Keynote with Gary S. Guthart, PhD, CEO and Member of the Board of Directors at Intuitive | LSI USA '25

Gary S. Guthart  0:05  
I delighted to join you today. There's more wisdom in the audience than there is on the stage. So I I don't think I'm qualified to tell you where the future of med tech is, because you all are doing it, what I can do is share our perspective on it. The way this this morning is set up is maybe 20 minutes of a little background on intuitive where we're at and how we think. And then Scott will come join me, and we will have a conversation, which I hope is interactive. And for me, the exciting part is actually the conversation, not the slide. So the slides are just a little bit of grounding, just taking it through it. I How do we think about things? You know, it's easy, particularly in a setting like this, to talk about market size or to talk about tamsam or talk about penetration rates. These are the easy things come right off your tongue. But it's actually not why we get up in the morning, certainly not why I get up in the morning. So I like to start with, what are the problems that all of us are here to solve? And these get me up. Actually, they they generally speaking, get my blood boiling. I think they're shocking. So just give you three examples of there are 100 that you could view this way. One of them is lung cancers. How many folks in here working on lung cancer one way or another? Some of us so simple. Stat, it turns out, from the time you could detect a lung cancer, so second biggest cancer diagnosis in the United States, number one killer, still not great, five year survival from the time you could detect it to the time you do detect it is, on average, a year. So it's been in your body for many years before it was detectable by current means, but people are walking around for a year before, on average, they find it. I think that's outrageous. It makes me angry. It upsets me. That's just one example. I mean living in the world, we're living that second thing, just endometriosis. On average, an American woman will go five years experiencing pain and symptoms of endometriosis before she's definitively diagnosed, and even longer before it's treated. That's today. I think that's nuts. Make any sense to me? In the cardiac space, Structural Heart mitral valve repair or replacement somebody who needs mitral valve surgery of some sort. The the mortality rate one year after surgery in the United States runs about 7% after that intervention. Any, any folks structural heart? Yeah, so this is nuts. I just I'm sickened by it. The fact that we're not sickened by it is because we know it so much that we stop looking anyway. So I think that's what drives us. And you know, case statistics, that's easy, but let me tell you an anecdote I know something about. So talking about lung cancer. This is 10 years ago. A patient comes in ground glass lesion periphery of the lung. 78 year old prior smoker is a woman school teacher, and she they look at it. It turns out, most of these suspicious lesions in the lung that could be cancer or in the periphery, they're not near the main bronchial stem, and as a result, it's hard to get to and so what the standard of care is, come back every every three to five months, get a CT scan, see if it progresses. In the case of this woman, three months later, it comes back. Still not clear. Three months later, comes back. So through this cycle, goes through the three month cycle five times. Finally they go, You know what it looks like? It's, it's advanced, and we're going to go do a manual bronchoscopy, try to get it. But the manual bronchoscopy, because it's in the distal part of the lung, fails. So they try it, it's an interventional procedure, and they get nothing, no definitive result. Couldn't get tissue sample. So you could, you could alternatively do a T, T N, A you can, you can do a transfer acid Neal aspiration, try it from the outside, but then you risk puncturing along and having a pneumothorax. So they don't want to do that. So they do a diagnostic vats procedure, turns out they take out the sample immediately, determine its cancer, do a full lobectomy. Patient is in the ICU for six days in the ICU, patient in the ICU after a lung surgery has the devil's choice for the surgeon. How many folks are surgeons in the room? The Devil's choice? What's going on the you have the pain of the incision, so if you don't put enough narcotics into the patient, then they won't breathe deeply because the incision hurts and they get pneumonia. But if you give them enough narcotics to avoid the pain, they don't breathe deeply because of the narcotics, and they get pneumonia. So what is the what is the physician doing? They're sitting there with the dime like this, and this is why this patient's in the ICU for six days. Two, two follow on procedure. To clear the lungs because of fluid accumulation. Seven, eight year old. Finally, she she was able to get up, walk around. As soon as she can start walking, she can clear the fluids, the lungs clear. She can go home, and she recovers. If you talk to an oncologist, pardon me, any oncologist in the room. Talk to an oncologist, they go great results you lived, that's true, but it was a tough run, and it cost a lot of money. Wasn't trivial, okay? So several years later, we have the the intuitive product is a flexible robotic system. It's about a meter long, fully sensed along its length, and it can navigate with with high precision and confidence to the deep regions of the lung. And it can sample tissue so it's high diagnostic yield in tough to reach spots. So a 78 year old woman, school teacher, prior smoker, Match Case matched. She comes in, she gets a CT scan suspicious lesion. In three weeks, she gets an ion bronchoscopy, definitive result, turns out it is cancer, not good. It she was a surgical candidate. Is referred to a minimally invasive robotic surgery. She is treated the same day and the same event, positive, negative margins. She goes home in 48 hours after that procedure and this issue is resolved. The difference in time is is a factor of 10. Through those two experiences, it's rare to make that sort of a change in medicine. It's hard and it's these are anecdotes, but is absolutely true that these kind of technologies are pulling forward the definitive diagnosis of disease in ways that are substantially safer than they used to be. This is what we're trying to do. This is what we're at. Why do I tell you this anecdote? How do I know this? Well, patient, patient. One is my mother, so we experienced that firsthand, and for those we're all patients in our in our own lives, and we're all caring for people. Going through these things on the sterile side of the drape is a totally different experience than going through them on the spreadsheet side of the drape. And that's what I think fires us up. That's what drives our mission and vision. I won't read them to you, but you know, we think that key technologies, we think advanced technologies delivered really well, can absolutely change the course of care. We think that it can, can absolutely revel revolutionize how people do their work. The I started with. Here are some things. I could give you 30 examples, I'll give you three, but here are some things in healthcare that are just crazy. We could talk about breast oncology, which I think is crazy. I we could talk about colorectal cancer and talk about its treatment paradigms and what it looks like, and I think it's very tough. So what's our what's our vision is we should identify things quickly. Why are we waiting 18 months to find definitive diagnosis. Why are women waiting five years to get a definitive diagnosis of endometriosis? Why don't we work on that and then if you're going to go do it, if you're going to go solve it, then get people back to to their full lives quickly, full health. Return people to full health quickly. That that's what we're about. You know us as a robotics company. That is not how we think of ourselves. So robots are tools. I don't think anybody should care at all about a robot. And I'm a technologist. I've been a technologist my whole career. They're dead things. Robots are dead things. You know, the the durable need is to help our customers, who are hospitals and professional physicians, deliver things that matter in the in the hands of their institutions. So we view ourselves as designers. We are designers of technology enabled ecosystems that deliver programs that deliver serious results. We don't measure ourselves by how many robots we install. Of course, that matters. Of course, you're going to have to count those things. But, but delivering one is not the same as somebody using it to great effect. Just some stats on where we are. The company was founded in December of 1995 so this is our 30th year. There are now over 17 million procedures that have been performed by customers using our platforms. There are about 2.7 million procedures in the trailing 12 months. There are over 10,000 of these platforms out in the world, there are about 4000 peer reviewed clinical publications per year. On clinical publication base of over 43,000 we are amongst the most studied medical devices out there. I think this is exciting and important, and we'll talk a little bit about clinical data and study. I am a applied mathematician by training. I became CEO. I joined the company as the 11th employee in April of 1996

I became the CEO in 2010 and one of the things so measures and metrics are important to me, but I wanted us to be measure. Measuring not our internal processes, which, of course, we do. I wanted to measure ourselves in the eyes of the customer, in the language they use. And to do that, we instituted at the time the Quadruple Aim is a set of measures that we would be serious about gathering. AMA has has subsequently increased this to the quintuple lane. So what is that better patient outcomes? Well, let's measure it and prove it. Let's make sure it's peer reviewed so it can be challenged. We want to look at Better Care Team experiences. It's hard to be a physician, so this is all about workflow and human factors in ergonomics. We wanted to have better patient experiences so that when they interact with us in any way that they are treated with respect and dignity given the position that they're in. We want to be lower total cost to treat per patient episode. We'll talk a lot about economics. I can tell you absolutely, with very high confidence. Well, run robotics programs are the most profitable thing our hospitals do. Not the least. This is a man bikes dog thing. People think, Oh, my God, it's an expensive robot. It can't possibly be profitable, but it's total cost to treat per patient episode, total cost of ownership. That's the measure. Many, many people stop at the instinct and don't look at the data, but go look at the data. And finally, better access to care. And if you ask yourself, do Americans have equal access to good surgery? What do you think the answer is? Anybody raise your hand if you think it's pretty close to equal access. Do you think it varies by state? Do you think it varies by city? It varies by zip code? So we went through and did the analysis. The data is all in front of you, and what it turns out is that four miles makes a difference. If you're four miles apart, somebody will walk in and be offered a surgery that is that was state of the art 30 years ago, and four miles down the road, they'll be offered something that's state of the art today. And if they don't know to ask, they will get what they get. It is absolutely true. It is absolutely verifiable, and it's kind of shocking. And again, this is another man bites dog story, robotics, levels you go. How could that be? This is expensive piece of capital equipment. It level, but it absolutely levels. We can prove that too. We have a series of publications that have been peer reviewed, that are coming out now. These are powerful things. I think that that our credibility as an organization is based on strong peer reviewed data across the quintuple lane. How do we succeed? In the face of strong skepticism and worries about spending how do we possibly succeed? It's to go through this set of data with both peer review and publication, but also looking at real world evidence in the hands of our customers, and sitting alongside them, same side of the table, shoulder to shoulder and going through that data. So I think it's powerful. Let me keep moving. Why am I here? Why? LSI, how do we engage with the ecosystem of innovators out there further? This is how intuitive thinks about opportunity. This is not a judgment. Other organizations think about it differently, and that's fair. If you're a organization that's spectacular at logistics, at very low cost and high, very high reliability, you will not view the world this way, but we view it this way. So what do we care about? First, we go for things that are aligned to our mission. I described it a minute ago. We want a substantial difference in the quintuple lane. We're trying to get not 2% differences. We're trying to get havings or doublings. We're trying to do something that's that's a big difference. We're structured for that. We will do things that we think are clearly better together, that are clearly better integrated. We do not see ourselves as a merchandiser. Is not an insult, but it's not. We don't want something to have in the bag just to be in the back. Either it's better because it's together, or we're not interested. Somebody else does it well. And then finally, part is, you know, total economics for everybody, have to work a path to healthy economics for us, for the customer, for our suppliers. If that doesn't work, it doesn't go anywhere. We have focused in the last few years. We are a focused organization. We don't look and act like a conglomerate. So we've been driving hard in general surgery, and we've had some success. We've been pushing into lung cancer diagnosis today, ion is used in a substantial double digit percentage of all lung cancer diagnoses in the United States, where we're well above 25% over a quarter are being done, and this is in four or five years across the country. We are expanding internationally. We're selling and supporting in over 70 countries outside the United States. Is outgrowing the United States by a real clip. We have a soft tissue robot that is not in the multi port space, called single port narrow access or single incision. It is the most utilized soft tissue robot that is not one of our multi ports. So actually, relative to all the other players in the market, SP is the single port is the is the biggest soft tissue robot that that isn't named da Vinci. It. Growing at very nice rates. We have been optimizing our global supply chain. It's gotten a little exciting with all the changes in government. We'll continue to do that, and we've been incubating machine learning, data analytics and AI for the last several years. We started internet of things for our systems. 15 years ago, we have been building our analytics capability sequentially over that period of time. So I'm sure we'll talk about it just two seconds on how we think, for those of you are interested in chatting with us, our teams are here. We are serious developers. Our our R and D spend is as a percentage of revenue is amongst the highest in our peer group. We think that innovation really matters. This is a two axis chart that says, what do we work on in terms of clinical application and What technologies do we try to master? Those are the two axes in the center. We have business units, and we work hard against those. Our business development teams are active. They are here. I'm going to ask Alex to raise his hand if you want to talk to our business development arm, raise it higher. They're all looking at you find Alex. He's the right person. And in bit Dev, what we're looking for is, you know, who's going to work with us, who can be better together. We can co market, we can do joint ventures, we can do development agreements. We can acquire that's in that space that drives the edges for us, but we wanted to do more with that too. I'm a huge believer that vibrant organizations are not fortresses. They're porous and and they allow ideas to come in and out of their walls. And ideas are, of course, carried by people. So we also have intuitive ventures. We have several of our ventures team here. We're not typically going to ventures because we think that's a quick acquisition. That's not our objective. Our objective is to seed in the world people who will drive interesting things that expand the field of play, that will bring the kinds of ideas and technologies to our customers that expand their horizons, and we want to be a good financial return. So I'll describe our team in a minute. So those two separate things, they're here too. So I'm going to ask you to reach out. Some folks may think intuitive is insular. I do not. We are acquirers. These are all companies that we have acquired over the years on my tenure, and we're highly appreciative. We use the algorithm that I just described better together that are going to speed us up and give and bring things to our customers that really matter. And just to give you a sense of what that looks like. 97% of the staff and acquired companies stay with us over the over the subsequent 18 months. We're really proud of that. When we acquire, we acquire because we are dead serious about it. We we're not hedging. We don't go out and fire something as a hedge. We go we care. We're good at Deep diligence. Our BD teams and our venture teams are very strong here. And when we commit, we commit, we're in it together. Why do people stay anywhere? They stay because you believe it, you're going to follow through. So that's what we believe. The strategic folk of our focus, of our ventures team in the first couple of funds were two funds in we get a new fund vintage about every four years. First has been integration and access, and our portfolio companies are here. We're very proud of them, and close with them. We have been interested in precision diagnostics and other interventions. Those are our portfolio companies. And we're interested in data, and I'm sure we'll talk about it with Scott here in a minute, data AI and machine learning opportunities. We also are proud to work alongside other great investors. And here are the groups here, so it's a collaboration or coalition, and we're proud to be a part of it. This is our ventures team, and for the team that are in the room, if you're interested in talking to our ventures group. We have Muriel and Terri and Vijay, so please come to seek them. Anybody else from the ventures team here? That's it. Okay, so we're delighted to have them. We're believers in a balance between organic and inorganic. We are deeply committed to product development. I'm a huge believer that it starts with great product. What's the rain in the hills that becomes a mighty river? The rain in the hills on top are great product ideas. They allow you to go to market with great commercial ideas, but failed product, you know, the greatest commercial team in the world. And a hard product is a hard thing. So we're believers in that, and if, if we can find joint things to work on together, then we're delighted to work with you. With that. It's my pleasure to introduce Scott Pantel, our host, Scott.

Scott Pantel  19:57  
Thank you, Gary. He just answered all my questions. I don't know where to start now. Great to have you here. Thank you for that. We're gonna take some Q and A from the audience. So if you have some questions, get ready for those. Catherine Moore was here last year, almost to the day, and at the time, she was talking about the 29 year overnight success. So I guess now it's a 30 year overnight success. I want to know about your journey. You mentioned 11th employee. Tell us how you got in, how your journey's been, and then we'll talk a little about people later. Yeah, I

Gary S. Guthart  20:29  
started in the sciences. I thought I'd be a professor of mathematics. I went to, I was here in Southern California, went to Cal Tech, and got a degree in nonlinear wave mechanics, which I haven't used since. But, but it turns out I was good in the lab, and I was good collaborating with people, and having a math being a math professor was a solitary career, and I got some advice that said you ought to look elsewhere, which made me mad at the time, because I'd invest a lot of time to get there. But they were right, and I wound up at Stanford Research Institute, and we have some colleagues from Sri in the audience too. And that's a place with it's kind of a storied Silicon Valley institution, and it's got a lot of smart people there. And I ran into people working on surgical robots. And that was 1993 I had that collision with that group. I got excited by it. I joined it as a mathematician, kind of an algorithms person at the time, and that technology got licensed out to a venture team with some strong entrepreneurs, Fred Maul, who, you know, Rob Young, who, whose name you know, John Freund, were the were the founding group. They invited me to join. I said, No, I just gotten a promotion, and I was enjoying my life. And thankfully, they called me back 30 days later and they said, Why don't you try? And the compelling argument was from John freundi, bought me a coffee, and he said, Hey, Sri, will be here for you. And by the way, you'll better be a better applied researcher if you see what it's really like to be in a company and what it really takes. And that was compelling to me. So I said, Okay. I said, Yes, I went. I had a one year old daughter who is now 30, and I turned to my wife and said, What do you think? And she said, Do it now's the time to take risk. Let's take a risk. And so I said, Yes, and thank thank goodness I did. That's good.

Scott Pantel  22:21  
So we'll come back to people in a minute and talking about, we've talked a lot about teams and leadership, and you just put an amazing stat up there with your 97% retention rate. But we spent some time in our prep talking about this idea that, and we have this room full of builders and innovators and investors here, and it's not an easy journey. And you shared this idea that the the vision is the easy part. It's the path that's hard. So tell share with us what what you mean by that.

Gary S. Guthart  22:53  
Sure you know, I was joined when I'm 20 or 29 years old, when I was joining intuitive and I didn't really know how to think about a startup. We were in Silicon Valley, which was lucky, but I lucky, but I had no exposure to that. I'd been a kind of quasi academic. And so I phoned a friend, which is something I often do, and he was a M and A attorney and and I said, How should I think about is he said, the stats at the time, this is back right@the.com boom. He said, The stats are that one five of these little companies you're going to talk to will make it to exit event, an IPO. Four out of five will die before they get to an exit. And nine out of 10 will never be profitable. Nine out of 10 will will get exhausted before you do it. And so he, he said, you know, choose wisely. And that was his early thing. And then what I've learned over the years in our own organization and working with others is the vision is the easy part. Here's where we want to go and think about AI as a hot topic. Now let's talk about AI and health care automation or robotics, whatever, and any of us can make the elevator elevator pitch on vision. That's the easy part. So I can get to describe, hey, let's cross the river. And you wouldn't be in this room if you couldn't describe the river you wanted to cross. But if you believe those statistics, I don't know if they're current, Scott, you would know better than me, like in this moment, are those statistics still roughly right now? True? That's daunting, that's that's hard, that's depressing. Okay, so the river is easy, but you need to create these way points across the river that are profitable steps. So you've got to decide, as your leader, you're going to put down this marker, you're going to jump onto that stone. If it isn't profitable, you got to beg for money, and you get washed away. And then you got to throw the next stone, and you got to jump to it. It's the stone throwing that's the hard part, not the vision. So that was my point, and what distinguishes the organizations that make it across has been the grittiness of understanding those are the right stones to jump on, and the determination to get there, and the real depth about finance and economics they really understand spend and. So, right stone, right team, right spent, yeah, and I'm, I'm

Scott Pantel  25:04  
assuming in your 30 year journey, on your path, on those steps, you had some, some dark moments, some near death experiences, maybe share, share one or two that were that this room might not know about.

Gary S. Guthart  25:17  
Yeah, there always are. You know, I think for us, there were a few the very first moments in the early days, the hard parts were, is the product, right? Is this going to work? Can we get it stable, surgical, robotic system of the type we make, has, give or take, 10,000 components in it. So if you just disassembled everything and put it on the stage, picture, 10,000 things, and you got to put all that stuff together, and it's got to work, and it's got to work, and it's got to work repeatedly and all the time. And so the early ones are, how do you get to a high level of performance? Then we got some adoption. I like Jeff Morris Crossing the Chasm. That book applies very well. And you say, Okay, we have some early interest from our key opinion leaders. But is it generalizable? Can we keep doing this and you get some success, and then you can hit air pockets. You can hit times where you're not sure where to go next, and those air pockets can be really stressful, and if you need additional funding, and the windows closed, we've had those moments so we thought we had something. The window closes you you have to shrink the size of your team. You have to really, really focus on the thing. So we've had those near death moments, and then you get a little bit bigger and and some of the bigger players in the space decide that you're not going to die of your own ugliness, and they start throwing serious competitive challenges at you. And that's the second thing is, okay, now you're now you're invited to the adults table at Thanksgiving, not the kids table. And when you're at the adults table, the the elbows that are thrown a little harder, and that can be destabilizing for you, too. So we've had our path through that you've had your path. Yeah, we'll come back to the numbers in a minute, but we we've also spent in our discussions a lot of time talking about people and teams and leadership. And aside from the the the success you've had with the numbers, are there any any things that you're especially proud about the culture? Anything about intuitive that, again, this room may not know. Let's talk. Talk about people in leadership. I think culture super simple is, yeah, we were talking today. You can sit in anybody in a room who's a leader. You can sit down in any institution in 15 minutes know whether the people working at that institution care. It is not complicated. You can go to a restaurant and find out whether the people at that restaurant are bought into the performance or a gym or anything. So the very first thing that that you look for is, do people care? And I actually think it's hard to make people care, and it is easy to break the bond with between the company and their caring. So you can, you want to hire people who care, and you can do that, and then the trick is not to break the bond. And so what does that look like? So I think at intuitive people really care. I think the leaders care. If leaders don't, the people won't. So I think leaders, if they don't care about the mission, are willing to sacrifice for the mission, then the team will not. And I think human beings are incredibly sensitive at deciding whether that leader is in it for themselves, they will pick that up. Okay, I get it. It's about you. Or are they in it for the customer and the mission? So I think that's one, yeah, for leadership really quick. I think the simplest working definition of leadership, to me is somebody who can see the problem as it is, understands current state in a real way, and can help the team envision a future that's better and then build an organization that can execute in a sustainable way, in a healthy culture to achieve that vision. I think that is the working definition of leadership. And if you just look around and you see somebody who doesn't understand current state, you got a problem. If you got somebody who doesn't understand a vision for the future, you got a problem. And if they can't build a sustainable team that will do it every time you got a problem. So that's what you look for.

Scott Pantel  29:04  
And we, you know, we I look around this room and the different events that I participated in, there's a lot of mentorship that is going on in this ecosystem. I think it's really important any mentors of yours, or people that have had a big impact for you personally along the way?

Gary S. Guthart  29:21  
Yeah, I love that question. There's so many. It's hard to list. How many of you are asked to be a mentor by others, and how many of you get asked sufficiently that you have to say no to some? That happens enough. How do you choose who to mentor? So we'll come back to that. But I think it's really interesting. Question is, it turns out there are attributes of people who will attract mentors, and there are attributes of people who don't attract mentors. I think it's interesting invert the problems God and so I think that people want to mentor people who are ambitious for excellence, but whose personal ambition hasn't clouded their. Uh, ambition for excellence. So what I'm looking for when I'm trying to mentor somebody is somebody who comes to me and says, I'm struggling with this problem. I really want to be great. I don't care what you call me. I just, let's just do it right. I love that person, and I have tried to be that. I I think I came out, I didn't expect to be a CEO. Was never a life goal. It was actually tapped by a prior mentor, Lonnie Smith, who was the the CEO that came after Fred, and was CEO of the company for 15 years, and was a spectacular leader, but he had tapped me on the shoulder and said, Hey, I think you're capable of doing more than you're doing right now. Let's talk about it. He he kind of drew me out. I had a high school quiet Math Science Kid with the great luck to be born in in Sunnyvale, California, is the heart of the Silicon Valley in the 60s. Like How lucky is that I had a calculus teacher who who said, you know, you have a talent for this. Let's let's help you. But I have never sought a title, and I've really never sought to be compensated like a king. I've always gone through and said, What are we trying to do, and all that kind of stuff. And I think that has drawn mentors. I had a great mentor at SRI International, a guy named Raul Martinez, who taught me discipline and how to work. And constantly you'll ask me questions. What did you do in this hard time? And my first thing is, almost always, phone a friend. Yeah, constantly, phone a friend and just talk it through. Yeah,

Scott Pantel  31:29  
that's great. So let's come back to the numbers and we had a conversation about this and maybe share with us the how how intuitive has balanced, you know, value to customers, profit to investors, while maintaining the phenomenal growth. How, what's the what's the magic? Yeah,

Gary S. Guthart  31:51  
I don't think it's magic. Just work priority list. Lonnie Smith wrote this, and he joined in 1997 and he wrote this within the first three or four months of being at the company, he said, here's our priority stack, and priority one is patient value, and we're going to make sure we work on on behalf of patients. And what's patient value in our space? It's the efficacy of the procedure divided by how invasive it is. He actually got that from a cardiac surgeon named Doug Murphy, and he said, that's number one. It's got to be better for patients. But we're not a healthcare company. We're a med tech company, so we don't touch the patient. So priority two is, is physicians and what do physicians want? They want a technology system that is dependable, reliable, easy to use, that can deliver great outcomes for patients. So we've got to make sure that that physicians are cared for because they're the ones who actually influence the patient and make the outcome. But actually, patients don't buy from us, and physicians don't buy from us. Hospitals do so. Number three on the list are hospitals. What are hospitals warrant? They want to treat their patient demographic. That's their mission. They need to recruit, retain and develop the best clinical teams who are like, professional athletes, and they need an ROI. They got to get return on that investment, otherwise they can't continue to invest. So we got to take care of them. And then he's like, none of this happens unless you have great employees. And what do employees want? Well, the best employees want to attach to a mission that really matters, and they want to be recognized for their contributions, which is additional responsibility and additional compensation as they get better. And then finally, shareholders. And what do shareholders want? They want a fantastic risk adjusted return on their investment. So everybody's on the list, but it's a prioritized list, and his point is, if you do something that's wrong for patients, you will destroy the stack. If you do something that's wrong for physicians, they will abandon you. If you do something that's wrong for hospitals, they will buy from others. If you treat your employees badly, they will go to another company. And so the shareholders are there, but they're last, so he hasn't forgotten them. But build the stack. And then the final point is, and I think this is really tricky in this audience, is we have had a messaging paradigm at intuitive with our shareholder base, which is an unwavering belief in the mid and long term capability of our company, in an extremely clear discussion of the challenges we face in the near term, we never whitewash the challenges in front of us. And so what we want from our investors is a belief in the long term and patience in the near term. And we are almost always the first to be out signaling to anybody struggles or structural changes or challenges, and we'll get punished for that. But in the long run, we've built an earned reputation of being extremely clear with our shareholder base, and that was from the earliest days. And what does that encourage? It encourages shareholders are aligned with the long term vision, and who can take bad news? That was something Ana had built that has allowed us to balance value across that still

Scott Pantel  34:58  
let's we're going. Have a few minutes for open Q and A but I think if we don't talk about AI, will probably not make it off the stage. So your your view, how does AI fit into intuitive plans, your thoughts on AI in general? Is anybody going to make money? What's, what's your view? Your view on this? Yeah, it's,

Gary S. Guthart  35:18  
it's discussed on every stage. How many of you are, are incorporating AI into your company. How about into your pitch, you know? So I, I came out at Silicon Valley. I came out right into the very late stages of the.com era, right as it was frothy. And then when two years it busted, and the first building we bought as our our headquarters was an online golf company, and it was gone. It was empty. We went into that building, and it was painted in in bright colors, and it was, it was like the show Silicon Valley, and the CEOs office had a little putting green in his office. And it was such an incredibly sad place because they had left as if it was a neutron bomb. There's garbage in the corners. The cups are still sitting on the tables. It was wiped out in minutes. There's a little bit of frothiness in the moment. So let's, let's talk about AI, you know, what? What is it? I like to sort of break things down to, what are we really talking about? You know, what's a what's a coach handbag, right? It's a leather bag with a wonderful brand on it that sells at this model. Let's talk about what it is. So what is AI? I think the first thing here is that the foundational element of AI is high quality data that is meaningful, that is foundational. The next layer is there's a new set of regulations that are dead serious and really interesting, which is, if you're gonna do anything in AI that matters, you have to understand the pipes. And the pipes are wildly harder than most people think. How many of you are working on AI pipes that the data input, output, cybersecurity, privacy, compliance, the pipes are trickier than you think, and you have to do them really well. Then on top of that, you get to you get to do the math. That invites you to do the math. The math is basically commoditized. I am a math major. I have been working on this stuff forever. We can all hire the same great staff out of universities, and they can do the math. The math is largely a commodity. We can all buy the chips from our partners, Nvidia. That is so it is, what is? Then what differentiates anything? What differentiates all these possibilities are two things. One is, do you have differentiated data that is high quality? And then the second thing is, have you decided to deliver it in a way that the customer is going to value? So do I? Does this make sense to everybody? Is this totally obvious? Okay, so when I get into this, we get pitched all the time. Internet of Things for 15 years, our digital investments are have been doubling the last several years. So we're believers. I think just depending AI to your pitch is not as powerful as it should be. A lot of features out there are easy to make in demo and hard to create value. I think there are some really valuable things that are coming. I think there's a lot of excitement around things like automation. I think we can say we know the pathway to automation quite well, the speed with which you do it in a highly validated way is, and there's all kinds of different automation. There's Data Automation, which is one thing, but there's interventional automation that that'll take some time and and it's because the validation is the demos are crazy easy, and that validation is crazy hard. So I think the winners are going to be the ones who seriously understand the validation. There's a perception out there that I think is wrong, which is, take all the data in the servers, see how many servers you have, put all those servers on a scale and weigh them. That's the winner. The one who has the most server weight of data wins. I think that is false. I think it is differentiated high quality data. That is the competitive differentiator. And then I think after that, it's the people who truly understand how to validate I think there's a whole bunch of people who are going to struggle to get a lot of revenue out of AI in the beginning. And I think there are a few who are going to create data enabled products that make a huge difference for customers in the end.

Scott Pantel  39:14  
Okay, we're gonna, we're gonna go to a rapid fire Q and A. This is the first time we've had a CEO of a publicly traded company that said, Yeah, bring it on. Let's do Q and A. From the audio, on. Let's do Q and A from the audience. So thank you for for being the brave CEO. 

Gary S. Guthart  39:28  
Yeah, ask the hard ones. Let's do it.

Scott Pantel  39:29  
It's true. And so thank you for that. We have a mic somewhere, and let's try to go pretty, pretty concise with some questions. We have one right here. Yep, Hi,

Audience Question  39:41  
Gary. Thank you for being for being here. Omar Khatib from the state of Medtech, so I have the pleasure of having a lot of former intuitive people on my show. Friends with them. It's a fascination to my audience. So one of the core philosophies intuitive has had for the last 30 years is very much aligned with what Andy Grove wrote about in his book. Only the Paranoid Survive, which is having healthy paranoia and always disrupting yourself. So every decade, you guys have done that. Fast forward to today, 170 $3 billion market cap. You're the darling of Wall Street, one of the greatest success stories in the industry. But what comes along with that is today you have hundreds of robotic companies constantly attacking your marketing. So knowing that your market is under attack, how do you sustain that culture of constantly disrupting

Gary S. Guthart  40:30  
yourself? You know, we start talk about what I love, that question at the very top, what's core economic competition in our space. What's the core? And you actually know the answer this. It isn't robots. The core competition is a patient seeking treatment. And we all are patients. So you go through and you say, Hey, I have been diagnosed with the disease, or I need I'm not feeling well, I have to be diagnosed and and what are the what are the key levers? And you're all doing them. But you can go lifestyle intervention. You can go pharmacology. You can go radiation oncology. By the way, the radiation oncology folks are way ahead of all of us in automation. They've been doing it for years. You can do surgery. You can do advanced interventions that are non surgical. Those are your choices. So what keeps us motivated is we do look around at people who are making robots, but we don't panic about that. You can't drive the car looking right and left. Should be aware of who's around you, but what's in front of you. JLP, once came out two years ago, and it changed surgery like that. It's a pill where it's a shot, I'm sorry, but so that's the real thing. And so what do we do? We go through and say, how do we make sure that the outcomes that are being generated through our systems are competitive with drugs, are competitive with radiation oncology, are competitive with non interventional techniques, and then we look out at other people are doing cool, Computer Aided things, and go, three quarters of them are allies. A few of them are going to be head to head competitive. But don't panic. So that's how we think.

Audience Question 2  42:02  
Yep, hey, hi, hello. Yossi from LEM Surgical. What's your opinion about the hard tissue? Robotics, spine, orthopedics, heart tissue?

Gary S. Guthart  42:13  
Yeah, so you're on the orthopedic side. And there's a lot of interesting companies out there doing a lot of interesting things. I think I really am a believer, if you start where I started in this talk, look from the bottom of your feet to the top of your head and just go looking for bad outcomes. That's just, that's where real estate, and we have small teams who do that. We that call that effort inside our company growth platforms, and we run that every few years, kind of a serious thing. Look bottom to top. Is there an opportunity for better and and I think there, there clearly are, and it could be better outcomes. It could be better functional outcome. It can be easier workflow, it can be lower total cost to treat. And it's an exciting space, and there are smart people in that space. So are they done? No, I think they're just beginning, but they're doing some really, really cool things. And I think, pick any place in the body and say, can a computer aided ecosystem help that? It's really hard to argue. No, it's pretty hard to argue, No, there's nothing to be done here. So

Audience Question 3  43:15  
hey, hi, Gary, you know at LSI, Portugal, another overnight success. Founder Todd Britton of Shockwave spoke about the early days and and he spoke about that early the early days startup journey, and the importance of being able to pivot, to be to stay on that journey to success. There's a lot of early stage startup founders here in the audience, and I'm wondering if you could share a little bit about an important pivot point in the early days of intuitive.

Gary S. Guthart  43:50  
Sure, absolutely true. You know, we we benefited early on the founding group, and intuitive was spectacular in terms of the founders themselves, but but also the first 50 people in the company were, we were really blessed by a really neat team, and so we started off in the thought was in minimally invasive cardiac surgery, and that's become that's also a 30 year overnight success. But at the time, it turned out some of our assumptions were were flawed. Now what saved us was Fred Moll, at that time, had gone in and said, Hey, we're going to do first principles design. We're going to design for key things in surgery that we can apply to multiple applications. And he was right about that. Early on, we looked at multiple things, and then we thought cardiac surgery was the beach head and the landing spot for this. And we were wrong about that. We tried it. It turns out it was extremely sensitive. The cardiac surgeons are rightly very conservative, and if we had stayed on that path, company would have gone out of business. But we had customers who had started to use in another mentally invasive surgery domains, including in urology. It was a Swiss urologist working in a German hospital that had bought a robot for cardiac. Yak. His name is Johan bender. And Dr Bender said, I can use this for Urology. And he started doing it. Other urologist looked at it and said, you know, maybe that's interesting, and it hard start to grow. And there was a key pivot in 2001 2002 in the company, where the CEO at the time, Lonnie Smith, decided, hey, we're going to focus on urology instead of cardiac, which was traumatic inside the company. We were we've gone public in 2000 our stock had been cut by two thirds. We were under enormous pressure, and he said, we're gonna do what we can do. He refocused the organization. At that time, there was some internal angst and conflict. We got through the conflict in the company created a success in this prostate meteorology business, which became a launch pad for subsequent indications. Okay,

Scott Pantel  45:50  
that is, unfortunately, all the time we have. But Gary, before we go final thoughts, maybe some advice for all the builders and investors out here, any Watch out or just general advice that you want to share in the closing here? Well,

Gary S. Guthart  46:05  
a thought, a thought for us, we're going into turbulent economic times. I think we were all locked on a plane with no air conditioning. We all had macaroni salad. The the flight attendants have been asked to take their jump seats, and the and the pilots are telling us that you're you're flying into turbulence, and it's 80 degrees in the cabin. It's going to take a strong stomach for the next several years. And I think for me, that's okay. What does that mean? I think for all of us is going to take there's some change coming, and I think that change is unavoidable. So what do I know? You know? How do we talk to our teams about it? What I know is that next year, people need surgery, and I know the year after that, people need surgery, and I know that five years from now, they need surgery, and I know that better surgery lowers the total cost to treat and increases the productivity of society. I know that too. So that means that we'll get through the turbulence. It'll be shaky, and I think the organizations that are calm, that understand how to navigate through hard times will excel. And I think organizations that lose their nerve and start to thrash will struggle in the next period. So that's that's how we think about it,

Scott Pantel  47:22  
all right. Well, Gary, thank you for joining us. 

Gary S. Guthart  47:23  
Thank you, Scott. I appreciate it.