4 Answers From MAKO Surgical
Last week, I posed four questions for MAKO Surgical going into its fourth-quarter and full-year 2012 earnings report. You see, despite MAKO's pre-earnings announcement last month, there still remained a few things investors were just aching to know.
Fortunately, MAKO provided some answers yesterday afternoon and finds itself trading up more than 11% this morning. Here's what they had to say.
How many robots?
First, I wanted to know how many RIO systems the company thinks it can sell in 2013.
Sure enough, MAKO provided sales guidance of between 45 and 48 RIO systems in 2013. Considering this is essentially flat from the 45 units the company sold in 2012, one can't help but wonder whether management is simply being conservative to leave room for an upside surprise should they finally be able to exit the dreaded sales chasm in which they seem to be stuck. Indeed, according to CEO Maurice Ferre on MAKO's conference call yesterday, the company has plenty of room to grow as it has only captured the business of 13% of the 1200 total possible sites in the U.S -- no small feat for a company that only sold its first system in 2006.
In any case, it's safe to say that management has learned its lesson after coming out guns-a-blazin' in 2012, telling investors to expect system sales between 56 and 62. While that guidance largely helped to drive shares of MAKO to all-time highs last March, it's safe to say some rapport was destroyed after management had to temper expectations twice during the year.
Do they like to travel?
Next, I wondered whether investors would be offered any signs of increased international market penetration.
While neither the announcement nor the conference call offered any new site-specific information, MAKO CFO Fritz LaPorte did repeatedly state they expect about 10% of future system sales to be placed internationally.
When we consider the fact that only five of MAKO's 156 systems are currently placed outside the U.S. -- or just 3.2% of its total -- that certainly bodes well for MAKO's global prospects going forward. While it's still nowhere near Intuitive Surgical's international market penetration (recall Intuitive has nearly one third of its systems placed internationally), it still counts as progress by any measure.
Are they being used?
I also wanted some color regarding guidance for monthly per system utilization.
Once again, while we weren't offered specific utilization numbers, there were a few updates worth noting.
First of all, going forward MAKO will report utilization on a per-site rather than per-system basis. Why the change?
According to management, MAKO wasn't previously counting procedures performed with five non-commercial international systems. Now, however, those systems are materially contributing to overall procedure counts with around 100 per quarter.
Next, MAKO's costs for each site remain fairly static regardless of how many systems are employed at any given location. As an increasing number of sites purchase more than one system, then, reporting on a per site basis better reflects "the leverage [they] gain from sites with multiple systems."
Finally, MAKO issued 2013 procedure guidance of 13,500 to 14,500, or an increase from the number of procedures performed in 2012 in the range of 32% and 42%. While that's lower than the 47% increase from 2011 to 2012, it's not entirely unexpected considering the relatively flat pace at which MAKO is growing its installed system base. Even so, steady growth is better than no growth at all, and these numbers indicate MAKO's placed RIO systems certainly aren't collecting dust.
What else can they do?
Last but not least, I was hoping management might give investors some updates on new procedure types. As I mentioned last week, MAKO would find it much easier to move systems if its platform could allow surgeons to perform a wide array of orthopedic surgeries, much in the same way Intuitive Surgical's da Vinci robots are capable of handling dozens of different soft tissue procedures -- and a large reason Intuitive was able to increase its monthly utilization in 2012 to 13 procedures per system.
Once again, while MAKO management was light on specifics, they did offer one little nugget to let shareholders know they have no plans of resting on their laurels. In outlining the company's "key operative priorities for 2013," LaPorte stated:
We know that it is important that we remain a technology leader and continue to innovate. In 2013, we plan to continue to collect and analyze user feedback, and use this information to further enhance our product offering.
Naturally, when pressed for details during the Q&A portion of the call, LaPorte still didn't provide any procedure-specific information but did mention the company has "over 100 engineers that have been working on technology, and that's where we're going to differentiate ourselves at the end of the day."
Even still, its evident long-term shareholders can't wait for the day MAKO actually does expand its product offerings with, say, a total knee or shoulder solution.
In the meantime, we'll just need to make do with steady growth driven by procedures geared toward MAKO's existing applications.
Fortunately for MAKO shareholders, today's pop shows the market doesn't seem to mind waiting for once.
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Fool contributor Steve Symington owns shares of MAKO Surgical. The Motley Fool recommends Intuitive Surgical and MAKO Surgical. The Motley Fool owns shares of Intuitive Surgical. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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