure growth of approximately 29%. With uptake in colorectal procedures and the introduction of Single-Site in the United States, the category of general surgery grew at the highest rate this quarter. Worldwide urology procedures grew year-over-year as well, led by growth in European dVP, while U.S. urology was flat. Aleks will provide additional procedure commentary later in the call. As we have mentioned on previous calls, we have been investing in improving our structural capabilities in Japan. Our team has worked with Japan's MHLW on reimbursement for da Vinci Prostatectomy, receiving reimbursement approval on April 1. Intuitive Surgical Japan has also successfully transitioned the import license for da Vinci S from Johnson & Johnson Japan to Intuitive Surgical Japan this month. We are encouraged by our progress in Japan and we will continue to invest to clear the path for increased da Vinci use. Overall, international system sales were encouraging. However, our first quarter system sales in Europe were somewhat disappointing. This is likely a combination of both economic pressures in Europe as well as organizational capability. Turning to operating highlights for the first quarter. Procedures grew 29% over the first quarter of 2011. We sold 140 da Vinci Surgical Systems, up from 120 during the first quarter of last year. Total revenue was $495 million, up 28% over last year. Instrument and accessory revenue increased to $208 million, up 32% over Q1 of 2011. Total recurring revenue grew to $289 million, up 31% from prior year and comprising 58% of total revenue. Net income was $144 million, up 38% over last year. We generated an operating profit of $228 million before noncash stock option expense, up 26% from the first quarter of last year and representing 46% of Q1 revenue. We ended the quarter with $2,371,000,000 in cash and investments, up $199 million from last quarter. Significant cash outlays during the quarter included $50 million invested in the acquisition of our Korean distributor, fixed assets and intellectual property. Excluding the impact of these outlays as well as $83 million from stock proceeds and $30 million used for working capital, we generated $211 million in gross cash flow from operations, which is 147% of our reported GAAP net income in the first quarter. The first quarter has been an active one for our product development, marketing and operations teams. In the quarter, we completed our first phase of rollout for our Single-Site instruments and accessories for da Vinci Si in the United States. Recall, Single-Site is a platform for increasing patient value by reducing the number of incisions required by traditional multiport minimally invasive surgery. Instead of the multiple incisions of traditional laparoscopy, the body is entered through a single incision at the umbilicus. Currently, Single-Site is cleared for single-incision cholecystectomy in the U.S. and for broader indications in Europe. Experiences by our Single-Site customers in the U.S. indicate that cholecystectomy procedure is safe, repeatable and teachable. Market response today has been very encouraging. We are working with our customers in Europe to identify procedures in which Single-Site can bring additional patient value beyond cholecystectomy. We continue to focus on developing products that enable surgeons to convert traditionally open surgeries to minimally invasive surgery using da Vinci. In the quarter, we completed our first customer access work on our EndoWrist vessel sealer and are pleased with its performance in surgery. Our vessel sealer brings to da Vinci surgeons full articulation and precise control. We think this instrument will facilitate robotic general surgery. We are communicating with FDA regarding our da Vinci stapler and we are making progress in answering their questions. In imaging, our Firefly Fluorescence Imaging system is now being used regularly to image kidney vasculature during da Vinci Partial Nephrectomy. Surgeons are also exploring the use of Firefly in visualizing blood flow in da Vinci colorectal procedures. As we enter new markets and drive into new product arenas, we continue to invest in building our team and expanding partnerships and in acquiring those technologies that can make a difference to robotic surgery. This quarter, we added 94 people to our team, predominantly in sales, manufacturing and R&D, bringing our total team to 2,018 employees. I'll now pass the time over to Marshall, our Chief Financial Officer. Marshall L. Mohr: Thank you, Gary. Our first quarter revenue was $495 million, up 28% compared with $388 million for the first quarter of 2011 and $2 million less than the $497 million reported for the fourth quarter of 2011. First quarter revenues by product category were as follows. First quarter instrument and accessory revenue was $208 million, up 32% compared with $157 million for the first quarter of 2011 and up 6% compared with $196 million in the fourth quarter of 2011. Year-over-year, instrument and accessory growth was driven by procedure growth of 29% and initial purchases of recently launched products, including Single-Site starter kits and our Firefly product. Note that the first quarter of 2012 included one more surgical day than the first quarter of 2011 due to leap year. Instrument and accessory growth relative to the first quarter of 2011 was primarily driven by procedure growth in sales of our Single-Site starter kits, partially offset by lower first quarter stocking orders associated with seasonally lower first quarter system sales. Instrument and accessory revenue realized per procedure, including initial stocking orders of $1,985 per procedure, was higher than the first quarter of 2011 by $50 and $10 higher than the fourth quarter of 2011. Over time, we expect instruments and accessories per procedure to decline slowly, given that initial stocking orders have a lower impact on a larger installed base. This natural decline has been more than offset in recent quarters by the positive impact of our new instrument and accessory products, specifically, Single-Site, Firefly and our thoracic lung kit. Instrument and accessory revenue per procedure will fluctuate based on the rate of adoption of newer products as well as product and procedure mix. First quarter 2012 systems revenue of $207 million increased 24% compared with $167 million of systems revenue for the first quarter of 2011 and decreased 8% compared with $225 million of systems revenue for the fourth quarter of 2011. We sold 140 systems in the fourth quarter of 2012 compared with 120 systems in the first quarter of 2011 and 152 systems in the fourth quarter of 2011. The first quarter of 2011 system count included systems involving trade-ins of older units comprised of 19 standard systems and 27 da Vinci S-es. The first quarter of 2011 system count included 13 standard trade-ins and 19 da Vinci S trade-ins, while the fourth quarter of 2011 included 23 standard trade-ins and 27 da Vinci S trade-ins. Our first quarter average selling price per system, including all da Vinci models, was $1.47 million, an increase from the $1.38 million realized in the fourth quarter of 2011 and the same as the fourth quarter. ASPs include simulators and systems configured with Firefly but exclude upgrades. The increase in average sales price relative to the first quarter of 2011 reflects a higher proportion of dual consoles, a higher number of systems shipped with surgical simulators and Firefly partially offset by an increased proportion of trade-ins. We sold 25 dual console systems in the first quarter of 2012 compared to 16 in the first quarter of 2011 and 29 in the fourth quarter of 2011. ASPs will fluctuate quarter-to-quarter based on product, customer and trade-in mix as well as foreign exchange rates on direct sales to foreign customers. Service revenue of $81 million increased 27% compared with $64 million last year and increased 7% compared with $75 million last quarter. The growth in service revenue was primarily driven by a larger system installed base. Total first quarter recurring revenue comprised of instrument, accessory and service revenue of $289 million, increased 31% compared with the first quarter of 2011 and increased 6% compared with the fourth quarter of 2011. Recurring revenue represented 58% of total first quarter revenue compared with 57% in the first quarter last year and 55% last quarter. International results were as follows. Procedures outside of the U.S. grew approximately 31% on a year-to-year basis led by growth in Europe, particularly dVPs. We also experienced growth in our other target procedures, including dVH in Europe. First quarter revenue outside of the U.S. of $105 million increased 15% compared with revenue of $91 million in the first quarter of 2011 and decreased 2% compared with seasonally strong fourth quarter revenue of $107 million. Instrument and accessory revenue outside of the U.S. grew 24% year-over-year and 22% sequentially. We sold 35 systems outside of the U.S. compared with 31 in the first quarter of 2011 and 39 last quarter. We sold 14 systems in Europe in the first quarter compared with 15 in the first quarter of 2011 and 23 in the fourth quarter of 2011. European system sales reflect a challenging economic environment. However, we are also taking steps to improve our execution. Capital sales in rest-of-world markets increased to 21 systems in the first quarter compared with 16 in each of the first and fourth quarters of 2011. Aleks will provide additional details of overseas system sales. Moving on to the remainder of the P&L. Gross margin in the first quarter of 72% was the same as the first quarter of 2011 and lower than the 73% last quarter. The lower gross margin compared to the fourth quarter primarily reflected lower margins on our newly introduced products. Margins on newly launched products like Single-Site will typically be lower than our mature products, reflecting vendor pricing on low volume, temporary tooling costs and other start-up costs. However, over time as volumes increase, and we refine the manufacturing process in the product, we would expect to see improvement in the margins of these newer products. First quarter 2012 operating expenses of $163 million were 25% compared -- up 25% compared with the first quarter of 2011, and were approximately the same as those for the fourth quarter of 2011. Relative to the fourth quarter of operating expenses, the first quarter expenses included costs associated with employees added during the quarter and payroll taxes on a higher level of employee stock option exercises, offset by lower engineering project costs which fluctuate with prototype spending. We added 94 employees in the quarter, including 41 employees in commercial operations and 44 employees in product operations. First quarter 2012 operating income was $193 million or 39% of sales compared with $148 million or 38% of sales for the first quarter of 2011 and $200 million or 40% of sales for the fourth quarter of 2011. First quarter 2012 operating income reflected $34 million of noncash stock compensation expense compared with $32 million for the fourth -- first quarter of 2011 and $35 million last quarter. We have changed our annual stock option grant process such that 1/2 of the employees' annual grants were issued on February 15 and the other 1/2 will be issued on August 15. The first quarter impact of the February 15 grant was more than offset by the full vesting of options granted in 2008. We would expect noncash compensation expense to increase in the second quarter, reflecting the full quarter impact of the February 15 grant, and then increase further in the third quarter with the August 15 grant. Our effective tax rate for the first quarter of 27% was lower than our rate for 2011 of 30%. The decrease reflects a one-time benefit associated with a change in the way the IRS interprets the rules associated with Section 199, domestic manufacturing tax credit. We expect the rate for the remainder of the year to be approximately 31%. The increase relative to 2011 reflects no research and development credit, a lower mix of foreign earnings partially offset by ongoing Section 199 tax credit. Our net income was $144 million or $3.50 per share compared with $104 million or $2.59 per share for the first quarter of 2011 and $151 million or $3.75 per share for the fourth quarter of 2011. Now moving to the balance sheet. We ended the first quarter with cash and investments of $2.4 billion, up $199 million compared with December 31, 2011. The increase reflects $167 million of cash flow from operations, $83 million from the exercise of stock option partially offset by $50 million associated with the purchase of our Korean distributor, purchase of capital and IP. During the fourth quarter, we did not repurchase any of our common stock. However,, we retained the option to exercise the remaining Board-authorized buybacks of $568 million. Our accounts receivable balance increased to $300 million at March 31 from $298 million at December 31. Our net inventory increased to $119 million at March 31 from $112 million at December 31. And with that, I'd like to turn it over to Aleks, who will go over our sales, marketing and clinical highlights.

Thank you, Marshall. During the first quarter, we sold 140 da Vinci systems: 105 in the United States, 14 into Europe and 21 into rest of world markets. As part of the 140 system sales, 19 standard da Vinci Systems and 27 da Vinci S Systems were traded in for credit against sales for new da Vinci Si Systems. We had a net 94 system additions to the installed base during the quarter, which brings to 2,226 the accumulative number of da Vinci systems worldwide, 1,615 in the United States, 379 in Europe and 232 in rest of world markets. 80 of the 140 systems installed during the quarter represented repeat system sales to existing customers. In total, 132 of the 140 systems sold represented da Vinci Si systems, which included 25 dual console systems. The 35 system sales internationally included 7 into Japan, 4 into India and 3 into the countries of Italy, the U.K. and Australia. While our overall international system sales were strong, our Q1 EU system sales were somewhat disappointing and below historical trends. Clinically, we had a strong quarter, achieving an overall year-over-year procedure growth rate of approximately 29%. Gynecology, international dVP, along with the emerging categories of general surgery and thoracic surgery, accounted for a large part of this growth. Cholecystectomy, colon and rectal resections, lobectomy, dVH, endometriosis resections, myomectomy and partial nephrectomy all exhibited strong year-over-year growth. International dVP growth remained strong both in Europe and rest of world. However,, in the U.S., dVP has felt some recent pressure from non-surgical disease management, mainly active surveillance. With the international market playing an every ever-increasing role in the worldwide procedure numbers, overall worldwide dVP growth remains positive. Recent new product launches are all proceeding well. The attachment rate for both the da Vinci simulator and our Firefly product remain high, which is helping to buoy da Vinci system ASPs. The initial customer response to our da Vinci Single-Site product line has been very positive, with many centers up and running and several more scheduled for training. We initiated a phased rollout of the vessel sealer product in the second half of the quarter, and early customers are beginning to perform their initial cases. The product is performing well and early customer feedback has been positive. But as with all new product launches, customer feedback processes and operational scaling will remain central themes. Throughout this period, the focus of our operations team will be to optimize manufacturing while reducing cost. During the quarter, over 350 abstracts and papers representing a variety of surgical specialties were published within various peer review journals, while the clinical conferences were abundant with live da Vinci procedure transmissions, post-graduate robotic courses, podium presentations and clinical poster sessions. As we've discussed, da Vinci colon and rectal surgery is an emerging category and is receiving a lot of clinical interest and for good reason. While clinical experiences for laparoscopic colon and rectal surgery date back to 1991, the adoption has been lagging. In a recent edition of the American Surgeon, Dr. Joseph Carmichael and his colleagues from the University of California Irvine published a comprehensive review on the utilization of laparoscopy in colorectal surgery for cancer in academic medical centers. In it, they segment various colorectal surgical procedures as they relate to laparoscopic adoption. University Hospital Consortium or UHC is a large organization consisting of 112 academic medical centers and their affiliates, representing approximately 90% of the nation's non-profit academic medical centers. The study, based on data from the UHC database, included records from 22,780 patients who had undergone open or laparoscopic colon and rectal surgery for cancer between 2007 and 2009. Interestingly, 19,408 or over 85% of these patients received an open surgery as compared to 3,372 or 14.8% who had received a laparoscopic procedure. The study reports that, as a percentage, the most commonly performed laparoscopic colon resection was a total colectomy at 22.6%, followed by a sigmoid resection at 17.3%. The least common were abdominoperineal resections at 8%, transverse colon resections at 10%. When subcategories were consolidated and analyzed, it was reported that laparoscopic surgery was incorporated in less than 20% of colon cancer resections and less than 10% of rectal cancer resections. Historically, both patient value and da Vinci's procedure adoption have been strongest where a traditional lap in MIS adoption has been limited. This is often the case within procedure categories where MIS is deemed clinically challenging. While every procedure has its own set of variables, prostatectomy, complex hysterectomy, partial nephrectomy, myomectomy, sacrocolpopexy and lobectomy have shared at least one common bond, which is that, each of them, despite years of clinical effort, was limited to a relatively small number of centers, resulting in limited MIS penetration. We believe that MIS colorectal surgery is consistent with this theme. While laparoscopic colorectal surgery is limited in the U.S., lap colon initiatives throughout Korean and Japanese universities have been more ambitious, which has led to some academic analysis of da Vinci's role versus laparoscopy. A comparative study of urinary voiding and sexual function following a total mesorectal excision or TME for rectal cancer was recently published in the Annals of Surgical Oncology. The study, authored by Dr. Young-Joon Kim and his colleagues from Yonsei University, compared laparoscopic and robotic TME as it relates to complications in urinary incontinence and sexual function, which are both common complications in rectal cancer surgery. 69 patients who underwent a lap or robotic procedure were prospectively enrolled. Their urogenital function was evaluated by uroflowmetry. Standard questionnaires to establish an international prostate symptom score and international index of erectile function score were given before surgery and at 1, 3, 6 and 12 months post surgery. Their initial findings were not surprising in that bladder function within both cohorts significantly decreased 1 month post surgery. In the lap TME group, urinary dysfunction gradually improved over a 6-month period, which is consistent with previously reported open surgery TME studies. In other words, both lap and open TME required 6 months for ISP scores to decrease. However, interestingly, patients who underwent robotic TME showed significantly earlier recovery at a period of less than 3 months. They also analyzed the urinary flow where the most objective urinary function results were obtained. The robotic TME showed no decrease in mean voiding volume. The robotic TME urinary data analysis revealed superior outcomes compared to laparoscopic TME data, not only in ISP score but also in urinary flow. With respect to erectile function, the robotic TME group showed earlier recovery as compared to the laparoscopic TME group, 6 months versus 12 months. They stated that, during pelvic dissection, avulsion or direct injury of the nerve plexus can easily happen, which is tied to post-operative sexual and urinary dysfunction. Enhanced 3D HD magnified views, along with 7 degrees of instrument freedom, were found to be of high value during delicate dissection. In their conclusions, the authors stated, and I quote: "We conclude that the use of da Vinci's surgical robotic TME system allowed for an earlier recovery in voiding and sexual function because it enabled meticulous dissection and maintenance of adequate countertraction strength as a result of enhanced dexterity." As stated earlier, our GYN franchise remains robust. While most of our previous growth has been U.S.-centric, we are beginning to experience dVH expansion in non-U.S. markets. As was the case in the United States, complex dVH from malignant conditions appears to be the catalyst. In this month's edition of Obstetrics & Gynecology, a group made up of both surgeons and epidemiologists from Jewish General Hospital and McGill University in Montréal, published their 2-year findings on both patient outcomes and economics associated with their robotic GYN cancer program. A total of 303 endometrial cancer patients were involved in this study. Following the initial -- the initiation of their robotics program, 143 consecutive dVH patients were compared to 160 consecutive patients who underwent surgery prior to the robotic program commencement. These 160 patients made up the historical cohort. Within the historical cohort, the rate of minimally invasive surgery performed with traditional laparoscopy was 17%. During the following 2 post-da Vinci years, the MIS rate had grown to 98%. Patient characteristics were comparable in both eras, except for an even higher body mass index in the robotics era. Robotic patients had longer operating times but fewer adverse events, 13% compared to 42%; lower estimated median blood loss, lower by approximately 70%; and shorter median hospital stay, 2.2 days compared with 5.5 days. The overall hospital cost for the robotic group was significantly lower as compared with the historical group, CAD $7,644 compared with CAD $10,368. The gains with robotic surgery are even more pronounced in a multivariable analysis where they considered both the full cohorts and matched sub-cohorts. The reduction in grade 2 or higher complications resulting in far less hospitalization drove significant dVH-related hospital savings. However, the key factor in evaluating any cancer treatment is oncologic outcome. At present, the 2-year post-dVH follow-up indicates a lower recurrence rate as compared with the historical cohort. Improving procedure efficacy while reducing hospital costs is a powerful combination and one that aligns us closely to the needs of our patients, providers and payers. This concludes my remarks, and I'll now turn the time over to Calvin.

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. During the first quarter, we saw continued strength in U.S. gynecology procedures and Europe dVPs. We also saw strong global general surgery growth and positive U.S. early market reactions to our Single-Site cholecystectomy offering. We are now increasing our 2012 procedure guidance. On our last call, we forecast procedures to grow approximately 24% to 26% from the base of approximately 360,000 procedures performed in 2011. We now forecast full year 2012 da Vinci procedure volume to grow approximately 25% to 27% above our 2011 total. Moving on to revenues. We are also increasing our 2012 revenue guidance. Based upon our higher procedure expectations and revenue contributions from new products, we now expect 2012 revenue to grow between 19% and 21% above total 2011 revenue of $1.76 billion. This is up from 17% and 19% revenue growth forecast on our previous call. Now turning to operating income. Consistent with our previous forecast, we continue to expect operating income to fall within a range of between 39% and 40% of net revenue. We will likely trend towards the lower end of this range as a result of lower gross profit percentages realized on recently launched instrument products. Now turning to noncash expenses. We now expect noncash stock compensation to fall within a range of between $152 million and $156 million for the year compared to our previous forecast of $144 million to $150 million, with the increase driven by higher option valuations associated with our higher stock price. As Marshall described earlier, we would expect noncash stock compensation expense to increase in the second quarter, reflecting the full quarter impact of the February 15 grant, and to increase further in the third quarter with the August 15 grant. Amortization of purchased intellectual property, which is mostly recorded as R&D expense, is still expected to fall within a range of between $20 million and $24 million in 2012. We expect other income, which is mainly comprised of interest income, to total between $15 million and $17 million for the year. With regard to income tax. Our Q1 reported tax rate of 27.2% fell below our guidance range of between 29% and 31%, driven by the release of Section 199 reserves, deductions for U.S. manufacturing activities. Going forward, we expect our tax rate in quarters 2 through 4 to come in at the higher end of our range at around 31% of pretax income. While we will benefit from the ongoing manufacturing activities deduction, we project this benefit will be more than offset by the non-continuance of the U.S. R&D tax credit and a slight shift in our projected geographic mix of pretax profit towards the U.S. We expect that our share count for calculating EPS in Q2 2012 will be approximately 41.2 million shares. Our higher forecasted share count is driven by higher equivalent shares assigned to the diluted share calculation based on our higher stock price. That concludes our prepared remarks. We will now open the call to your questions.

A question comes from the line of Spencer Nam with ThinkEquity. Spencer Nam - ThinkEquity LLC, Research Division: Just a couple of questions here. First of all, you guys mentioned a lot about these new products and these different upgrades having impact on your procedure volume. And I'm curious whether the -- well, whether you guys could tell us how much of the increase in procedure volume is driven by the upgrades and this new capability introduction versus you actually going out and just opening up the new procedure areas that you're currently working on.

Well, I'll answer that the best I can, as I understand it. First off, I don't know that we had necessarily indicated that the new products, i.e. Single-Site and/or the vessel sealer, are the reason for the additional procedure growth, although they did add and contribute to it. The categories of general surgery, which include colorectal surgery, the categories of thoracic surgery, lobectomy, et cetera, in addition to the strong GYN growth and international dVP growth, were really the reasons that drove the added procedure for the quarter. As far as differentiating between new procedures and/or new products, I don't know that we can do that calculation for you. I think, in general, there's good procedure strength that's happening across the core business, specifically dVP outside the United States. dVP in the United States was actually down a little bit, but it was more than made up for in the addition of the other procedures that we talked about.

And our last question comes on the line of Tycho Peterson with JPMorgan. Tycho W. Peterson - JP Morgan Chase & Co, Research Division: Maybe I'll comment on that last point. You talk about active surveillance and the dynamic there in the U.S. Can you just talk about -- I mean, are you expecting dVP to remain flat here? And just talk about watchful waiting and how you think about that impacting this.

Well, I think, in general, we've been talking about dVP being flattish for some time in the United States, for probably the last 3 or 4 quarters. And it's our expectation that, as -- I think you have to almost back away and not look at it as dVP and look at it in general as prostate cancer and the treatment of the disease of prostate cancer and what may happen on a macro level with -- if more people end up going into an active surveillance. And history will tell you that, at some point, something as high as 60% of those men, and it could be as high as 2/3, often wind up in some other therapy, either radiation or surgery, so some of this may be a lead lag effect. We don't really know how to handicap that. I think there's a lot of information that's out there and I think we will probably move up and down with surgery in general. And outside of the United States, again, just to underscore, you're seeing that the overall dVP number is growing, and that is really driven by both European strength as well as Asian and Latin American and other markets. Tycho W. Peterson - JP Morgan Chase & Co, Research Division: And then can you quantify what the revenues were from Single-Site stocking orders? We've had a few people ask on that. Marshall L. Mohr: I'm sorry?

Single-Site stocking orders, quantify. Marshall L. Mohr: We're not going to quantify it. I'd just tell you that, like we said in the script, that the attach rate for Single-Site was reasonable in the quarter. So we're still in the early phases. It's not -- I think, if we gave out numbers now, it really wouldn't be an indication of much. Tycho W. Peterson - JP Morgan Chase & Co, Research Division: And then last one, on service margins. I think they were at a record this quarter. Just talk about the sustainability of the service margins there and then what's kind of driving the strength. Marshall L. Mohr: Really, improvements in product quality, reducing the amount of time that our field engineers have to spend servicing the equipment and leveraging than more systems over an existing field service engineer force. It'll fluctuate a little bit here and there, but I think that you've seen the margins over the last few quarters at a certain level and they should continue at that level.

And our next question comes from the line of Ben Andrew with William Blair. Ben Andrew - William Blair & Company L.L.C., Research Division: Aleks or Gary, maybe a question for you. If you think about the relative benefits of single-incision cholecystectomy versus lap, is it -- are you seeing enough kind of evidence of that benefit in the early days that convinces you the procedure trajectory is going to be very strong? And just talk a little bit about the selling process and what you're seeing in the initial rollout, if you would. Gary S. Guthart: You know, I think, on the first part of where the benefits sit, the early anecdotes we're hearing are a combination of benefits on pain and benefits on cosmesis. How these play out over time and what segment of the broader population is interested on those things, just hard to forecast right now, so we'll see. Ben Andrew - William Blair & Company L.L.C., Research Division: Gary, are you hearing that that's patient driven or physician driven? Because we've heard some comments that a Single-Site through the umbilicus can actually be more painful in a way than the 4 ports of a typical lap chole. Gary S. Guthart: Yes, what most -- mostly, what we're hearing is a little bit of both. We hear both the surgeon commentary on it as well as some patient commentary on it, but it's early days. And I think there'll be conflicting opinions for a while until there's a large-enough procedure base and evidence base for to sort out. I'll let Aleks speak to this, on the process.

Again, if you look at the market before we entered into it, I think there were a fair amount of physicians and hospitals that were interested in single-incision surgery, as evidenced by the number of surgeons that were trained and some of the early successes that some of the other companies may have had in that area. So the demand is there in terms -- let's say that the interest level is there. And in terms of the sales process, I think we're seeing a few things converge at the same time: You're seeing general surgeons who have garden-variety procedures like cholecystectomy. At the same time, you're seeing colorectal surgeons who don't necessarily get involved in those type of surgeries, and you're seeing other areas. And we don't talk about them because they're not large markets, but we look at procedures like adrenalectomies and some of the upper-G.I. gastric surgeries, et cetera. They are all on the small end but nice trajectory. So there seems to be a lot of global awareness from the general surgeon that is making it, let's say, easier for our people to get in front of and then consolidate the messaging of robotics programs to include general surgery. So there isn't really any sort of paint-by-numbers here that we can say is consistent other than there's a lot of global awareness in this category they know. Ben Andrew - William Blair & Company L.L.C., Research Division: And maybe 2 other quick questions. You talked about Europe placements being weak. What is your outlook for the -- I know it's probably baked into your guidance, but do you think -- do you assume that it gets better, or are you baking it at staying relatively tough even though procedure growth was pretty good? And what are you hearing about the magnitude of hospital budgets relative to procedure capability as they go through the year? Marshall L. Mohr: A couple of questions in there. I -- we think it will remain pressured for some time to come, so we're not forecasting that the pressure comes off capital budgets. The -- as you said, the procedure side has been reasonably healthy to date. How capital -- or how expenditures reflect back into procedures is really hard for us to handicap. I think we're just going to have to wait and see where that goes. Ben Andrew - William Blair & Company L.L.C., Research Division: And then finally, a quick one for Marshall. You talked about gross margin pressure early on with the rollout of SILS and the new products. Is that something we could see resolving over the course of this year? Or maybe it takes a bit longer to get enough scale there? Marshall L. Mohr: We're not going to put a time frame on it. I'll just say that, like I said in the script, over time, we will -- we are working towards revising our production processes as well as the product itself in driving the cost down.

And our next question comes from the line of David Lewis with Morgan Stanley. David R. Lewis - Morgan Stanley, Research Division: A couple of quick questions. I want to try to, maybe Aleks or Gary, to rectify the revenue per procedure numbers. Obviously, it's stronger than we would have thought, and you've talked about general surgery being a contributor to incremental growth. So I'm trying to figure out, if general surgery comes on, revenue per procedure should trend down slightly, but in this quarter it trended up and it did contribute to growth. So can you just give us some more granularity on your revenue per procedure going up even though general surgery did contribute to positive growth acceleration? Marshall L. Mohr: Yes, so when we're selling SILS kits or our single-incision product... Gary S. Guthart: Or Single-Sites. Marshall L. Mohr: Yes, Single-Site product. We're -- they're buying it as a kit and they may not have done any surgeries yet, right? And so that's really what is helping increase the revenue per procedure, that, as well as Firefly, as well as thoracic kits. So they're buying instruments and accessories in advance of doing the procedures. Now over time, they'll be doing the procedures and then that will balance out. Long term, I think your question is, is the price that they are paying for single-incision products less than what we're charging for our normal -- our multiple-incision products? And the answer is yes. David R. Lewis - Morgan Stanley, Research Division: Okay. So it sounds like, even though the ancillary products, like Firefly, are doing obviously well, you still believe, over time, this trend is going to annualize down.

Yes, yes. Gary S. Guthart: Over time. It's hard to exactly predict because the mix of new products and the mix of procedures is hard to forecast precisely. And so some of them carry it up and some of them push it down and so you have those 2 trends working in opposition. David R. Lewis - Morgan Stanley, Research Division: Fine. And I know it's early, but is it safe to assume that, in the earliest days of the international general surgery traction, that the majority of this success has been in chole versus other procedures? Gary S. Guthart: You're seeing really 2 different -- general surgery for us is a tale of 2 different activities. We have strength in colorectal, which is typically cancer procedures that would otherwise have been done open, and so that tends to be one-site. There's a larger volume there. And then we have Single-Site, which is right now approved for cholecystectomy. So you're seeing those 2 things kind of as a barbell. As a total number of procedures, I think you're getting more from colorectal in terms of growth than you have in chole so far. David R. Lewis - Morgan Stanley, Research Division: Okay, very helpful. And just one last quick one and I'll jump back in queue, just in terms of an OUS market dynamic question. If you think about your key markets, maybe Japan is less relevant right now, but in terms of Germany, France, Italy, in those key markets, is prostatectomy still your single biggest growth contributor? So not necessarily absolute, but on a growth perspective, is prostatectomy still the biggest driver in those 3 markets? Marshall L. Mohr: Yes, the answer is, mostly yes. Although, we're beginning -- there's -- you can see high growth off small bases in a couple of other procedures. So off a substantial base, the dVP is the highest grower. We're beginning to see hysterectomy for cancer condition starting to come up. And there's some interest in general surgery in Italy and that's starting to come up on a lower basis.

[Operator Instructions] Our next question comes from the line of Lennox Ketner with Bank of America. Lennox Ketner - BofA Merrill Lynch, Research Division: Just to go back to the Single-Site product. Our checks suggest you were in probably 20 to 30 hospitals this quarter. I'm just wondering if you're willing to comment on whether that's the right ballpark. And also just wondering, are you still in -- at a point where you're hand-selecting the sites so that you can work with the early adopters? Or is that product developed for broad distribution now?

First, with respect to the number of centers, we really aren't in a position to disclose what those numbers are and we'll probably pass on trying to answer that question. But I would say that, during the course of the quarter, we've seen a lot of interest both in centers that have purchased and have begun doing cases as well as the centers who are in the process of being trained. So comparing and contrasting Single-Site versus the vessel sealer, Single-Site, from a market development standpoint, is much further along than vessel sealing which was a product that we started to phase into -- rollout in the later half of the first quarter. So you should think of those 2 differently: Think of Single-Site being further along and think of Single-Site as a product now that customers can get their hands on. Lennox Ketner - BofA Merrill Lynch, Research Division: Okay. And then you mentioned that it's cleared for broader indications in Europe. Is it cleared for additional specific indications in Europe, or does it -- are you just cleared to use it in anything in Europe? Gary S. Guthart: It's cleared in most things in the abdomen. It's not cleared in all parts of the body. Lennox Ketner - BofA Merrill Lynch, Research Division: Okay. And then lastly, on Japan, sorry if I missed this one. I'm just wondering if you said how many systems were sold into Japan and then also if you could just talk a little bit about what the process is for getting additional procedures approved in Japan. And I know you are kind of, last quarter at least, still debating which procedures to pursue there next, but if you can maybe just talk a little bit about the process there and whether you've made any decisions. Gary S. Guthart: Sure. So the first question was how many went into Japan this quarter. It was 7. With regard to what happens next in terms of reimbursements, first, we're happy to have the first one under our belt. Going forward, the process changes a little bit and surgical societies are then the groups that lead the pursuit of a reimbursement beyond the first one. And so we'll be in support of the societies as they look to see where they want to go. It's a little bit early to figure out which one will be the next one in the queue, but those societies are interested and they're starting to talk to us about it. And as we know more, then we'll report more in future quarters.

And our next question comes from the line of Rick Wise with Leerink Swann. Frederick A. Wise - Leerink Swann LLC, Research Division: Let me go back to the Europe issues again. Did I hear you correctly that -- part of the issues that you cited and disappointing were the external factors, but some of them, if I understood you, were organizational. And you said you're taking steps to improve. Can you expand on that and give us a little more color on what you're doing and maybe how much of what was disappointing was related to internal versus external issues? Gary S. Guthart: That's -- it's hard to quantify the differences. You did hear us right. I think there are some things we can do to strengthen our capabilities in Europe. And they tend to be around things like economic support, health technology assessments, marketing, those kinds of market access and structural issues, more than they are a sales process type. So we're working on those things, I think we're making some investments in them. How to distinguish how much is one and how much is the other, very tough to do. We don't know exactly how to do that. Frederick A. Wise - Leerink Swann LLC, Research Division: And so was it sort of a minor factor really this quarter, or if this is something that really could make a significant difference as you address it in the second half, let's say, or... Gary S. Guthart: It's clear there are economic pressures in Europe having nothing to do with us, and so I think -- and those things are going to exist. How quickly we can add some capabilities and make some changes, that's going to be hard for us to forecast. They're directionally correct and we'll make those investments and progress. Frederick A. Wise - Leerink Swann LLC, Research Division: Okay. Two other quick ones. You highlighted the transfer of the da Vinci S license from J&J to you. Is there any economic impact that we should think about or ability to sell or freedom of action that, that helps with that we should understand? Gary S. Guthart: There is nothing material in terms of a commercial aspect of revenue or cost. What it does allow us to do is move on our timelines and a little more quickly with regard to approvals of future products and the ability to be more responsive in the marketplace. And so that's really the excitement of it for us. Frederick A. Wise - Leerink Swann LLC, Research Division: Yes. And a last quick one. You mentioned no stock buybacks in either the fourth quarter or the first quarter. I don't know how to ask it other than rudely: Why not? What are you -- what are the factors that would -- might drive that process? Gary S. Guthart: I -- Warren Buffet wrote in his shareholder letter something on this point that I thought was great, and I'll just quote it for you. He says he looks for 2 conditions to be satisfied for buy back stock, and I'll quote him: "first, the company has ample funds to take care of the operational and liquidity needs of its business; second, its stock is selling at a material discount, so the company's intrinsic business value, conservatively calculated." I think he said it right. I think we're happy to emulate his behavior there. And that's how we think about it.

And our last and final question comes from the line of Michael Matson with Mizuho Securities. Michael Matson - Mizuho Securities USA Inc., Research Division: Yes, so I guess just taking sort of a -- standing back, taking a bigger picture view of things, I guess. First of all, you've got -- hysterectomy is obviously doing extremely well in the U.S. By my math, I think you are kind of getting up to -- upwards of -- in the 50% range now in terms of penetration, and I guess, in another year or 2, that's going to start to peak, I guess. And so where -- what do you really see sort of beyond that to pick up the slack if that really started to slow down, as what we've seen with prostatectomy? Do you think it's really going to be Single-Site? Do you think it's just a combination of a multitude of these other smaller procedures? Do you think it's general surgery? I'd just be interested in getting your thoughts there.

Yes, so it -- think about it this way, Michael: You've got -- if we went back in time in 2005 or so where that question was asked as to, "What are you going to do when U.S. prostatectomy reaches its height?", we weren't talking about hysterectomy. We weren't talking about U.S. hysterectomy, let alone international hysterectomy. We weren't talking about lobectomy. We weren't talking about any of these procedures. Now we're Single-Site and general surgery, in general. So what I -- sort of fast-forward the tape to where we are today. so recognize that dVP U.S. has been flat for some time, let's call it a year, and yet we're growing at a pretty significant rate. Why? Because there are other ways to sort of slice it and look at it internationally. dVP internationally is growing at a very quick rate and it is a larger market than the U.S. dVP market, potentially. Now when you look at dVH, you are talking about the U.S. dVH market which we segmented down to a certain number but it doesn't include non-U.S. geographies. We are continuing to add procedures. And when you add general surgery, whether it be through single-incision or other multiple-incision procedures, and you continue to add thoracic, et cetera, there is plenty for us to do. We don't feel as if we're running out of steam or running out of procedures, but by all means, we feel completely the opposite. So at this stage, it is -- there is plenty on our plate and we think that, over time, we will be adding more things to our plate. Michael Matson - Mizuho Securities USA Inc., Research Division: Okay. And just as sort of a follow-on to that, just wondering what your thoughts are in terms of hysterectomy in Europe and outside the U.S. I mean, you kind of commented on it a little bit earlier in the Q&A, but is there any reason to believe that it might not sort of follow what's happened in the U.S.? I mean, I realize that these procedures probably aren't as common, at least, on a per-capita basis outside the U.S., but is there any reason to believe that, at least for the portion that are done, that we wouldn't see some more adoption curves with time?

Yes, if you look at it from a couple perspectives: One is that dVH is done for a multitude of reasons. It could be endometrial or cervical cancer, ovarian cancer. You move into the benign side and you've got fibroids, multiple fibroids, large fibroids, endometriosis, combination of all the above and normal uterine bleeding, et cetera. So when you try to draw a connection between the way women's health care is performed in the United States or delivered in the United States, it -- and try to compare it to other markets, it's a little bit different, whereas prostatectomy is done for the same reason. They're all done for cancer. Cancer tends to have consistency in a lot of countries: U.S. and OUS. So what our thoughts are at this stage is that, not unlike the United States, we would expect the dVH for malignant conditions to probably be the beachhead, if you will, into most of these countries. And what happens after that, we will have to wait and see. But thus far, the strength that we've seen is consistent with that explanation. So overall, I think you can just take away that women's health care in general, especially for benign conditions, is different in a lot of countries than it is in the United States. Gary S. Guthart: Thank you. That was the last question. As we've said previously, while we focus on financial metrics such as revenues, profits and cash flows 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 from Kimberly in Florida gives you some sense of what this means in the lives of our patients. "I was diagnosed with vaginal prolapse in November of 2011. I had a hysterectomy 2 years prior, in November of 2009. This is an unfortunate condition caused by several factors such as heredity; number of children, I have 4; and a previous hysterectomy. My gynecologist referred me to Dr. Coyle for the da Vinci procedure due to its minimally invasive nature and, most of all, its high success rate. I researched the procedure, met with Dr. Coyle, discussed it with my family, prayed and decided to schedule the surgery. After years of back pain and discomfort, I was looking forward to some relief. Never did I expect to feel as good as I do today, just 4 weeks post surgery. The first couple of days after the surgery were the hardest, and that was it. After the most -- after that, the most difficult thing was adhering to the post-surgery instructions of what I couldn't do because I felt so good. I never realized how much the nagging pain I'd lived with prior to the procedure was affecting my life. Now I feel so renewed, refreshed and, easily, 10 years younger. I would like to say thank you to Dr. Coyle and his team for their continued pursuit of technological advances in the medical field, their commitment to medical excellence and true compassion for their patient's well-being. I would also like to thank those who created the da Vinci robot for their commitment to these types of advancements in medical technology that make such a positive difference in people's lives. If you're considering this procedure, do yourself a favor and say yes. The outcome is truly worth passing on to others." Patients like Kimberly are the strongest advocates for da Vinci surgery and form the very foundation of our operating performance. We have built our company to take surgery beyond the limits of the human hand, and I assure you that we remain committed to driving the vital few things that truly make a difference. This concludes today's call. We thank you for your participation and support on this extraordinary journey to improve surgery. And we look forward to talking with you again in 3 months.

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