Intuitive Surgical (ISRG) 10-K risk factor changes: FY2020 vs FY2019

In addition, the U.S. federal government has called for, or enacted, substantial changes to trade, fiscal, and tax policies, which may include changes to existing trade agreements including, but not limited to, the replacement of [removed: the North American Free Trade Agreement (“NAFTA”) contemplated] [added: NAFTA] by the [removed: pending United States-Mexico-Canada Agreement ("USMCA"),] [added: USMCA (effective July 1, 2020),] that may have a significant impact on our operations.

Companies have introduced products in the field of robotic surgery or have made explicit statements about their efforts to enter the field including, but not limited to, the following companies: [removed: Avatera Medical] [added: avateramedical] GmbH; CMR Surgical [removed: Limited;] [added: Ltd.;] Johnson & Johnson (including their wholly-owned subsidiaries [added: Auris Health, Inc. and Verb Surgical Inc.); Medicaroid, Inc.; Medrobotics Corporation; Medtronic plc; MicroPort Scientific Corporation; Olympus Corporation; Samsung Group; Shandong Weigao Group Medical Polymer Company Ltd.; Smart Robot Technology Group Co. Ltd.; Titan Medical Inc.; and TransEnterix, Inc. Other companies with substantial experience in industrial robotics could potentially expand into the field of surgical robotics and become competitors.]

[removed: Historically, our] sales of da Vinci Surgical Systems have tended to be heavier in the fourth quarter and lighter in the first quarter, as hospital budgets are reset.

Revenue from OUS markets accounted for approximately [added: 32%,] 30%, [removed: 29%,] and [removed: 27%] [added: 29%] of our revenue for the years ended December 31, [added: 2020,] 2019, [removed: 2018,] and [removed: 2017,] [added: 2018,] respectively.

- protectionist [removed: laws] [added: laws, policies,] and business practices that favor local [removed: competitors,] [added: competitors or lead to non-U.S. customers favoring domestic technology solutions,] which could slow our growth in OUS markets;

- anti-corruption laws, such as the U.S. Foreign Corrupt Practices [removed: Act,] [added: Act ("FCPA"),] and other local laws prohibiting corrupt payments to governmental officials;

Such tariffs and, if enacted, any further legislation or actions taken by the U.S. federal government that restrict trade, such as additional tariffs, trade barriers, and other protectionist or retaliatory measures taken by governments in Europe, Asia, [added: and other countries, could adversely impact our ability to sell products and services in our OUS markets.]

These increased costs could adversely impact the gross margin that we earn on our [removed: products.][added: products, which could make our products less competitive and reduce consumer demand.]

Please see our risk factor below titled “We Are Subject to Product Liability and Negligence Claims Relating to the Use of Our Products and Other Legal Proceedings That Could Materially Adversely Affect Our Financial Condition, Divert Management’s Attention, and Harm Our Business.” [removed: The actions of our] [added: Our] distributors may affect our ability to effectively market our products in certain foreign countries or regulatory jurisdictions if a distributor holds the regulatory authorization in such countries or within such regions and causes, by action or inaction, the suspension of such marketing authorization or sanctions for non-compliance.

[added: Although we have established a hedging program to partially hedge our] exposure to foreign currency exchange rate fluctuations, primarily related to transactions denominated in the Euro, Japanese Yen, Korean Won, British Pound, and Swiss Franc, and we regularly review our hedging program and make adjustments as necessary, our hedging activities may not offset more than a portion of the adverse financial impact caused by unfavorable movement in foreign currency exchange rates, which could materially adversely affect our financial condition or results of operations.

While we have not realized any significant losses on our cash [removed: equivalents or] [added: equivalents,] marketable securities, [added: or other investments,] future fluctuations in their value could have a material adverse impact on our business, financial condition, results of operations, or cash flows.

[removed: IF DEFECTS ARE DISCOVERED IN OUR PRODUCTS, WE MAY INCUR ADDITIONAL UNFORESEEN COSTS, HOSPITALS MAY NOT PURCHASE OUR PRODUCTS, AND OUR REPUTATION MAY SUFFER.][added: - If defects occur in our products, we may incur additional unforeseen costs, hospitals may not purchase our products, and our reputation may suffer.]

Product liability claims have been brought against us by, or on behalf of, individuals alleging that they have sustained personal injuries and/or death as a result of purported product defects, the alleged failure to warn, and/or the alleged [added: inadequate training by us of physicians regarding the use of the da Vinci Surgical System.]

[removed: If] we [removed: do not prevail in the purported class actions, product liability litigation, or other legal proceedings, we] may be faced with significant monetary damages or injunctive relief against us that could have a material adverse effect on our business, financial condition, results of operations, or cash flows.

Because we retain some portion of our insurable risks and, in some cases, we are [removed: self-insured completely,] [added: entirely self-insured,] unforeseen or catastrophic losses in excess of insurance coverage could require us to pay substantial amounts, which may have a material adverse impact on our business, financial condition, results of operations, or cash flows.

If we are unable to [added: develop or] maintain larger-scale manufacturing capabilities, our ability to generate revenues will be limited and our reputation in the marketplace could be damaged, which may have a material adverse impact on our business, financial condition, results of operations, or cash flows.

In the U.S., hospitals generally bill for the services performed with our products to various third-party payors, such as Medicare, Medicaid, [removed: and] other government [removed: programs] [added: programs,] and private insurance plans.

[removed: Other foreign markets have both] private insurance systems and government-managed systems that control reimbursement for new products and procedures.

In addition, healthcare cost containment efforts similar to those in the U.S. are prevalent in many of the other countries in which we intend to sell our [removed: products] [added: products,] and these efforts are expected to continue.

[removed: IF WE LOSE OUR KEY PERSONNEL OR ARE UNABLE TO ATTRACT AND RETAIN ADDITIONAL PERSONNEL, OUR ABILITY TO COMPETE WILL BE HARMED.][added: - If we lose key personnel or are unable to attract and retain additional personnel, our ability to compete will be harmed.]

[removed: NATURAL DISASTERS OR OTHER EVENTS BEYOND OUR CONTROL COULD DISRUPT OUR BUSINESS AND RESULT IN LOSS OF REVENUE OR IN HIGHER EXPENSES.][added: - Natural disasters or other events beyond our control could disrupt our business and result in loss of revenue or higher expenses.]

Natural disasters, terrorist activities, and other business disruptions including, but not limited to, internet security [removed: threats,] [added: threats and violence motivated by political or social causes,] could seriously harm our revenue and financial condition and increase our costs and expenses.

[removed: Furthermore, our] [added: Our] corporate headquarters and many of our operations, including certain of our manufacturing facilities, are located in California, which has experienced both severe earthquakes and other natural disasters in the [removed: past.][added: past and is vulnerable to climate change effects.]

[removed: We do not] have multiple-site capacity for all of our operations in the event of a business disruption.

[removed: EPIDEMIC DISEASES, OR THE PERCEPTION OF THEIR EFFECTS, COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS, OR CASH FLOWS.][added: - Public health crises or epidemic diseases, or the perception of their effects, have had and could continue to have a material adverse effect on our business and results of operations.]

Outbreaks of [added: other] epidemic, pandemic, or contagious diseases, such [removed: as the recent novel coronavirus or,] [added: as,] historically, the Ebola virus, Middle East Respiratory Syndrome, Severe Acute Respiratory Syndrome, or the H1N1 virus, could [added: also] divert medical resources and priorities towards the treatment of that disease.

An outbreak of [removed: a] [added: other] contagious [removed: disease] [added: diseases] could [removed: also] negatively affect hospital admission rates or disrupt our [removed: business.][added: business similar to the impact of the COVID-19 pandemic highlighted above.]

[removed: Business disruptions could include disruptions or] [added: As a result of the COVID-19 outbreak, we have experienced significant business disruptions, including] restrictions on our ability to travel [removed: or to distribute our products,] as well as [added: distribute and service our products,] temporary closures of our facilities [removed: or] [added: and] the facilities of our suppliers and their contract manufacturers, and a reduction in [added: access to our customers due to diverted resources and priorities and] the business hours of [removed: hospitals.][added: hospitals, as governments institute prolonged shelter-in-place and/or self-quarantine mandates.]

Any of these [removed: events] [added: outbreaks] could negatively impact the number of da Vinci procedures performed and have a material adverse effect on our business, financial condition, results of operations, or cash flows.

It is possible that conflicts may arise in these relationships, such as conflicts concerning the achievement of performance milestones or the interpretation of significant terms under any agreement, such as those related to financial obligations, termination rights, or the ownership or control of intellectual property developed during the [removed: collaboration.]

If we [removed: determined] [added: determine] that our investments in privately held companies have experienced a decline in value, we may be required to record impairments, which could be material and have an adverse effect on our results of operations.

[removed: The] [added: These] alliances may [added: also] involve significant expense and divert the focus and attention of our management and other key personnel.

In 2019, we acquired certain assets and operations from Schölly Fiberoptic GmbH, a supplier of endoscopes and other visualization [removed: equipment.][added: equipment and, in 2020, we acquired Orpheus Medical Ltd. and its wholly-owned subsidiaries (“Orpheus Medical”) to deepen and expand our integrated informatics platform.]

We expect that market demand, government regulation, third-party [added: payor] coverage and reimbursement policies, government contracting requirements, and societal pressures will continue to change the worldwide healthcare industry, resulting in further consolidation, which may exert further downward pressure on prices of our products and services and may have a material adverse impact on our business, financial condition, results of operations, or cash flows.

[added: Our efforts to address] these problems may not be successful and could result in unexpected interruptions, delays, cessation of service, and harm to our business operations.

For example, the General Data Protection Regulation (the "GDPR"), which is in effect across the European Economic Area (the "EEA"), imposes several stringent requirements for controllers and processors of personal data and increased our obligations, for example, by imposing higher standards when obtaining consent from individuals to process their personal data, requiring more robust disclosures to individuals, strengthening individual data rights, shortening timelines for data breach notifications, limiting retention periods and secondary use of information, increasing requirements pertaining to health data as [removed: well as pseudonymised (i.e., key-coded) data, and imposing additional obligations when we contract third-party processors in connection with the processing of personal data.]

In addition, recent legal developments in [removed: Switzerland and] Europe have created complexity and compliance uncertainty regarding certain transfers of [removed: information] [added: Personal Information] from [removed: Switzerland and] the [removed: EU] [added: EEA] to the United States.

[removed: If one or more of the legal bases for transferring Personal Information from Europe to the U.S. is invalidated, or] [added: Moreover,] if we are unable to transfer Personal Information between and among countries and regions in which we operate, it could affect the manner in which we provide our services [removed: or] [added: and] could adversely affect our financial results.

In addition, various federal, state, and foreign legislative or regulatory bodies may enact new or additional laws and regulations concerning privacy, data-retention, and data-protection issues, including laws or regulations mandating disclosure to domestic or international law enforcement bodies, which could adversely impact our business or our reputation [removed: with customers.]

In addition, the ability of the FDA to review and [added: clear or] approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes.

You should consider each of the following risk factors, which could materially affect our business, financial position, or future results of operations.

Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial position, or future results of operations.

In addition, the global economic climate and additional or unforeseen effects from the COVID-19 pandemic amplify many of these risks.

RISK FACTORS SUMMARY

- Because our markets are highly competitive, customers may choose to purchase our competitors’ products or services or may not accept da Vinci robotic-assisted surgery, which would result in reduced revenue and loss of market share.

- If our products do not achieve market acceptance, we will not be able to generate the revenue necessary to support our business.

- If institutions or surgeons are unable to obtain coverage and reimbursement from third-party payors for procedures using our products, or if reimbursement is insufficient to cover the costs of purchasing our products, we may be unable to generate sufficient sales to support our business.

- We are subject to product liability and negligence claims relating to the use of our products and other legal proceedings that could materially adversely affect our financial condition, divert management’s attention, and harm our business.

- We are subject to significant, uninsured liabilities.

- Negative publicity, whether accurate or inaccurate, concerning our products or our company could reduce market acceptance of our products and could result in decreased product demand and a decline in revenues.

- Our reliance on sole and single source suppliers could harm our ability to meet demand for our products in a timely manner or within budget.

- We experience long and variable capital sales cycles and seasonality in our business, which may cause fluctuations in our financial results.

- New product developments and introductions may adversely impact our financial results.

- We are subject to a variety of risks due to our operations outside of the U.S.

- Disruption of critical information systems or material breaches in the security of our systems could harm our business, customer relations, and financial condition.

- Our business is subject to complex and evolving laws and regulations regarding privacy, data protection, and other matters relating to information collection.

- If we fail to successfully acquire or integrate new businesses, products, and technology, we may not realize expected benefits or our business may be harmed.

- If we do not successfully manage our collaboration arrangements, licensing arrangements, joint ventures, strategic alliances, or partnerships with third parties, we may not realize the expected benefits from such alliances, which may have a material adverse effect on our business, financial condition, results of operations, or cash flows.

- Our customers may use unauthorized or unapproved instruments and accessories, which would result in reduced revenue and loss of market share.

- We expect gross profit margins to vary over time, and changes in our gross profit margins could adversely affect our financial condition or results of operations.

- We utilize distributors for a portion of our sales, which subjects us to a number of risks that could harm our business.

- We offer alternative capital acquisition approaches.

As a result, we are exposed to the credit risk of some of our customers and the risk of losses of revenue, which could result in material losses.

[Table of](#ifd6f4af27a57401890271d74ae2e1592_7) [Contents](#ifd6f4af27a57401890271d74ae2e1592_7)

- We are exposed to credit risk and fluctuations in the market value of our investments.

- We may incur losses associated with currency fluctuations and may not be able to effectively hedge our exposure.

- We may encounter manufacturing problems or delays that could result in lost revenue.

- Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire, retain or deploy key leadership and other personnel, or otherwise prevent products from being developed, approved, or commercialized in a timely manner or at all, which may adversely affect our business.

- Continued consolidation in the healthcare industry could have an adverse effect on our sales and results of operations.

- Economic conditions could have a material adverse effect on our company.

- Changes in our effective tax rate may impact our results of operations.

- We use estimates, make judgments, and apply certain methods in determining our financial results and in measuring the progress of our business.

As these estimates, judgments, and methods change, our results of operations and our assessment of the progress of our business could vary.

SUMMARY OF RISKS RELATING TO OUR REGULATORY ENVIRONMENT

- Complying with FDA regulations is a complex process, and our failure to comply fully could subject us to significant enforcement actions.

- Our products are subject to a lengthy and uncertain domestic regulatory review process.

If we do not obtain and maintain the necessary domestic regulatory authorizations, we will not be able to sell our products in the U.S.

- If our manufacturing facilities do not continue to meet federal, state, or other manufacturing standards, we may be required to temporarily cease all of our manufacturing operations, import/export of our products, and/or recall some products, which would result in significant product delivery delays and lost revenue.

If we do not obtain and maintain the necessary international regulatory approvals, we will not be able to sell our products in foreign countries.

- Changes in healthcare legislation and policy may have a material adverse effect on our financial condition and results of operations.

Auris Health, Inc. and Verb Surgical Inc.); Medicaroid Inc.; MedRobotics Corp.; Medtronic plc; meerecompany Inc.; Olympus Corp.; Samsung Corporation; Smart Robot Technology Group Co. Ltd.; Titan Medical, Inc.; TransEnterix, Inc.; and Wego Holding Co., Ltd. Other companies with substantial experience in industrial robotics could potentially expand into the field of surgical robotics and become competitors.

On June 23, 2016, the United Kingdom (the “UK”) held a referendum in which voters approved an exit from the European Union (the “EU”), commonly referred to as “Brexit.” On March 29, 2017, the UK formally notified the EU of its intention to withdraw pursuant to Article 50 of the Lisbon Treaty.

The commencement of the official withdrawal process by the UK has created uncertainties affecting business operations in the UK and the EU.

On January 24, 2020, the UK and EU entered into a withdrawal agreement pursuant to which the UK will leave the EU on January 31, 2020, but will, for a transition period ending on December 31, 2020, maintain access to the EU single market and to the global trade deals negotiated by the EU on behalf of its members and remain subject to EU law.

The ongoing uncertainty within the UK’s government and Parliament on the status of Brexit has negatively impacted the UK’s economy and will likely continue to have a negative impact until the UK and EU reach a definitive resolution on the outstanding trade and legal matters.

Until the terms of the UK’s exit from the EU are determined, including any transition period, it is difficult to predict its impact.

Even if the UK maintains access to the EU single market and trade deals following the transition period, Brexit could result in further economic downturn globally.

If the UK ultimately loses access to the EU single market and trade deals, significant market and economic disruption would likely occur, our business would likely be negatively impacted, and the demand for our products could be depressed.

In addition, it is possible that the withdrawal could, among other things, affect the legal and regulatory environments to which our business is subject, impose greater restrictions on imports and exports between the UK and the EU and other parties, and create economic and political uncertainty in the region.

We may face new regulations in the UK.

Compliance with such regulations could be costly, negatively impacting our business, results of operations, and financial condition.

Brexit could also adversely affect European and worldwide economic and market conditions and could contribute to instability in global financial and foreign exchange markets, including volatility in the value of the euro, British pound, and other currencies that Intuitive conducts business in.

In addition, the U.S. federal government has made changes to U.S. trade policy, including signing an executive order to withdraw from the negotiating process of the Trans-Pacific Partnership, renegotiating the terms of NAFTA, as contemplated by the USMCA, and imposing border taxes on imports into the U.S. On November 30, 2018, the leaders of the U.S., Mexico, and Canada signed the USMCA, a replacement to NAFTA, which remains subject to the ratification by the legislatures of each country.

We manufacture a majority of the instruments that we sell in Mexico and any legislation enacted that impacts the relationship between the U.S. and Mexico and/or the continuity of NAFTA could adversely affect our operations and financial results.

and other countries, could adversely impact our ability to sell products and services in our OUS markets.

Tariffs could make our products more expensive for customers, which could make our products less competitive and reduce consumer demand.

Although we have established a hedging program to partially hedge our

inadequate training by us of physicians regarding the use of the da Vinci Surgical System.

Any disruption of our suppliers and their contract manufacturers or our customers would likely impact our sales and operating results.

In addition, a significant outbreak of epidemic, pandemic, or contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our products.

The integration of this acquisition involves complex manufacturing and repair operations across different geographic locations.

Therefore, we cannot assure you that we can successfully integrate this acquisition or manufacture robotic endoscopes after the acquisition.

Our efforts to address

For example, the EU-US Privacy Shield Framework is regularly reviewed, and there is current litigation challenging the adequacy of EU-specified standard contractual clauses (another data transfer mechanism).

It is uncertain whether the Privacy Shield Framework and/or the standard contractual clauses will be invalidated by the European courts or legislature.

We rely on a mixture of mechanisms to transfer personal data from our EU business to the U.S. and could be impacted by changes in law as a result of a future review of these transfer mechanisms by European regulators under the GDPR as well as current challenges to these mechanisms in the European courts.

CHANGES IN FUNDING FOR THE FDA OR OTHER GOVERNMENT AGENCIES, INCLUDING A PROLONGED GOVERNMENT SHUTDOWN, MAY ADVERSELY AFFECT OUR BUSINESS.

For sales between January 1, 2013, and December 31, 2015, medical device manufacturers were required to pay an excise tax (or sales tax) of 2.3% of certain U.S. medical device revenues.

Although there were some exceptions to the excise tax, this excise tax applied to most of our products sold within the U.S. In December 2015, the Consolidated Appropriations Act, 2016 (the “Appropriations Act”) was signed into law.

The Appropriations Act included a two-year moratorium on the MDET such that medical device sales in 2016 and 2017 were exempt from the excise tax.

This moratorium was extended through December 31, 2019, by the Extension of Continuing Appropriations Act of 2018, signed into law on January 22, 2018.

The MDET was repealed in December 2019.

Further, the PPACA, among other things, amends the intent requirement of the federal anti-kickback and criminal healthcare fraud statutes.

and industry.

It is possible that federal or state enforcement authorities might take action if they

In addition, other parties may have filed

We take a holistic [removed: approach] [added: approach,] offering intelligent technology and systems designed to work together to make MIS intervention more available and applicable.

We are early in the launch of our da Vinci SP Surgical System, and we have [removed: placed 29] [added: an installed base of 69] da Vinci SP Surgical Systems [removed: in 2019 and have an installed base of 44] as of December 31, [removed: 2019.][added: 2020.]

We offer [removed: over 80] [added: approximately 70] different multi-port da Vinci instruments to provide surgeons with flexibility in choosing the types of tools needed to perform a particular surgery.

We offer advanced instrumentation for the da Vinci Xi and da Vinci X platforms, including [removed: the] da Vinci [removed: Vessel Sealer Extend] [added: Energy] and da Vinci Stapler products, to provide surgeons with sophisticated, computer-aided tools to precisely and efficiently interact with tissue.

Da Vinci X and da Vinci Xi Surgical Systems share the same instruments whereas the da Vinci Si Surgical System uses instruments that are not compatible with [added: da Vinci] X or [added: da Vinci] Xi systems.

We are early in the launch and have placed [removed: 10] [added: 36] Ion systems for commercial use [removed: through] [added: as of] December 31, [removed: 2019, which are not included in our da Vinci Surgical System installed base.][added: 2020.]

We [added: currently] have [removed: also placed 6] [added: 3] Ion systems [added: placed] with hospitals for gathering clinical [removed: data.][added: data in addition to the systems placed for commercial use.]

We generally earn between [removed: $700] [added: $600] and $3,500 of [removed: instrument] [added: instruments] and [removed: accessory] [added: accessories] revenue per surgical procedure performed, depending on the type and complexity of the specific procedures performed and the number and type of instruments used.

For the [removed: year] [added: years] ended December 31, [added: 2020, and] 2019, the associated impact to revenue and gross margin was not significant.

Recurring revenue consists of [removed: instrument] [added: instruments] and [removed: accessory] [added: accessories] revenue, service revenue, and operating lease revenue.

Recurring revenue increased to [removed: $3.2] [added: $3.4] billion, or [removed: 72%] [added: 77%] of total revenue in [removed: 2019,] [added: 2020,] compared [removed: with $2.6] [added: to $3.2] billion, or [removed: 71%] [added: 72%] of total revenue in [removed: 2018,] [added: 2019,] and [removed: $2.2] [added: $2.6] billion, or 71% of total revenue in [removed: 2017.][added: 2018.]

[removed: Instrument] [added: Instruments] and [removed: accessory] [added: accessories] revenue has grown at a faster rate than systems revenue over time.

The growth of [removed: instrument] [added: instruments] and [removed: accessory] [added: accessories] revenue largely reflects continued procedure adoption.

Service revenue [removed: growth has been] [added: remained unchanged,] driven by the growth of the base of installed da Vinci Surgical [removed: Systems.][added: Systems, offset by the effects of the Customer Relief Program.]

The installed base of da Vinci Surgical Systems grew [removed: 12%] [added: 7%] to approximately [removed: 5,582] [added: 5,989] at December 31, [removed: 2019; 13%] [added: 2020; 12%] to approximately [removed: 4,986] [added: 5,582] at December 31, [removed: 2018;] [added: 2019;] and 13% to approximately [removed: 4,409] [added: 4,986] at December 31, [removed: 2017.][added: 2018.]

Service revenue [removed: increased to] [added: was] $724 million in [removed: 2019,] [added: 2020,] compared [removed: with $635] [added: to $724] million in [removed: 2018] [added: 2019] and [removed: $573] [added: $635] million in [removed: 2017.][added: 2018.]

In the years ended December 31, [added: 2020,] 2019, [removed: 2018,] and [removed: 2017,] [added: 2018,] we shipped [added: 432,] 425, [removed: 272,] and [removed: 139 systems,] [added: 272 da Vinci Surgical Systems,] respectively, under lease and usage-based arrangements, of which [added: 317,] 384, [removed: 229,] and [removed: 108] [added: 229] systems, respectively, were operating lease and usage-based arrangements.

Operating lease revenue has grown at a faster rate than overall systems revenue and was [removed: $106.9] [added: $177] million, [removed: $51.4] [added: $107] million, and [removed: $25.9] [added: $51] million for the years ended December 31, [added: 2020,] 2019, [removed: 2018,] and [removed: 2017,] [added: 2018,] respectively.

As of December 31, [removed: 2019,] [added: 2020,] a total of [removed: 658] [added: 901] da Vinci Surgical Systems were installed at customers under operating lease or usage-based arrangements.

[added: As revenue for operating leases and usage-based] systems is recognized over time, total systems revenue growth is reduced in a period when the number of operating lease and usage-based placements increases as a proportion of total system placements.

[removed: Also,] [added: Moreover,] usage-based [removed: leases] [added: arrangements] generally contain no minimum payments; therefore, customers may exit such arrangements without paying a financial penalty to us.

Revenue generated from customer purchases of systems under operating lease arrangements (“Lease Buyouts”) was [removed: $92.8] [added: $52.2] million, [removed: $48.8] [added: $92.8] million, and [removed: $39.5] [added: $48.8] million for the years ended December 31, [added: 2020,] 2019, [removed: 2018,] and [removed: 2017,] [added: 2018,] respectively.

In geographies where da Vinci procedure adoption is in an early [removed: stage,] [added: stage or] system [added: placements are constrained by regulation, system] sales will precede procedure growth.

Our fully featured da Vinci Xi Surgical System with advanced [removed: instruments, including the EndoWrist Vessel Sealer] [added: instruments (including da Vinci Energy] and EndoWrist [added: and SureForm] Stapler [removed: products,] [added: products)] and our Integrated Table Motion product targets the more complex procedure segment.

These benign procedures and other short-term elective procedures tend to be more seasonal than cancer operations and surgeries for other [removed: life threatening] [added: life-threatening] conditions.

Seasonality in the U.S. for [removed: these] procedures for benign conditions typically results in higher fourth quarter procedure volume when more patients have met annual deductibles and lower first quarter procedure volume when deductibles are reset.

In [removed: May and December] 2018, we began direct operations in India and [removed: Taiwan, respectively.][added: Taiwan.]

[removed: Between 2017 and 2019,] [added: Since 2018,] we obtained regulatory clearances for the following products:

- In June 2019, we received CE mark clearance for our da Vinci Endoscope Plus for the da Vinci [removed: X/Xi] [added: Xi and da Vinci X] Surgical Systems in Europe.

- In June 2019, we obtained FDA clearance for our da Vinci Handheld [removed: Camera.][added: Camera and, in February 2020, we received CE mark clearance.]

We have placed [removed: 10] [added: 36] Ion systems for commercial use [removed: through] [added: as of] December 31, [removed: 2019.][added: 2020.]

We are [removed: in the early stages of an IRIS] [added: currently conducting a] pilot study [added: of our Iris product and service] in the field at a small group of U.S. hospitals to gain initial product experience and insights.

- In December 2018, we received [removed: regulatory clearance] [added: product registration] for our da Vinci Xi Surgical System in China.

The [removed: Xi clearance] [added: registration approval] does not include advanced energy or stapling products that attach to the [added: da Vinci] Xi system.

Separate [removed: clearances] [added: product registrations] are required for each of these products by China National Medical Products Administration (“NMPA”).

[removed: The] [added: After an adjustment notice was published in the third quarter of 2020, the] government will [added: now] allow [added: for] the [added: total] sale of [removed: 154] [added: 225] new surgical robots into China, which could include da Vinci Surgical Systems as well as surgical systems introduced by others.

As of December 31, [removed: 2019,] [added: 2020,] we have sold [removed: 57] [added: 111] da Vinci Surgical Systems under this quota.

In January [added: 2019 and February] 2019, we obtained FDA clearance [added: and CE mark clearance, respectively,] to market SureForm 45.

We have also received regulatory clearance in South Korea and Japan to market [added: both] SureForm 60 and SureForm [removed: 45 and 60.][added: 45.]

We have [removed: placed 29] [added: an installed base of 69] da Vinci SP Surgical Systems [removed: in 2019 and have an installed base of 44] as of December 31, [removed: 2019.][added: 2020.]

Ion systems are not included in our da Vinci Surgical System installed base.

[Table of](#ifd6f4af27a57401890271d74ae2e1592_7) [Contents](#ifd6f4af27a57401890271d74ae2e1592_7)

COVID-19 Pandemic

*Procedures*

Prior to the spread of COVID-19 in the first quarter of 2020, we experienced procedure growth trends consistent with those experienced in the fourth quarter of 2019, including strength in general surgery, growth in mature procedures in the U.S., and growth in OUS urology.

Beginning in January 2020, we saw a substantial reduction in da Vinci procedures in China and, by early February 2020, procedures per week in China had declined by approximately 90% compared to the weekly procedure rates experienced in early January 2020.

As the COVID-19 pandemic subsided in China in March 2020, da Vinci procedure volume began to recover and, by the end of the first quarter of 2020, China procedures per week were approximately 70% of the early January 2020 weekly procedure rate.

As the COVID-19 pandemic spread to Western Europe and the U.S., we experienced a significant decline in da Vinci procedures in the last half of March 2020, and procedures per week in the U.S. declined to approximately 65% of the weekly procedure rate experienced earlier in the first quarter of 2020.

In April 2020, procedures per week in the U.S. continued to decline, reaching approximately 30% of pre-COVID-19 levels.

In May and June, U.S. procedures began a recovery phase, as COVID-19 cases dropped and elective procedures were permitted, and, by the middle of June, had grown to nearly the same level as that measured in the first two weeks of the first quarter of 2020.

However, in the last two weeks of June and into July, with the resurgence of COVID-19 cases, some regions postponed elective procedures, and we experienced a corresponding decline in da Vinci procedures.

The impact of COVID-19 in Europe during the second quarter varied by country with procedures in Italy, France, and the UK declining more steeply, while Germany experienced a year-over-year increase in procedures.

During the second quarter of 2020, China procedures per week continued to increase to a level consistent with the early January 2020 weekly procedure rate.

In the third quarter of 2020, procedures recovered slowly in the U.S., leveling off near pre-COVID-19 levels towards the end of the quarter.

Outside of the U.S., da Vinci procedures varied in the third quarter of 2020, depending on the spread and/or resurgence of COVID-19.

For example, COVID-19 had a less significant impact in Germany where da Vinci procedures grew at mid-single digits relative to the third quarter of 2019, while it had a more significant impact in the U.K. where da Vinci procedures declined year over year.

Procedures in China grew significantly year over year in the third quarter of 2020, while regional COVID-19 outbreaks resulted in year-over-year procedure growth rates in Japan slowing somewhat relative to earlier in the year.

The COVID-19 pandemic has also affected the volumes of certain procedure types differently.

For example, patient concerns over exposure to COVID-19 and the fact that prostate cancer can be slow growing, combined with lower prostate diagnoses and treatments, have caused the number of dVP procedures to decline in the third quarter of 2020 relative to the third quarter of 2019.

Da Vinci bariatric procedures grew significantly year over year in the third quarter of 2020 due to our optimized instrument set and focus by our sales organization and may also have benefited from certain patients prioritizing weight loss as obesity is a significant COVID-19 risk factor.

However, the diagnoses and treatment pathways for bariatric patients are long, and many of the patients in the third quarter may have begun their treatment pathway prior to the spread of COVID-19; therefore, we cannot assure you that we will continue to see significant growth in bariatric procedures.

In the fourth quarter of 2020, procedure volumes continued to be significantly impacted by the COVID-19 pandemic as healthcare systems around the world diverted resources to respond to the pandemic.

The impact continued to differ significantly by geography and region, depending on the spread and resurgence of COVID-19.

In the U.S., while procedures continued to recover in the early part of the quarter, the resurgence of COVID-19 infections experienced by some states had an increasingly adverse impact on our procedure volumes as the quarter progressed, a trend that continued into January.

The impact of a resurgence in a particular region can be significant.

Outside of the U.S., similar to the trends noted in the third quarter, procedures also continued to vary significantly by geography and region.

The resurgence of COVID-19 had a more significant impact on procedures in Italy, France, and the UK.

Procedures in China continued to grow significantly year over year.

The trends that were noted in the third quarter of 2020 in relation to types of procedures, such as dVP and bariatric procedures, continued into the fourth quarter of 2020.

We continue to see that the impact of COVID-19 on our procedure volumes varies widely by country, region, and type.

When COVID-19 infection rates spike in a particular region, procedure volumes have been negatively impacted and the diagnoses of new conditions and their related treatments are deferred.

Also, based on our experience during 2020, we do not expect all markets, regions, and procedure types to recover at the same pace.

Due to the uncertainty of the recovery, including the potential for COVID-19 infection rates to increase, the extent and period of time over which the COVID-19 pandemic and any resultant economic recession will impact hospital spending, and additional policy responses that may be outlined by governments and other authorities, we cannot reliably estimate the impact that the COVID-19 pandemic may have on procedure volume in the first quarter of 2021 and beyond.

[Table of](#ifd6f4af27a57401890271d74ae2e1592_7) [Contents](#ifd6f4af27a57401890271d74ae2e1592_7)

*System Demand*

As the impact of the COVID-19 pandemic progressed throughout 2020, customers in affected regions deferred decisions to purchase or lease systems into future quarters and, in some cases, indefinitely.

These deferral decisions continued into the fourth quarter of 2020.

In addition, the year-over-year stagnation in procedures and, in turn, reduced utilization of our systems has resulted in unused capacity in the existing installed base.

We expect hospitals to first fill their unused capacity before purchasing additional systems.

The depth and extent to which the COVID-19 pandemic will impact individual markets will vary based on the availability of testing capabilities, personal protective equipment, intensive care units and operating rooms, and medical staff, as well as government interventions.

Instrument and accessory revenue increased to $2.4 billion in 2019, compared with $2.0 billion in 2018 and $1.6 billion in 2017.

As revenue for operating leases and usage-based

Systems revenue grew 19% to $1,346 million in 2019; 21% to $1,127 million in 2018; and 16% to $928 million in 2017.

- In July 2018, we obtained FDA clearance to market SureForm 60, our da Vinci EndoWrist 60mm Stapler.

Following the CE mark, in May 2017, we obtained FDA clearance to market our da Vinci X Surgical System in the U.S. We received regulatory clearance for the da Vinci X Surgical System in South Korea and Japan in September 2017 and April 2018, respectively.

Regulatory clearances for the da Vinci X Surgical System may be received in other markets over time.

If these procedures are not adopted and we are not successful in obtaining adequate procedure reimbursements for additional procedures, then the demand for our products in Japan could be limited.

In head

U.S. procedure growth was also driven by growth in thoracic procedures, as well as moderate growth in more mature urologic and gynecologic procedure categories.

During 2019, we have seen increasing contributions to growth from other U.S. general surgery procedures, including cholecystectomy and bariatric procedures.

2019 growth in U.S. dVP procedures was consistent with growth in 2018.

2019 growth in OUS dVP procedures was consistent with growth in 2018.

In 2018 and the first quarter of 2019, procedure growth in China moderated, as the previous systems quota expired at the end of 2015 and the systems installed in China are highly utilized.

In October 2018, the China National Health Commission announced a new quota to allow the sale of 154 new surgical robots into China through 2020, which could include da Vinci Surgical Systems.

This quota applies to the da Vinci Si and recently approved da Vinci Xi Surgical Systems (refer to the previous discussion in the “Clearances and Approvals” section), as well as competitors’ products when and if cleared by NMPA.

Sales of da Vinci Surgical Systems under the quota are uncertain, as they are dependent on provincial allocation processes and hospitals completing a tender process and receiving associated approvals.

In the last three quarters of 2019, procedure growth in China accelerated, as initial systems placed during these quarters provided additional capacity in the field.

In Japan, we experienced strong procedure growth after receiving the national reimbursements for dVP and partial nephrectomy in 2012 and 2016, respectively.

However, as adoption for these procedures has progressed towards higher levels of penetration, growth in these two urologic procedures has moderated.

A total of 12 additional da Vinci procedures were granted national reimbursement status effective April 1, 2018, including gastrectomy, low anterior resection, lobectomy, and hysterectomy, for both malignant and benign conditions.

Procedure growth in Japan has accelerated since the new procedures were granted reimbursement status.

However, these additional 12 reimbursed procedures have varying levels of conventional laparoscopic penetration and are reimbursed at rates equal to the conventional laparoscopic procedures.

Given the reimbursement level and laparoscopic penetration for these procedures, there can be no assurance that adoption will occur or that the adoption pace for these procedures will be similar to any other da Vinci procedures.

If these procedures are not adopted and we are not successful in obtaining adequate procedure reimbursement for additional procedures, then the demand for our products in Japan could be limited.

versatility to the da Vinci Energy portfolio.

The da Vinci Endoscope Plus is currently available in Europe and is expected to launch in the U.S. later in 2019.

We are introducing the da Vinci Handheld Camera in a measured fashion in 2019 with a broad launch expected in early 2020.

We continue to introduce the da Vinci SP

*Da Vinci X Surgical System.* In May 2017, we launched a new da Vinci model, the da Vinci X, in the U.S. The da Vinci X system provides surgeons and hospitals with access to some of the most advanced fourth generation da Vinci surgery technology at a lower cost.

The da Vinci X system uses the same vision cart and surgeon console that are found on our flagship product, the da Vinci Xi system.

For new customers, the da Vinci X system provides a cost effective capital entry point while providing a pathway for upgrading to other fourth generation systems.

Existing customers may negotiate to trade in their older da Vinci systems in order to standardize their robotics programs onto the fourth generation platform, choosing which system model by considering clinical and economic factors.

The da Vinci X system enables optimized, focused-quadrant surgery, including procedures like prostatectomy, hernia repair, and benign hysterectomy, among others.

The system features flexible port placement and 3D digital optics, while incorporating the same advanced instruments and accessories as the da Vinci Xi.

The da Vinci X system drives operational efficiencies through set-up technology that uses voice and laser guidance, drape design that simplifies surgery preparations, and a lightweight, fully integrated endoscope.

Acquisition of Certain Assets from Schölly Fiberoptic

In July 2019, we entered into an agreement to acquire certain assets and operations from Schölly Fiberoptic GmbH (“Schölly”), a supplier of endoscopes and other visualization equipment (the "Schölly Acquisition").

On August 31, 2019, upon the satisfaction of closing conditions, we acquired control of these assets and operations, which collectively met the definition of a business.

Total purchase consideration of $101.4 million, as of the acquisition date, consisted of an initial cash payment of $34.4 million and deferred cash payments totaling approximately $67.0 million, of which $37.3 million continues to be deferred as of December 31, 2019.

The timing of the future payments is based upon achieving certain integration steps, which are expected to be completed around the end of 2020.

To achieve this objective, we maintain a diversified portfolio of cash equivalents and short- and long-term investments in a variety of high quality securities, including U.S. [removed: treasuries,] [added: treasury and] U.S. government [removed: agencies,] [added: agency securities, taxable and tax-exempt municipal notes,] corporate [removed: debt, cash deposits, money market funds,] [added: notes and bonds,] commercial paper, non-U.S. government agency securities, [added: cash deposits,] and [removed: taxable or tax exempt municipal bonds.][added: money market funds.]

The weighted average duration of our portfolio as of December 31, [removed: 2019,] [added: 2020,] was approximately [removed: 1.0] [added: 0.7] years.

A hypothetical increase in interest rate by 25 basis points would have resulted in a decrease in the fair value of our net investment position of approximately [removed: $13.5] [added: $10.5] million as of December 31, [removed: 2019.][added: 2020.]

Uncertain financial markets [removed: have resulted] [added: could result] in a tightening in the credit markets, a reduced level of liquidity in many financial markets, and extreme volatility in fixed income and credit markets.

For the year ended December 31, [removed: 2019,] [added: 2020,] sales denominated in foreign currencies were approximately [removed: 20%] [added: 23%] of total revenue.

The objective of our hedging program is to mitigate the impact of changes in currency exchange rates on our net cash flow from foreign currency denominated [removed: sales.][added: sales and expenses.]

For the year ended December 31, [removed: 2019,] [added: 2020,] our revenue would have decreased by approximately [removed: $53.5] [added: $72.6] million if the U.S. dollar exchange rate strengthened by 10%.

A 10% strengthening of the U.S. dollar exchange rate against all currencies to which we have exposure, after considering foreign currency hedges and offsetting positions as of December 31, [removed: 2019,] [added: 2020,] would have resulted in an approximately [removed: $2.8] [added: $1.7] million increase in the carrying amounts of those net assets.

[Table of](#ifd6f4af27a57401890271d74ae2e1592_7) [Contents](#ifd6f4af27a57401890271d74ae2e1592_7)

Intuitive®, Intuitive [removed: Surgical®,] [added: Surgical*®*,] da Vinci®, da Vinci S®, da Vinci S HD Surgical System®, da Vinci Si®, da Vinci Si HD Surgical System®, da Vinci [added: X®, da Vinci] Xi®, da Vinci SP®*,* EndoWrist®, Firefly®, InSite®, [removed: da Vinci Connect®,] Intuitive Surgical EcoSystem®*,* [removed: da Vinci X®, SureFormTM, IonTM, IRIS®,] [added: SureForm®, Ion®, Iris®,] and [removed: SynchroSealTM] [added: SynchroSeal®] are trademarks or registered trademarks of the Company.

[removed: We] [added: Our mission reflects that we] believe that minimally invasive care is life-enhancing care.

The current healthcare environment [removed: is exerting a large and increasing burden on] [added: continues to stress] critical resources, including the professionals who staff care teams: surgeons, anesthesiologists, nurses, and other staff.

At the same time, governments [removed: are straining] [added: strain] to cover the healthcare needs of their populations and [removed: are demanding] [added: demand] lower total cost per patient to treat disease.

In the face of these challenges, we believe scientific, process, and technological advances in biology, computing, imaging, algorithms, and robotics offer [removed: the promise of] new methods to solve [removed: old] [added: continued] and difficult problems.

In 2000, [removed: it was cleared by] the U.S. Food and Drug Administration (“FDA”) [added: cleared da Vinci] for general laparoscopic surgery.

It consists of an ergonomic surgeon console or consoles, a patient-side cart with [added: an] interactive arm or arms, a high-performance vision system, and proprietary instruments and accessories.

In 2019, [added: the FDA cleared] our Ion endoluminal [removed: system was cleared by the FDA and] [added: system, which] enables minimally invasive biopsies in the lung.

Our Ion system is a flexible, robotic-assisted, catheter-based platform that utilizes instruments and accessories, which extends our commercial offering beyond surgery into [removed: diagnostic] [added: diagnostic, endoluminal] procedures with this first application.

Surgeons can reposition the surgical camera quickly with foot controls or zoom in, out, up, down, left, [removed: and] [added: or] right by moving their hands while maintaining a stable image.

In conventional MIS, the instrument tip moves in the opposite direction from the surgeon’s [removed: hand] [added: hand,] and surgeons must adjust their hand-eye coordination to compensate for the direction reversal by the pivot.

We have commercialized [removed: the following] four generational platforms of da Vinci Surgical Systems: our fourth generation da Vinci X, da Vinci Xi, and da Vinci SP Surgical Systems, our third generation da Vinci Si Surgical System, our second generation da Vinci S Surgical System, and our first generation da Vinci standard Surgical System.

The da Vinci Surgical System allows surgeons to operate while comfortably seated at an ergonomic console viewing a [removed: 3D] [added: 3DHD] image of the surgical field.

On [added: most of] our current systems (da Vinci X*,* da Vinci Xi*,* and da Vinci Si), a second surgeon’s console may be used in two ways: to provide assistance to the primary surgeon during surgery or to act as an active aid during surgeon-proctor training sessions.

The fourth instrument arm is a standard, integrated feature on the da Vinci X, [added: da Vinci] Xi, and [added: da Vinci] Si Surgical Systems.

A digital zoom feature in the 3DHD vision system allows surgeons to magnify the surgical field of view without adjusting the endoscope position [added: and, thereby, reduces interference between the endoscope] and [added: instruments.]

The 3DHD vision system is a standard, integrated feature on the da Vinci X*,* [added: da Vinci] Xi*,* [added: da Vinci] SP, [added: da Vinci] Si*,* and [added: da Vinci] S Surgical Systems.

[removed: *Da Vinci Skills] [added: *Skills] Simulator.* The Skills Simulator is a practice tool that gives a user the opportunity to practice their skills and gain familiarity with the surgeon console controls.

The Skills Simulator incorporates 3D, physics-based computer simulation technology to immerse the user within a virtual [removed: environment.][added: environment and provides training capabilities that have been used extensively by surgeons.]

The Skills Simulator is intended to augment, not replace, existing training programs for the da Vinci X, [added: da Vinci] Xi, and [added: da Vinci] SP Surgical Systems.

Integrated Table Motion coordinates the movements of the da Vinci [removed: robot] [added: robotic] arms with an advanced operating room table, the [removed: TruSystem®] [added: TS] 7000dV [added: OR Table] sold by [removed: Trumpf MedicalTM,] [added: HillromTM,] to enable managing the patient’s position in real-time while the da Vinci [removed: surgical] robotic arms remain docked.

Firefly is a standard feature of the da Vinci X and [added: da Vinci] Xi Surgical Systems and is available on our da Vinci Si Surgical System.

Firefly is typically used in the [added: procedure] categories of urology, gynecology, and general surgery.

We market four staplers available with the da Vinci X and [added: da Vinci] Xi Surgical Systems: the EndoWrist Stapler 30 and 45 and the SureForm 45 and 60, where the numeric designation indicates the length of the staple line.

The EndoWrist Stapler 45 is used in [removed: general,] [added: general surgery,] gynecologic, thoracic, and urologic [removed: surgery.][added: procedures.]

The SureForm 60 is a single-use, fully wristed, stapling instrument intended [removed: for resection, transection, and/or creation of anastomoses, with] [added: to deliver] particular utility in bariatric procedures.

We sell various accessory products, which are used in conjunction with the da Vinci Surgical [removed: System] [added: Systems] as surgical procedures are performed.

Accessory products include sterile drapes used to help ensure a sterile field during surgery, vision [removed: products] [added: products,] such as replacement 3D stereo endoscopes, camera heads, [added: and] light guides, and other items that facilitate use of the da Vinci Surgical [removed: System.][added: Systems.]

The Ion system uses an ultra-thin articulating robotic catheter that can [removed: move] [added: articulate] 180 degrees in all directions.

Our goal [removed: is to fundamentally improve surgery and other acute interventions by] [added: aligns with the Quadruple Aim:] enabling physicians and hospitals to improve outcomes for their patients, improve their patient’s and the care [removed: team's] [added: team’s] experience, and lower the total cost to treat per patient episode.

*Patient Value.* We believe that the value of a surgical procedure to a patient can be [removed: defined as:] [added: defined:] *Patient Value = Procedure [removed: Efficacy/Invasiveness*.][added: Efficacy / Invasiveness*.]

We believe that most patients will place higher value on procedures that are not only more [removed: efficacious,] [added: efficacious] but also less invasive than alternative treatments.

Key procedures that we are focused on include da Vinci hysterectomy (“dVH”), da Vinci prostatectomy (“dVP”), da Vinci for hernia repair, da Vinci for colon and rectal procedures, da Vinci for partial nephrectomy, da Vinci for sacrocolpopexy, da Vinci for lobectomy, [removed: and] da Vinci for transoral robotic [added: surgery, and da Vinci for bariatric] surgery.

Hysterectomies can be performed using open surgery (laparotomy) or MIS techniques, which include vaginal, laparoscopic, and [removed: robotic] [added: robotic-assisted] approaches.

During a hernia repair surgery, the weakened tissue is [removed: secured] [added: secured,] and defects are repaired.

Surgeons have reported that the use of robotic-assisted surgery with a da Vinci Surgical System and our latest technologies, such as the [removed: da Vinci Xi Surgical System,] EndoWrist [removed: Stapler,] [added: Stapler] and [removed: EndoWrist Vessel Sealer,] [added: da Vinci Energy,] have enabled them to offer MIS approaches to a broader range of colorectal surgery patients.

Surgeons have reported that the use of robotic-assisted surgery with a da Vinci Surgical System in thoracic surgery has enabled them to offer MIS approaches to a broader range of thoracic surgery patients and improved clinical outcomes compared to open and video-assisted thoracic surgery in published single-center, [removed: multi-center] [added: multi-center,] and national database clinical studies.

Surgeons have reported that da Vinci [removed: Transoral Surgery] [added: transoral surgery] allows them to operate on tumors occurring in the oropharynx [removed: (e.g.,] [added: (i.e.,] tonsil and base of tongue) and larynx via the mouth and to overcome some of the line-of-sight limitations of conventional transoral surgery.

Thus, hospitals are more sensitive to the costs associated with treating less [removed: complex] [added: complex,] benign conditions.

Our fully featured da Vinci Xi Surgical System with advanced instruments, including the [removed: EndoWrist Vessel Sealer] [added: da Vinci Energy] and EndoWrist and SureForm Stapler products, and our Integrated Table Motion product, targets the more complex procedure segment.

By striving to find less invasive ways to enter the body, provide clearer views of anatomy and more precise tissue interactions, and helping hone surgical skills, Intuitive launched its first da Vinci Surgical System in 1999.

[Table of](#ifd6f4af27a57401890271d74ae2e1592_7) [Contents](#ifd6f4af27a57401890271d74ae2e1592_7)

Additionally, the FDA cleared Iris, Intuitive’s augmented reality imaging product, for use in kidney procedures.

Iris extracts CT scans, runs them through machine-learning algorithms, and returns a segmented model of the kidney for use in planning for a procedure and for intraoperative visualization of the area.

The tool uses augmented reality to give surgeons an image with details of the kidney anatomy – blood vessels, tumor shape, and size – that they may not be able to see well with other imaging.

Intuitive designed Iris, among other things, to be shared as a teaching tool among surgeons to coordinate approaches to complex cases.

It can also be part of the viewing experience during a procedure to enhance information and let surgeons know where critical anatomy sits as they work through a procedure.

Many suspicious lesions found in the lung may be small and difficult to access, which can make diagnosis challenging, and Ion helps physicians obtain tissue samples from deep within the lung, which could help enable earlier diagnosis.

[Table of](#ifd6f4af27a57401890271d74ae2e1592_7) [Contents](#ifd6f4af27a57401890271d74ae2e1592_7)

Informatics

*Intuitive Cloud.* The vast majority of our systems are connected to the Intuitive cloud to enable proactive monitoring and provide software updates.

*SimNow.* Our cloud-enabled SimNow simulation platform is our latest generation simulator, which allows surgeons to learn and practice their surgical skills.

SimNow is compatible with multiple da Vinci platforms and can be connected to the internet.

The SimNow online connection drives real-time simulation performance tracking for surgeons and administrators through an online dashboard and supports remote updates of the VR content and 3DHD videos to drive a more interactive and engaging customer experience.

*Iris.* In February 2019, the FDA cleared Iris, Intuitive’s augmented reality imaging product, for use in kidney procedures.

Iris extracts CT scans, runs them through machine-learning algorithms, and returns a segmented model of the kidney for use in planning for a procedure and for intraoperative visualization of the area.

The tool uses augmented reality to give surgeons an image with details of the kidney anatomy – blood vessels, tumor shape, and size – that they may not be able to see well with other imaging.

Intuitive designed Iris to be shared as a teaching tool among surgeons to coordinate approaches to complex cases, for example.

It can also be part of the viewing experience during a procedure to enhance information and let surgeons know where critical anatomy sits as they work through a procedure.

We are currently only using Iris in pilot studies.

We launched our first pilot site in the U.S. in December 2019 and have five pilot sites as of December 31, 2020.

[Table of](#ifd6f4af27a57401890271d74ae2e1592_7) [Contents](#ifd6f4af27a57401890271d74ae2e1592_7)

In 2020, we introduced our "Extended Use Program," which consists of select da Vinci Xi and da Vinci X instruments possessing 12 to 18 uses ("Extended Use Instruments") compared to the prior 10 use instruments.

These Extended Use Instruments represent some of our higher volume instruments but exclude stapling, monopolar, and advanced energy instruments.

Instruments included in the program are used across a number of da Vinci procedures.

Their increased uses are the result of continuous, significant investments in the design and production capabilities of our instruments, resulting in improved quality and durability.

We introduced Extended Use Instruments in the U.S. in October 2020 and in Europe in November 2020.

We expect to introduce Extended Use Instruments in other geographies throughout 2021 and 2022, depending on the timing of regulatory approvals.

The E-100 generator is Intuitive's first generator and is offered as an upgrade to power the da Vinci Vessel Sealer Extend and SynchroSeal.

SynchroSeal will enable a surgeon to perform rapid, one-step sealing and transection with a single pedal press.

SynchroSeal uses advanced bipolar energy from its raised cut electrode to transect tissue and then cool down quickly.

[Table of](#ifd6f4af27a57401890271d74ae2e1592_7) [Contents](#ifd6f4af27a57401890271d74ae2e1592_7)

The change to cloud-based analytics and routine use of local analytics may help surgeons track their procedures and processes and, with a network-connected smartphone and the MyIntuitive app, surgeons can access and explore their procedure data, such as console time and instrument usage, to gain insights into their program.

We also offer our Custom Hospital Analytics program, which enables the integration of data sources so that individual health institutions can analyze their data in their own environment.

Using this data, administrators, chiefs of surgery, and surgeons can gain alignment around their programs based on their KPIs, determine best practices, assess gaps, and take actionable steps to address any gaps.

[Table of](#ifd6f4af27a57401890271d74ae2e1592_7) [Contents](#ifd6f4af27a57401890271d74ae2e1592_7)

[Table of](#ifd6f4af27a57401890271d74ae2e1592_7) [Contents](#ifd6f4af27a57401890271d74ae2e1592_7)

[Table of](#ifd6f4af27a57401890271d74ae2e1592_7) [Contents](#ifd6f4af27a57401890271d74ae2e1592_7)

More than half of da Vinci procedures performed are for benign conditions.

These benign procedures and other short-term elective procedures tend to be more seasonal than cancer procedures and surgeries for other life-threatening conditions.

With the aim of entering the body less invasively, seeing anatomy more clearly, interacting with tissue more precisely, and enabling surgical skill, Intuitive launched its first da Vinci Surgical System in 1999.

thereby reduces interference between the endoscope and instruments.

No single customer accounted for more than 10% of revenue during the years ended December 31, 2019, 2018, and 2017.

In 2019, we acquired certain assets and operations from Schölly Fiberoptic GmbH, and we are integrating endoscope manufacturing operations across multiple sites in Germany and the U.S., which is expected to be completed around the end of 2020.

We believe that many companies are focused on adding capabilities to manual MIS systems.

Because many of these developments are aimed at MIS, we believe that our da Vinci Surgical Systems may prove complementary to some of these new technologies.

United States Regulation

that there is scientific data to substantiate the claims, and that our advertising is neither false nor misleading.

We are currently seeking reimbursement for additional procedures through the MHLW’s Senshin Iryo processes as well as alternative reimbursement processes.

Our Senshin Iryo approvals require in-country clinical data and are considered for reimbursed status in April of even-numbered years.

medical devices in the regions in which we operate and market our products.

The PPACA contained a number of provisions designed to

The U.S. Medical Device Excise Tax ("MDET") initially became effective on January 1, 2013.

For sales between January 1, 2013 and December 31, 2015, medical device manufacturers were required to pay an excise tax (or sales tax) of 2.3% on certain U.S. medical device revenues.

In December 2015, the Consolidated Appropriations Act, 2016 (the “Appropriations Act”) was signed into law.

The Appropriations Act included a two-year moratorium on the MDET such that medical device sales in 2016 and 2017 were exempt from the excise tax.

This moratorium was extended through December 31, 2019, by the Extension of Continuing Appropriations Act of 2018, signed into law on January 22, 2018.

The MDET was repealed in December 2019.

Employees

None of our employees are covered by a collective bargaining agreement, and we consider our relationship with our employees to be good.

The information included in [removed: Note] [added: [Note] 8 to the Consolidated Financial [removed: Statements] [added: Statements](#ifd6f4af27a57401890271d74ae2e1592_259)] included in Part II, Item 8 of this report is incorporated herein by reference.

For the fiscal year ended December 31, [removed: 2019][added: 2020]

[removed: ][added: ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T [added: (§ 232.405 of this chapter)] during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

The aggregate market value of the voting and non-voting common equity held by non-affiliates on June 30, [removed: 2019,] [added: 2020,] based upon the closing price of Common Stock on such date as reported on The Nasdaq Global Select Market, was approximately [removed: $59.9] [added: $66.4] billion.

The number of outstanding shares of the registrant’s common stock as of January [removed: 17, 2020,] [added: 15, 2021,] was [removed: 115,984,044.][added: 117,718,298.]

Part III incorporates information by reference to the definitive proxy statement for the Company’s Annual Meeting of Stockholders to be held on or about April [removed: 23, 2020,] [added: 22, 2021,] to be filed within 120 days of the registrant’s fiscal year ended December 31, [removed: 2019.][added: 2020.]

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| [PART [removed: I](#i_0_13) | | |] [added: I](#ifd6f4af27a57401890271d74ae2e1592_13)] | | | | | | | | |

| [Item [removed: 1.](#i_0_16) | | | [Business](#i_0_16)] [added: 1.](#ifd6f4af27a57401890271d74ae2e1592_16)] | | | [removed: [5](#i_0_16)] [added: [Business](#ifd6f4af27a57401890271d74ae2e1592_16)] | | | [added: [5](#ifd6f4af27a57401890271d74ae2e1592_16)] | | |

| [Item [removed: 1A.](#i_0_58)] [added: 1A.](#ifd6f4af27a57401890271d74ae2e1592_58)] | | | [Risk [removed: Factors](#i_0_58) | | | [20](#i_0_58)] [added: Factors](#ifd6f4af27a57401890271d74ae2e1592_58)] | | | [added: [23](#ifd6f4af27a57401890271d74ae2e1592_58)] | | |

| [Item [removed: 1B.](#i_0_73)] [added: 1B.](#ifd6f4af27a57401890271d74ae2e1592_73)] | | | [Unresolved Staff [removed: Comments](#i_0_73) | | | [41](#i_0_73)] [added: Comments](#ifd6f4af27a57401890271d74ae2e1592_73)] | | | [added: [48](#ifd6f4af27a57401890271d74ae2e1592_73)] | | |

| [Item [removed: 2.](#i_0_76) | | | [Properties](#i_0_76)] [added: 2.](#ifd6f4af27a57401890271d74ae2e1592_76)] | | | [removed: [41](#i_0_76)] [added: [Properties](#ifd6f4af27a57401890271d74ae2e1592_76)] | | | [added: [48](#ifd6f4af27a57401890271d74ae2e1592_76)] | | |

| [Item [removed: 3.](#i_0_79)] [added: 3.](#ifd6f4af27a57401890271d74ae2e1592_79)] | | | [Legal [removed: Proceedings](#i_0_79) | | | [41](#i_0_79)] [added: Proceedings](#ifd6f4af27a57401890271d74ae2e1592_79)] | | | [added: [48](#ifd6f4af27a57401890271d74ae2e1592_79)] | | |

| [Item [removed: 4.](#i_0_82)] [added: 4.](#ifd6f4af27a57401890271d74ae2e1592_82)] | | | [Mine Safety [removed: Disclosures](#i_0_82) | | | [41](#i_0_82)] [added: Disclosures](#ifd6f4af27a57401890271d74ae2e1592_82)] | | | [added: [48](#ifd6f4af27a57401890271d74ae2e1592_82)] | | |

| [PART [removed: II](#i_0_85) | | |] [added: II](#ifd6f4af27a57401890271d74ae2e1592_85)] | | | | | | | | |

| [Item [removed: 5.](#i_0_88)] [added: 5.](#ifd6f4af27a57401890271d74ae2e1592_88)] | | | [Market for the Registrant’s Common Equity, Related Stockholder Matters [removed: and](#i_0_88)] [added: and](#ifd6f4af27a57401890271d74ae2e1592_88)] [Issuer Purchases of Equity [removed: Securities](#i_0_88) | | | [42](#i_0_88)] [added: Securities](#ifd6f4af27a57401890271d74ae2e1592_88)] | | | [added: [49](#ifd6f4af27a57401890271d74ae2e1592_88)] | | |

| [Item [removed: 6.](#i_0_91)] [added: 6.](#ifd6f4af27a57401890271d74ae2e1592_91)] | | | [Selected Financial [removed: Data](#i_0_91) | | | [45](#i_0_91)] [added: Data](#ifd6f4af27a57401890271d74ae2e1592_91)] | | | [added: [52](#ifd6f4af27a57401890271d74ae2e1592_91)] | | |

| [Item [removed: 7.](#i_0_94)] [added: 7.](#ifd6f4af27a57401890271d74ae2e1592_94)] | | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#i_0_94) | | | [46](#i_0_94)] [added: Operations](#ifd6f4af27a57401890271d74ae2e1592_94)] | | | [added: [53](#ifd6f4af27a57401890271d74ae2e1592_94)] | | |

| [Item [removed: 7A.](#i_0_190)] [added: 7A.](#ifd6f4af27a57401890271d74ae2e1592_193)] | | | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#i_0_190) | | | [67](#i_0_190)] [added: Risk](#ifd6f4af27a57401890271d74ae2e1592_193)] | | | [added: [78](#ifd6f4af27a57401890271d74ae2e1592_193)] | | |

| [Item [removed: 8.](#i_0_193)] [added: 8.](#ifd6f4af27a57401890271d74ae2e1592_196)] | | | [Financial Statements and Supplementary [removed: Data](#i_0_193) | | | [68](#i_0_193)] [added: Data](#ifd6f4af27a57401890271d74ae2e1592_196)] | | | [added: [79](#ifd6f4af27a57401890271d74ae2e1592_196)] | | |

| [Item [removed: 9.](#i_0_277)] [added: 9.](#ifd6f4af27a57401890271d74ae2e1592_289)] | | | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#i_0_277) | | | [105](#i_0_277)] [added: Disclosure](#ifd6f4af27a57401890271d74ae2e1592_289)] | | | [added: [116](#ifd6f4af27a57401890271d74ae2e1592_289)] | | |

| [Item [removed: 9A.](#i_0_280)] [added: 9A.](#ifd6f4af27a57401890271d74ae2e1592_292)] | | | [Controls and [removed: Procedures](#i_0_280) | | | [105](#i_0_280)] [added: Procedures](#ifd6f4af27a57401890271d74ae2e1592_292)] | | | [added: [116](#ifd6f4af27a57401890271d74ae2e1592_292)] | | |

| [Item [removed: 9B.](#i_0_283)] [added: 9B.](#ifd6f4af27a57401890271d74ae2e1592_295)] | | | [Other [removed: Information](#i_0_283) | | | [105](#i_0_283)] [added: Information](#ifd6f4af27a57401890271d74ae2e1592_295)] | | | [added: [116](#ifd6f4af27a57401890271d74ae2e1592_295)] | | |

| [PART [removed: III](#i_0_286) | | |] [added: III](#ifd6f4af27a57401890271d74ae2e1592_298)] | | | | | | | | |

| [Item [removed: 10.](#i_0_289)] [added: 10.](#ifd6f4af27a57401890271d74ae2e1592_301)] | | | [Directors, Executive Officers and Corporate [removed: Governance](#i_0_289) | | | [106](#i_0_289)] [added: Governance](#ifd6f4af27a57401890271d74ae2e1592_301)] | | | [added: [117](#ifd6f4af27a57401890271d74ae2e1592_301)] | | |

| [Item [removed: 11.](#i_0_292)] [added: 11.](#ifd6f4af27a57401890271d74ae2e1592_304)] | | | [Executive [removed: Compensation](#i_0_292) | | | [106](#i_0_292)] [added: Compensation](#ifd6f4af27a57401890271d74ae2e1592_304)] | | | [added: [117](#ifd6f4af27a57401890271d74ae2e1592_304)] | | |

| [Item [removed: 12.](#i_0_295)] [added: 12.](#ifd6f4af27a57401890271d74ae2e1592_307)] | | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#i_0_295) | | | [106](#i_0_295)] [added: Matters](#ifd6f4af27a57401890271d74ae2e1592_307)] | | | [added: [117](#ifd6f4af27a57401890271d74ae2e1592_307)] | | |

| [Item [removed: 13.](#i_0_298)] [added: 13.](#ifd6f4af27a57401890271d74ae2e1592_310)] | | | [Certain Relationships and Related Transactions and Director [removed: Independence](#i_0_298) | | | [106](#i_0_298)] [added: Independence](#ifd6f4af27a57401890271d74ae2e1592_310)] | | | [added: [117](#ifd6f4af27a57401890271d74ae2e1592_310)] | | |

| [Item [removed: 14.](#i_0_301)] [added: 14.](#ifd6f4af27a57401890271d74ae2e1592_313)] | | | [Principal Accountant Fees and [removed: Services](#i_0_301) | | | [106](#i_0_301)] [added: Services](#ifd6f4af27a57401890271d74ae2e1592_313)] | | | [added: [117](#ifd6f4af27a57401890271d74ae2e1592_313)] | | |

| [Item [removed: 15.](#i_0_307)] [added: 15.](#ifd6f4af27a57401890271d74ae2e1592_319)] | | | [Exhibits and Financial Statement [removed: Schedules](#i_0_307) | | | [107](#i_0_307)] [added: Schedules](#ifd6f4af27a57401890271d74ae2e1592_319)] | | | [added: [118](#ifd6f4af27a57401890271d74ae2e1592_319)] | | |

| [Item [removed: 16.](#i_0_313)] [added: 16.](#ifd6f4af27a57401890271d74ae2e1592_325)] | | | [Form 10-K [removed: Summary](#i_0_313) | | | [109](#i_0_313)] [added: Summary](#ifd6f4af27a57401890271d74ae2e1592_325)] | | | [added: [119](#ifd6f4af27a57401890271d74ae2e1592_325)] | | |

These forward-looking statements include, but are not limited to, statements related to [added: the expected impacts of the COVID-19 pandemic on] our [added: business, financial condition, and results of operations, the potential decline of our procedure volume, our acquisitions, our] expected business, [added: our expected] new product introductions, [added: the impacts of Extended Use Instruments,] procedures and procedure adoption, future results of operations, future financial position, our ability to increase our revenues, the anticipated mix of our revenues between product and service revenues, our financing plans and future capital requirements, anticipated costs of revenue, anticipated expenses, our potential tax assets or liabilities, the effect of recent accounting pronouncements, our investments, anticipated cash flows, our ability to finance operations from cash flows and similar matters, and statements based on current expectations, estimates, forecasts, and projections about the economies and markets in which we operate and our beliefs and assumptions regarding these economies and markets.

These forward-looking statements should, therefore, be considered in light of various important [removed: factors] [added: factors,] including, but not limited to, the following: [added: our ability to obtain accurate procedure volume and mix in] the [added: midst of the COVID-19 pandemic; the risk that the COVID-19 pandemic could lead to further material delays and cancellations of, or reduced demand for, procedures; curtailed or delayed capital spending by hospitals; disruption to our supply chain; closures of our facilities; delays in surgeon training; delays in gathering clinical evidence; delays in obtaining new product approvals or clearances from the U.S. Food and Drug Administration due to COVID-19; the evaluation of the risks of robotic-assisted surgery in the presence of infectious diseases; diversion of management and other resources to respond to the COVID-19 outbreak; the] impact of global and regional economic and credit market conditions on healthcare spending; [added: the risk that the COVID-19 virus disrupts local economies and causes economies in our key markets to enter prolonged recessions;] healthcare reform legislation in the U.S. and its impact on hospital spending, reimbursement, and fees levied on certain medical device revenues; changes in hospital admissions and actions by payers to limit or manage surgical procedures; the timing and success of product development and market acceptance of developed products; [removed: our ability to integrate acquisitions;] the results of any collaborations, in-licensing arrangements, joint ventures, strategic alliances, or partnerships, including the joint venture with Shanghai Fosun Pharmaceutical (Group) Co., Ltd.; our completion of and ability to successfully integrate [removed: the acquisition of] [added: acquisitions, including] Schölly Fiberoptic's robotic endoscope [removed: business;] [added: business and Orpheus Medical;] procedure counts; regulatory approvals, clearances, and restrictions or any dispute that may occur with any regulatory body; guidelines and recommendations in the healthcare and patient communities; intellectual property positions and litigation; competition in the medical device industry and in the specific markets of surgery in which we operate; [added: risks associated with our operations outside of the United States;] unanticipated manufacturing disruptions or the inability to meet demand for products; [added: our reliance on sole and single source suppliers;] the results of legal proceedings to which we are or may become a party; product liability and other litigation claims; adverse publicity regarding us and the safety of our products and adequacy of training; our ability to expand into foreign markets; the impact of changes to tax legislation, guidance, and interpretations; [added: changes in tariffs, trade barriers,] and [added: regulatory requirements; and] other risk factors.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

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| [PART IV](#ifd6f4af27a57401890271d74ae2e1592_316) | | | | | | | | |

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| [SIGNATURES](#ifd6f4af27a57401890271d74ae2e1592_328) | | | | | | [120](#ifd6f4af27a57401890271d74ae2e1592_328) | | |

[Table of](#ifd6f4af27a57401890271d74ae2e1592_7) [Contents](#ifd6f4af27a57401890271d74ae2e1592_7)

[Table of](#ifd6f4af27a57401890271d74ae2e1592_7) [Contents](#ifd6f4af27a57401890271d74ae2e1592_7)

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| [PART IV](#i_0_304) | | | | | | | | | | | |

| [SIGNATURES](#i_0_316) | | | | | | | | | [110](#i_0_316) | | |

As of December 31, [removed: 2019,] [added: 2020,] we own approximately [removed: 1.0] [added: 1.2] million square feet of space on [removed: 95] [added: 98] acres of land in Sunnyvale, California, where we house our principal headquarters, research and development, service, and support functions, and certain of our manufacturing operations.

Outside of Sunnyvale, California, we own facilities in other U.S. locations that are used for [removed: sales] [added: sales, training, engineering,] and [removed: training] [added: administrative functions] as well as manufacturing.

We also lease approximately [removed: 750,000] [added: 620,000] square feet [added: of space] for certain engineering, warehousing, and support functions at various locations in the U.S. Outside of the U.S., we own properties in Mexicali, Mexico, primarily for manufacturing operations, and Aubonne, Switzerland, primarily for our international headquarters.

In Israel, we lease facilities, including space for the operations of our recent acquisition of Orpheus Medical.

[Table of](#ifd6f4af27a57401890271d74ae2e1592_7) [Contents](#ifd6f4af27a57401890271d74ae2e1592_7)

Our common stock is [removed: being] traded on The Nasdaq Global Select Market under the symbol “ISRG.”

As of January [removed: 17, 2020,] [added: 15, 2021,] there were [removed: 188] [added: 159] stockholders of record of our common stock, although we believe that there are a significantly larger number of beneficial owners of our common stock.

The following table contains information as of December 31, [removed: 2019,] [added: 2020,] for two categories of equity compensation plans.

| Plan Category | | | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | | | | | | Weighted- average exercise price of outstanding options [removed: (2)] [added: (2)] | | | | | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | | |

| Equity compensation plans [added: not] approved by security holders [added: (1)] | | | [removed: 4,802,150] [added: 371,711] | | | | | | $ | [removed: 253.85] [added: 189.00] | | | | | [removed: 7,298,684] [added: —] | | |

| Equity compensation plans [removed: not] approved by security holders [removed: (1)] | | | [removed: 551,413] [added: 4,104,159] | | | | | | $ | [removed: 183.85] [added: 315.57] | | | | | [removed: —] [added: 9,139,869] | | |

[added: (1)] Since March 2009, we have had an active stock repurchase program.

As of December 31, [removed: 2019,] [added: 2020,] our Board of Directors (the “Board”) [removed: has] [added: had] authorized an aggregate amount of up to $7.5 billion for stock repurchases, of which the most recent authorization occurred in January [removed: 2019] [added: 2019,] when the Board increased the authorized amount available under our share repurchase program to $2.0 billion.

The remaining [added: $1.6 billion represents the] amount available to repurchase shares under the authorized repurchase program [removed: was $1.7 billion] as of December 31, [removed: 2019.][added: 2020.]

The graph set forth below compares the cumulative total stockholder return on our common stock between December 31, [removed: 2014,] [added: 2015,] and December 31, [removed: 2019,] [added: 2020,] with the cumulative total return of (i) the Nasdaq Composite Index, (ii) the S&P 500 Healthcare Index, and (iii) the S&P 500 Index over the same period.

This graph assumes an investment of $100.00 on December 31, [removed: 2014] [added: 2015] in our common stock, the Nasdaq Composite Index, the S&P Healthcare Index, and the S&P 500 Index and assumes the re-investment of dividends, if any.

[removed: ][added: ]

| | | | December 31, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | [removed: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

| | | | [removed: 2014 | | | | | |] 2015 | | | | | | 2016 | | | | | | 2017 | | | | | | 2018 | | | | | | 2019 | | | | | | [removed: | | | | | | | | | | | | | | | | | | | | | | | |] [added: 2020] | | |

| Total | | | 4,475,870 | | | | | | $ | 305.07 | | | | | 9,139,869 | | |

[Table of](#ifd6f4af27a57401890271d74ae2e1592_7) [Contents](#ifd6f4af27a57401890271d74ae2e1592_7)

The table below summarizes our stock repurchase activity for the quarter ended December 31, 2020.

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| Fiscal Period | | | Total Number of Shares Repurchased | | | | | | Average Price Paid Per Share | | | | | | Total Number of Shares Purchased As Part of a Publicly Announced Program | | | | | | Approximate Dollar Amount of Shares That May Yet be Purchased Under the Program (1) | | |

| October 1 to October 31, 2020 | | | — | | | | | | $ | — | | | | | — | | | | | | $ | 1.6 | billion |

| November 1 to November 30, 2020 | | | 51,914 | | | | | | $ | 661.07 | | | | | 51,914 | | | | | | $ | 1.6 | billion |

| December 1 to December 31, 2020 | | | — | | | | | | $ | — | | | | | — | | | | | | $ | 1.6 | billion |

| Total during quarter ended December 31, 2020 | | | 51,914 | | | | | | $ | 661.07 | | | | | 51,914 | | | | | | | | |

[Table of](#ifd6f4af27a57401890271d74ae2e1592_7) [Contents](#ifd6f4af27a57401890271d74ae2e1592_7)

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| Intuitive Surgical, Inc. | | | $ | 100.00 | | | | | $ | 116.11 | | | | | $ | 200.46 | | | | | $ | 263.07 | | | | | $ | 326.91 | | | | | $ | 449.37 | |

| Nasdaq Composite | | | $ | 100.00 | | | | | $ | 108.87 | | | | | $ | 141.13 | | | | | $ | 137.12 | | | | | $ | 187.44 | | | | | $ | 271.64 | |

| S&P 500 Healthcare Index | | | $ | 100.00 | | | | | $ | 95.64 | | | | | $ | 114.77 | | | | | $ | 120.16 | | | | | $ | 142.60 | | | | | $ | 158.90 | |

| S&P 500 Index | | | $ | 100.00 | | | | | $ | 111.96 | | | | | $ | 136.40 | | | | | $ | 130.42 | | | | | $ | 171.49 | | | | | $ | 203.04 | |

[Table of](#ifd6f4af27a57401890271d74ae2e1592_7) [Contents](#ifd6f4af27a57401890271d74ae2e1592_7)

| Total | | | 5,353,563 | | | | | | $ | 246.64 | | | | | 7,298,684 | | |

During the quarter ended December 31, 2019, we did not purchase any of our securities in the open market.

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| Intuitive Surgical, Inc. | | | $ | 100.00 | | | | | $ | 103.26 | | | | | $ | 119.89 | | | | | $ | 206.98 | | | | | $ | 271.63 | | | | | $ | 337.55 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Nasdaq Composite | | | $ | 100.00 | | | | | $ | 106.96 | | | | | $ | 116.45 | | | | | $ | 150.96 | | | | | $ | 146.67 | | | | | $ | 200.49 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| S&P 500 Healthcare Index | | | $ | 100.00 | | | | | $ | 105.21 | | | | | $ | 100.62 | | | | | $ | 120.75 | | | | | $ | 126.42 | | | | | $ | 150.03 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| S&P 500 Index | | | $ | 100.00 | | | | | $ | 101.38 | | | | | $ | 113.51 | | | | | $ | 138.29 | | | | | $ | 132.23 | | | | | $ | 173.86 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | Fiscal Year | | | | | | | | | | | | | | | | | | | | | | | | | | | [removed: | | | | | | | | | | | | | | | | | | | | | | | |]

| | | | [removed: 2019 | | | | | | 2018] [added: 2020] | | | | | | [removed: 2017 (2)] [added: 2019] | | | | | | [removed: 2016] [added: 2018] | | | | | | [removed: 2015] [added: 2017] (1) | | | | | | [removed: | | | | | | | | | | | | | | | | | |] [added: 2016] | | |

| | | | (In millions, except per share amounts and headcount) | | | | | | | | | | | | | | | | | | | | | | | | | | | [removed: | | | | | | | | | | | | | | | | | | | | | | | |]

| Revenue | | | $ | [removed: 4,478.5] [added: 4,358.4] | | | | | $ | [removed: 3,724.2] [added: 4,478.5] | | | | | $ | [removed: 3,138.2] [added: 3,724.2] | | | | | $ | [removed: 2,706.5] [added: 3,138.2] | | | | | $ | [removed: 2,384.4 | | | | | | | | | | | | | | | | | | | | | | | |] [added: 2,706.5] | |

| Gross profit | | | $ | [removed: 3,110.2] [added: 2,861.2] | | | | | $ | [removed: 2,604.1] [added: 3,110.2] | | | | | $ | [removed: 2,202.0] [added: 2,604.1] | | | | | $ | [removed: 1,892.9] [added: 2,202.0] | | | | | $ | [removed: 1,577.9 | | | | | | | | | | | | | | | | | | | | | | | |] [added: 1,892.9] | |

| Net income attributable to Intuitive Surgical, Inc. | | | $ | [removed: 1,379.3] [added: 1,060.6] | | | | | $ | [removed: 1,127.9] [added: 1,379.3] | | | | | $ | [removed: 670.9] [added: 1,127.9] | | | | | $ | [removed: 738.3] [added: 670.9] | | | | | $ | [removed: 588.8 | | | | | | | | | | | | | | | | | | | | | | | |] [added: 738.3] | |

| Net income per share attributable to Intuitive Surgical, Inc.: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | [removed: | | | | | | | | | | | | | | | | | | | | | | | |]

| Basic | | | $ | [removed: 11.95] [added: 9.06] | | | | | $ | [removed: 9.92] [added: 11.95] | | | | | $ | [removed: 6.01] [added: 9.92] | | | | | $ | [removed: 6.43] [added: 6.01] | | | | | $ | [removed: 5.29 | | | | | | | | | | | | | | | | | | | | | | | |] [added: 6.43] | |

| Diluted | | | $ | [removed: 11.54] [added: 8.82] | | | | | $ | [removed: 9.49] [added: 11.54] | | | | | $ | [removed: 5.77] [added: 9.49] | | | | | $ | [removed: 6.26] [added: 5.77] | | | | | $ | [removed: 5.18 | | | | | | | | | | | | | | | | | | | | | | | |] [added: 6.26] | |

| Shares used in computing basic and diluted net income per share: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | [removed: | | | | | | | | | | | | | | | | | | | | | | | |]

| Basic | | | [removed: 115.4 | | | | | | 113.7 | | | | | | 111.7 | | | | | | 114.9 | | | | | | 111.3] [added: 117.0] | | | | | | [added: 115.4] | | | | | | [added: 113.7] | | | | | | [added: 111.7] | | | | | | [added: 114.9] | | |

| Diluted | | | [removed: 119.5 | | | | | | 118.8 | | | | | | 116.3 | | | | | | 117.9 | | | | | | 113.7] [added: 120.3] | | | | | | [added: 119.5] | | | | | | [added: 118.8] | | | | | | [added: 116.3] | | | | | | [added: 117.9] | | |

| Cash, cash equivalents, and investments | | | $ | [removed: 5,845.2] [added: 6,869.1] | | | | | $ | [removed: 4,834.4] [added: 5,845.2] | | | | | $ | [removed: 3,846.5] [added: 4,834.4] | | | | | $ | [removed: 4,837.9] [added: 3,846.5] | | | | | $ | [removed: 3,347.8 | | | | | | | | | | | | | | | | | | | | | | | |] [added: 4,837.9] | |

| Total assets | | | $ | [removed: 9,733.2] [added: 11,168.9] | | | | | $ | [removed: 7,846.7] [added: 9,733.2] | | | | | $ | [removed: 5,776.8] [added: 7,846.7] | | | | | $ | [removed: 6,521.4] [added: 5,776.8] | | | | | $ | [removed: 4,907.3 | | | | | | | | | | | | | | | | | | | | | | | |] [added: 6,521.4] | |

| Other long-term liabilities | | | $ | [removed: 418.3] [added: 444.6] | | | | | $ | [removed: 338.6] [added: 418.3] | | | | | $ | [removed: 333.6] [added: 338.6] | | | | | $ | [removed: 112.1] [added: 333.6] | | | | | $ | [removed: 95.9 | | | | | | | | | | | | | | | | | | | | | | | |] [added: 112.1] | |

| Stockholders’ equity | | | $ | [removed: 8,284.7] [added: 9,759.1] | | | | | $ | [removed: 6,687.5] [added: 8,284.7] | | | | | $ | [removed: 4,780.4] [added: 6,687.5] | | | | | $ | [removed: 5,820.1] [added: 4,780.4] | | | | | $ | [removed: 4,319.5 | | | | | | | | | | | | | | | | | | | | | | | |] [added: 5,820.1] | |

| Total headcount | | | [removed: 7,326 | | | | | | 5,527 | | | | | | 4,444 | | | | | | 3,755 | | | | | | 3,211] [added: 8,081] | | | | | | [added: 7,326] | | | | | | [added: 5,527] | | | | | | [added: 4,444] | | | | | | [added: 3,755] | | |

[removed: (2)Reflects] [added: (1)Reflects] amounts recorded for the enactment of the 2017 Tax Act.

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[Table of](#ifd6f4af27a57401890271d74ae2e1592_7) [Contents](#ifd6f4af27a57401890271d74ae2e1592_7)

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

(1)Does not reflect the impact of the adoption of ASC Topic 606, *Revenue from Contracts with Customers*, effective January 1, 2018, using the full retrospective method, which restated fiscal years 2017 and 2016.

| [Report of Independent Registered Public Accounting [removed: Firm](#i_0_196)] [added: Firm](#ifd6f4af27a57401890271d74ae2e1592_199)] | | | [removed: [69](#i_0_196)] [added: [80](#ifd6f4af27a57401890271d74ae2e1592_199)] | | |

| [Consolidated Balance Sheets at December [removed: 31, 2019,] [added: 31,](#ifd6f4af27a57401890271d74ae2e1592_202) [2020](#ifd6f4af27a57401890271d74ae2e1592_202)[,] and [removed: 2018](#i_0_202)] [added: 201](#ifd6f4af27a57401890271d74ae2e1592_202)9] | | | [removed: [71](#i_0_202)] [added: [81](#ifd6f4af27a57401890271d74ae2e1592_202)] | | |

| [Consolidated Statements of Income for the years ended December [removed: 31, 2019, 2018,] [added: 31,](#ifd6f4af27a57401890271d74ae2e1592_208) [2020](#ifd6f4af27a57401890271d74ae2e1592_208)[, 201](#ifd6f4af27a57401890271d74ae2e1592_208)[9](#ifd6f4af27a57401890271d74ae2e1592_208)[,] and [removed: 2017](#i_0_208)] [added: 201](#ifd6f4af27a57401890271d74ae2e1592_208)8] | | | [removed: [72](#i_0_208)] [added: [82](#ifd6f4af27a57401890271d74ae2e1592_208)] | | |

| [Consolidated Statements of Comprehensive Income for the years ended December 31, [removed: 2019, 2018,] [added: 20](#ifd6f4af27a57401890271d74ae2e1592_217)[20](#ifd6f4af27a57401890271d74ae2e1592_217)[, 201](#ifd6f4af27a57401890271d74ae2e1592_217)[9](#ifd6f4af27a57401890271d74ae2e1592_217)[,] and [removed: 2017](#i_0_211)] [added: 201](#ifd6f4af27a57401890271d74ae2e1592_217)8] | | | [removed: [73](#i_0_211)] [added: [83](#ifd6f4af27a57401890271d74ae2e1592_217)] | | |

| [Consolidated Statements of Stockholders’ Equity for the years ended December [removed: 31, 2019, 2018,] [added: 31,](#ifd6f4af27a57401890271d74ae2e1592_223) [2020](#ifd6f4af27a57401890271d74ae2e1592_223)[, 201](#ifd6f4af27a57401890271d74ae2e1592_223)[9](#ifd6f4af27a57401890271d74ae2e1592_223)[,] and [removed: 2017](#i_0_214)] [added: 201](#ifd6f4af27a57401890271d74ae2e1592_223)8] | | | [removed: [74](#i_0_214)] [added: [84](#ifd6f4af27a57401890271d74ae2e1592_223)] | | |

| [Consolidated Statements of Cash Flows for the years ended December [removed: 31, 2019, 2018,] [added: 31,](#ifd6f4af27a57401890271d74ae2e1592_229) [2020](#ifd6f4af27a57401890271d74ae2e1592_229)[, 201](#ifd6f4af27a57401890271d74ae2e1592_229)[9](#ifd6f4af27a57401890271d74ae2e1592_229)[,] and [removed: 2017](#i_0_220)] [added: 201](#ifd6f4af27a57401890271d74ae2e1592_229)8] | | | [removed: [75](#i_0_220)] [added: [85](#ifd6f4af27a57401890271d74ae2e1592_229)] | | |

| [Notes to the Consolidated Financial [removed: Statements](#i_0_223)] [added: Statements](#ifd6f4af27a57401890271d74ae2e1592_232)] | | | [removed: [76](#i_0_223)] [added: [86](#ifd6f4af27a57401890271d74ae2e1592_232)] | | |

| [Schedule II—Valuation and Qualifying [removed: Accounts](#i_0_274)] [added: Accounts](#ifd6f4af27a57401890271d74ae2e1592_286)] | | | [removed: [104](#i_0_274)] [added: [115](#ifd6f4af27a57401890271d74ae2e1592_286)] | | |

We have audited the accompanying consolidated balance sheets of Intuitive Surgical, Inc. and its subsidiaries (the “Company”) as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] and the related consolidated statements of income, of comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, [removed: 2019,] [added: 2020,] including the related notes and [added: financial statement] schedule [removed: of valuation and qualifying accounts for each of the three years in the period ended December 31, 2019] listed in the [removed: accompanying] index [added: appearing under Item 15(a)(2)] (collectively referred to as the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, [removed: 2019,] [added: 2020,] based on criteria established in *Internal Control - Integrated Framework* (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2019] [added: 2020] in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2019,] [added: 2020,] based on criteria established in *Internal Control - Integrated Framework* (2013) issued by the COSO.

[removed: For the contingent consideration, key] [added: Key] assumptions included (1) the [removed: probability] [added: amount] and timing of [removed: milestone achievements based on] projected future [removed: revenues through 2019 and 2020] [added: cash flows,] and (2) the discount rate used to [removed: calculate] [added: determine] the present value of [removed: the milestone payments.][added: these cash flows.]

| | | | December 31, | | | | | | | | | [removed: | | | | | |]

| | | | [removed: 2019] [added: 2020] | | | | | | [removed: 2018] [added: 2019] | | | | | | [added: 2018] | | |

| ASSETS | | | | | | | | | | | | [removed: | | | | | |]

| Current assets: | | | | | | | | | | | | [removed: | | | | | |]

| Cash and cash equivalents | | | $ | [removed: 1,167.6] [added: 1,622.6] | | | | | $ | [removed: 857.9 | | | | | |] [added: 1,167.6] | |

| Short-term investments | | | [removed: 2,054.1 | | | | | | 2,205.2] [added: 3,488.8] | | | | | | [added: 2,054.1] | | |

| Accounts receivable, net of allowances of [removed: $8.3] [added: $17.7] and [removed: $8.2] [added: $8.3] as of December 31, [removed: 2019,] [added: 2020,] and [removed: 2018,] [added: 2019,] respectively | | | [removed: 645.2 | | | | | | 682.3] [added: 645.5] | | | | | | [added: 645.2] | | |

| Inventory | | | [removed: 595.5 | | | | | | 409.0] [added: 601.5] | | | | | | [added: 595.5] | | |

| Prepaids and other current assets | | | [removed: 200.2 | | | | | | 178.8] [added: 267.5] | | | | | | [added: 200.2] | | |

| Total current assets | | | [removed: 4,662.6 | | | | | | 4,333.2] [added: 6,625.9] | | | | | | [added: 4,662.6] | | |

| Property, plant, and equipment, net | | | [removed: 1,272.9 | | | | | | 812.0] [added: 1,577.3] | | | | | | [added: 1,272.9] | | |

| Long-term investments | | | [removed: 2,623.5 | | | | | | 1,771.3] [added: 1,757.7] | | | | | | [added: 2,623.5] | | |

| Deferred tax assets | | | [removed: 425.6 | | | | | | 428.6] [added: 367.7] | | | | | | [added: 425.6] | | |

| Intangible and other assets, net | | | [removed: 441.4 | | | | | | 261.0] [added: 503.6] | | | | | | [added: 441.4] | | |

| Goodwill | | | [removed: 307.2 | | | | | | 240.6] [added: 336.7] | | | | | | [added: 307.2] | | |

| Total assets | | | $ | [removed: 9,733.2] [added: 11,168.9] | | | | | $ | [removed: 7,846.7 | | | | | |] [added: 9,733.2] | |

| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | | | | [removed: | | | | | |]

| Current liabilities: | | | | | | | | | | | | [removed: | | | | | |]

| Accounts payable | | | $ | [removed: 123.5] [added: 81.6] | | | | | $ | [removed: 100.7 | | | | | |] [added: 123.5] | |

| Accrued compensation and employee benefits | | | [removed: 251.6 | | | | | | 193.8] [added: 235.0] | | | | | | [added: 251.6] | | |

| Deferred revenue | | | [removed: 337.8 | | | | | | 294.3] [added: 350.3] | | | | | | [added: 337.8] | | |

| Other accrued liabilities | | | [removed: 317.3 | | | | | | 231.8] [added: 298.3] | | | | | | [added: 317.3] | | |

| Total current liabilities | | | [removed: 1,030.2 | | | | | | 820.6] [added: 965.2] | | | | | | [added: 1,030.2] | | |

| Other long-term liabilities | | | [removed: 418.3 | | | | | | 338.6] [added: 444.6] | | | | | | [added: 418.3] | | |

| Total liabilities | | | [removed: 1,448.5 | | | | | | 1,159.2] [added: 1,409.8] | | | | | | [added: 1,448.5] | | |

| Commitments and contingencies (Note 8) | | | | | | | | | | | | [removed: | | | | | |]

| Stockholders’ equity: | | | | | | | | | | | | [removed: | | | | | |]

*Determination of Standalone Selling Prices Related to System Sale Arrangements*

As described in Notes 2 and 5 to the consolidated financial statements, the Company recognized $1,178.9 million of systems revenue, during the year ended December 31, 2020.

If a standalone selling price is not directly observable, then management estimates the standalone selling price considering market conditions and entity-specific factors including, but not limited to, features and functionality of the products and services, geographies, and type of customer.

The principal considerations for our determination that performing procedures relating to the determination of standalone selling prices related to system sale arrangements is a critical audit matter are the high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence relating to the estimates of standalone selling prices used to allocate the transaction price of an arrangement to each distinct performance obligation.

These procedures included testing the effectiveness of controls over the revenue recognition process, including controls over the determination of the estimates of standalone selling prices.

These procedures also included, among others, (i) testing management's process for determining the estimates of standalone selling prices; (ii) evaluating the appropriateness of the overall methodology used by management to develop the estimates, including the appropriateness of the data inputs related to the products and services, geographies, and type of customer used in the methodology; (iii) testing the completeness and accuracy of the data used in the methodology; and (iv) testing the accuracy of management's calculations of estimated selling prices.

February 9, 2021

| | | | 2020 | | | | | | 2019 | | |

| Total comprehensive income attributable to Intuitive Surgical, Inc. | | | $ | 1,073.1 | | | | | $ | 1,405.0 | | | | | $ | 1,130.1 | |

(IN MILIONS)

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| Adoption of new accounting standard (2) | | | | | | | | | | | | | | | | | | | | | (0.1) | | | | | | | | | | | | (0.1) | | | | | | | | | | | | (0.1) | | |

| Repurchase and retirement of common stock | | | (0.2) | | | | | | | | | | | | (7.9) | | | | | | (126.4) | | | | | | | | | | | | (134.3) | | | | | | | | | | | | (134.3) | | |

| Other comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | 12.5 | | | | | | 12.5 | | | | | | 0.5 | | | | | | 13.0 | | |

| Balances at December 31, 2020 | | | 117.7 | | | | | | $ | 0.1 | | | | | $ | 6,445.2 | | | | | $ | 3,261.3 | | | | | $ | 24.9 | | | | | $ | 9,731.5 | | | | | $ | 27.6 | | | | | $ | 9,759.1 | |

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| (2) Represents the adjustment related to the adoption of Accounting Standards Update ("ASU") 2016-13, C*redit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments*. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

The Company is subject to additional risks and uncertainties due to the COVID-19 pandemic.

The extent of the impact on the Company's business is highly uncertain and difficult to predict.

The Company's customers are diverting resources to treat COVID-19 patients and deferring elective surgical procedures, both of which are likely to impact customers' ability to meet their obligations, including to the Company.

Furthermore, capital markets and economies worldwide have been negatively impacted by the COVID-19 pandemic, and it is possible that the impact could cause an extended local and/or global economic recession.

Such economic disruption could have a material adverse effect on our business as hospitals curtail and reduce capital and overall spending.

Policymakers around the globe have responded with fiscal policy actions to support the healthcare industry and economy as a whole.

However, the magnitude and overall effectiveness of these actions remains uncertain.

[Table](#ifd6f4af27a57401890271d74ae2e1592_7) [of Contents](#ifd6f4af27a57401890271d74ae2e1592_7)

The severity of the impact of the COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company's customers, all of which are uncertain and cannot be predicted.

The Company's future results of operations and liquidity could be materially adversely affected by delays in payments of outstanding receivables, supply chain disruptions, uncertain or reduced demand, and the impact of any initiatives or programs that the Company may undertake to address financial and operational challenges faced by its customers.

As of the date of issuance of these Financial Statements, the extent to which the COVID-19 pandemic may materially adversely affect the Company's financial condition, liquidity, or results of operations is uncertain.

Customer Relief Program

During the second quarter of 2020, the Company introduced a series of programs to provide financial relief to customers (the “Customer Relief Program”).

As part of the Customer Relief Program, the Company provided its customers service fee credits, extended payment terms, and deferred payments related to Intuitive System Leasing arrangements.

The Customer Relief Program ended at the end of the third quarter of 2020.

*Service fee credits*.

As part of the Customer Relief Program, the Company provided service fee credits to customers based on the reduction in the utilization of their systems during the second and third quarters of 2020 relative to a pre-COVID-19 level baseline.

The Company reflected the service fee credits as a reduction of service revenue and accounts receivable in the quarter they were earned by its customers.

The service fee credit program resulted in a $80 million decrease in service revenue in 2020.

*Short-term payment relief*.

In response to the COVID-19 pandemic, the Company introduced a payment deferral program to provide financial relief to qualified customers.

This relief extended payment terms up to 180 days for qualified and creditworthy customers.

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*Acquisitions of Chindex and Schölly - Fair value of Intangible Assets and Contingent Consideration*

As described in Note 7 to the consolidated financial statements, the Company completed two transactions accounted for as business combinations during the year ended December 31, 2019.

During the first quarter of 2019, the Company’s majority-owned joint venture with Fosun Pharma acquired certain assets from Chindex and its affiliates (“Chindex”), a subsidiary of Fosun Pharma, for total purchase consideration of $66.0 million, which resulted in $64.7 million of contingent consideration liability and $48.2 million of distribution rights being recorded.

Management measured the contingent consideration liability at estimated fair value using a discounted cash flow model, which requires significant inputs not observable in the market.

For the distribution rights intangible asset, key assumptions included (1) the amount and timing of projected future cash flows, and (2) the discount rate used to determine the present value of these cash flows.

During the third quarter of 2019, the Company acquired certain assets and operations from Schölly Fiberoptic GmbH (“Schölly”) for total purchase consideration of $101.4 million, which resulted in $28.0 million of a manufacturing process technology intangible asset being recorded.

For the manufacturing process technology intangible asset, key assumptions included (1) the amount and timing of projected future cash flows and (2) the discount rate used to determine the present value of these cash flows.

The principal considerations for our determination that performing procedures relating to the acquisitions of Chindex and Schölly, specifically the fair value of the distribution rights intangible asset, contingent consideration liability, and manufacturing process technology intangible asset, is a critical audit matter are there was significant judgment by management in developing the fair value estimates.

This in turn led to a high degree of auditor judgment, effort, and subjectivity in performing procedures and evaluating audit evidence relating to management's projected future cash flows, specifically the revenue projections, for the distribution rights intangible asset, contingent consideration liability and manufacturing process technology, and the discount rates for the distribution rights intangible asset and contingent consideration liability.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained from these procedures.

These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management's valuation of the distribution rights intangible asset and contingent consideration liability for the acquisition of Chindex and the manufacturing process technology intangible asset for the acquisition of Schölly, and controls over the development of the projected future cash flows, specifically revenue projections and discount rates.

These procedures also included, among others, (i) reading the purchase agreements, (ii) evaluating management’s assessments of the completeness of the identified intangible assets acquired, and (iii) testing management’s process for estimating the fair value of the distribution rights, contingent consideration liability, and manufacturing process technology.

Testing management’s process included evaluating the appropriateness of the methods used to develop the fair value estimates and evaluating the reasonableness of significant assumptions used by management, including the revenue projections and discount rates.

Evaluating the reasonableness of the revenue projections included evaluating consistency with evidence obtained in other areas of the audit and considering historical trends of the Company’s business.

Professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of the discount rates.

February 7, 2020

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(IN MILLIONS)

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| Balances at December 31, 2016 | | | 38.8 | | | | | | $ | — | | | | | $ | 4,211.8 | | | | | $ | 1,617.6 | | | | | $ | (8.9) | | | | | $ | 5,820.5 | | | | | $ | — | | | | | $ | 5,820.5 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Three-for-one stock split | | | 77.6 | | | | | | 0.1 | | | | | | (0.1) | | | | | | | | | | | | | | | | | | — | | | | | | | | | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Repurchase and retirement of common stock | | | (7.3) | | | | | | | | | | | | (152.0) | | | | | | (2,122.0) | | | | | | | | | | | | (2,274.0) | | | | | | | | | | | | (2,274.0) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Other comprehensive loss | | | | | | | | | | | | | | | | | | | | | | | | | | | (6.6) | | | | | | (6.6) | | | | | | | | | | | | (6.6) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

No single customer represented more than 10% of total revenue for the years ended December 31, 2019, 2018, and 2017.

The Company recognizes an impairment charge when a decline in the fair value of its investments below the cost basis is judged to be other-than-temporary.

The Company allocates the acquisition-date fair value to the assets acquired and liabilities assumed based on the estimated fair values.

the lease term.

For some leases, lease payments are based on the usage of the systems.

Management uses one measurement of profitability and does not segregate its business for internal reporting.

*Leases*

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, *Leases* *(Topic 842)* (“Topic 842”), which amended prior accounting standards for leases.

Please see the description of the Company's "Intuitive System Leasing" and "Other Leasing Arrangements" accounting policies above.

Also, see "Note 6.

Leases" for further information.

As permitted by the new standard, the Company elected the following practical expedients when assessing the transition impact from both the lessee and lessor perspectives: (i) not to reassess whether any expired or existing contracts as of January 1, 2019, are or contain leases; (ii) not to reassess the lease classification for any expired or existing leases as of January 1, 2019; (iii) not to reassess initial direct costs for any existing leases as of January 1, 2019; and (iv) not to reassess whether land easements meet the definition of a lease.

The primary impact for the Company was the balance sheet recognition of ROU assets and lease liabilities for operating leases as a lessee.

Based on the results of our assessment under the framework in the Internal Control—Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, [removed: 2019.][added: 2020.]

The effectiveness of our internal control over financial reporting as of December 31, [removed: 2019,] [added: 2020,] has been audited by an independent registered public accounting firm, as stated in their report, which is included under “Item 8.

There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, [removed: 2019,] [added: 2020,] that have materially affected, or are reasonably likely to materially affect, our internal control over financial statements.

Certain information required by Part III is omitted from this report on Form 10-K and is incorporated herein by reference to our definitive Proxy Statement for our next Annual Meeting of Stockholders (the “Proxy Statement”), which we intend to file pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, within 120 days after December 31, [removed: 2019.][added: 2020.]

2)The following financial statement schedule of Intuitive Surgical, Inc. [added: for 2020, 2019, and 2018] is filed as part of this report and should be read in conjunction with the financial statements of Intuitive Surgical, Inc.:

[removed: Schedule II:] [added: | [Schedule II -] Valuation and Qualifying [removed: Accounts.][added: Accounts](#ifd6f4af27a57401890271d74ae2e1592_286) | | | [115](#ifd6f4af27a57401890271d74ae2e1592_286) | | |]

| 3.1(1) | | | | | | [Amended and Restated Certificate of Incorporation of the Company, as [removed: amended.](http://www.sec.gov/Archives/edgar/data/1035267/000103526717000147/ex-31amendedandrestatedcer.htm) | | |] [added: amended.](https://www.sec.gov/Archives/edgar/data/1035267/000103526720000166/ex-31xamendedandrestat.htm)] | | |

| 3.2(2) | | | | | | [Amended and Restated Bylaws of the [removed: Company.](http://www.sec.gov/Archives/edgar/data/1035267/000103526716000248/ex31amendedandrestatedbyla.htm) | | |] [added: Company.](https://www.sec.gov/Archives/edgar/data/1035267/000103526721000021/exhibit31-amendedandrestat.htm)] | | |

| 4.1(3) | | | | | | [Specimen Stock Certificate.](http://www.sec.gov/Archives/edgar/data/1035267/000089161800002457/0000891618-00-002457.txt) | | | [removed: | | |]

| 4.2 | | | | | | [Description of the Registrant's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of [removed: 1934](https://www.sec.gov/Archives/edgar/data/1035267/000103526720000032/isrg-20191231xex42q420.htm). | | |] [added: 1934](https://www.sec.gov/Archives/edgar/data/1035267/000103526721000028/exhibit42-descriptionofthe.htm).] | | |

| 10.1(4) | | | | | | [2000 [removed: Equity Incentive] [added: Non-Employee Directors’ Stock Option] Plan.](http://www.sec.gov/Archives/edgar/data/1035267/000089161800001640/0000891618-00-001640.txt) * | | | [removed: | | |]

| [removed: 10.3(5)] [added: 10.2(5)] | | | | | | [Form of Indemnity Agreement.](http://www.sec.gov/Archives/edgar/data/1035267/000103526715000087/ex101intuitivesurgicalincf.htm) * | | | [removed: | | |]

| [removed: 10.4(6)] [added: 10.3(6)] | | | | | | [2009 Employment Commencement Incentive Plan, as amended and restated.](http://www.sec.gov/Archives/edgar/data/1035267/000103526715000051/ex422009employmentcommence.htm) * | | | [removed: | | |]

| [removed: 10.5(7)] [added: 10.4(7)] | | | | | | [2000 Employee Stock Purchase [removed: Plan.](http://www.sec.gov/Archives/edgar/data/1035267/000103526717000079/ex1012000employeestockpurc.htm)] [added: Plan, as amended and restated.](http://www.sec.gov/Archives/edgar/data/1035267/000103526717000079/ex1012000employeestockpurc.htm)] * | | | [removed: | | |]

| [removed: 10.6(8)] [added: 10.5(8)] | | | | | | [2010 Incentive Award Plan, as amended and [removed: restated.](http://www.sec.gov/Archives/edgar/data/1035267/000103526717000079/ex1022010incentiveawardplan.htm)] [added: restated.](https://www.sec.gov/Archives/edgar/data/1035267/000103526720000085/ex-101xamendedandresta.htm)] * | | | [removed: | | |]

| [removed: 10.7(9)] [added: 10.6(9)] | | | | | | [Severance Plan.](http://www.sec.gov/Archives/edgar/data/1035267/000119312508246630/dex101.htm) * | | | [removed: | | |]

| [removed: 10.8(10)] [added: 10.7(10)] | | | | | | [Form of [added: Amended and Restated] Intuitive Surgical, Inc. [removed: 2000 Equity] [added: 2009 Employment Commencement] Incentive Plan Stock Option [removed: Agreement (Incentive and Nonstatutory Stock Options).](http://www.sec.gov/Archives/edgar/data/1035267/000119312509154009/dex102.htm)] [added: Grant Notice.](http://www.sec.gov/Archives/edgar/data/1035267/000103526716000130/isrg-20151231xex109.htm)] * | | | [removed: | | |]

| [removed: 10.9(11)] [added: 10.8(11)] | | | | | | [Form of [added: Amended and Restated] Intuitive Surgical, Inc. 2009 Employment Commencement Incentive Plan [added: Restricted] Stock [removed: Option] [added: Unit] Grant [removed: Notice.](http://www.sec.gov/Archives/edgar/data/1035267/000103526716000130/isrg-20151231xex109.htm)] [added: Notice.](http://www.sec.gov/Archives/edgar/data/1035267/000103526716000130/isrg-20151231xex1010.htm)] * | | | [removed: | | |]

| [removed: 10.10(12)] [added: 10.10(13)] | | | | | | [Form of [added: Amended and Restated] Intuitive Surgical, Inc. [removed: 2009 Employment Commencement] [added: 2010] Incentive [added: Award] Plan [added: Global] Restricted Stock Unit Grant [removed: Notice.](http://www.sec.gov/Archives/edgar/data/1035267/000103526716000130/isrg-20151231xex1010.htm)] [added: Notice.](https://www.sec.gov/Archives/edgar/data/1035267/000103526720000122/ex-103x2010planrsunoti.htm)] * | | | [removed: | | |]

| [removed: 10.11(13)] [added: 10.9(12)] | | | | | | [Form of [added: Amended and Restated] Intuitive Surgical, Inc. 2010 Incentive Award Plan [added: Global] Stock Option Grant [removed: Notice.](http://www.sec.gov/Archives/edgar/data/1035267/000103526716000130/isrg-20151231xex1011.htm)] [added: Notice.](https://www.sec.gov/Archives/edgar/data/1035267/000103526720000122/ex-102x2010planoptionn.htm)] * | | | [removed: | | |]

| [removed: 10.13(15)] [added: 10.11(14)] | | | | | | [Master Confirmation and Supplemental Confirmation between Intuitive Surgical, Inc. and Goldman Sachs & Co. LLC dated January 24, 2017](http://www.sec.gov/Archives/edgar/data/1035267/000103526717000021/isrg-20161231xex1013.htm). * | | | [removed: | | |]

| [removed: 10.14] [added: 21.1] | | | | | | [removed: [Consulting Agreement between Intuitive] [added: [Intuitive] Surgical, Inc. [removed: and Sal Brogna.](https://www.sec.gov/Archives/edgar/data/1035267/000103526720000032/isrg-20191231xex1014q4.htm) * | | |] [added: Subsidiaries.](https://www.sec.gov/Archives/edgar/data/1035267/000103526721000028/isrg-20201231xex211q42020.htm)] | | |

| 23.1 | | | | | | [Consent of Independent Registered Public Accounting [removed: Firm.](https://www.sec.gov/Archives/edgar/data/1035267/000103526720000032/isrg-20191231xex231q42.htm) | | |] [added: Firm.](https://www.sec.gov/Archives/edgar/data/1035267/000103526721000028/isrg-20201231xex231q42020.htm)] | | |

| 31.1 | | | | | | [Certification of Principal Executive [removed: Officer.](https://www.sec.gov/Archives/edgar/data/1035267/000103526720000032/isrg-20191231xex311q42.htm) | | |] [added: Officer.](https://www.sec.gov/Archives/edgar/data/1035267/000103526721000028/isrg-20201231xex311q42020.htm)] | | |

| 31.2 | | | | | | [Certification of Principal Financial [removed: Officer.](https://www.sec.gov/Archives/edgar/data/1035267/000103526720000032/isrg-20191231xex312q42.htm) | | |] [added: Officer.](https://www.sec.gov/Archives/edgar/data/1035267/000103526721000028/isrg-20201231xex312q42020.htm)] | | |

| 32.1 | | | | | | [Certification of Chief Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of [removed: 2002.](https://www.sec.gov/Archives/edgar/data/1035267/000103526720000032/isrg-20191231xex321q42.htm) | | |] [added: 2002.](https://www.sec.gov/Archives/edgar/data/1035267/000103526721000028/isrg-20201231xex321q42020.htm)] | | |

| 101 | | | | | | The following materials from Intuitive Surgical, Inc.’s Annual Report on Form 10-K for the year ended December 31, [removed: 2019,] [added: 2020,] formatted in Inline XBRL (Inline Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements, tagged at Level I through IV. | | | [removed: | | |]

| 104 | | | | | | The cover page from Intuitive Surgical, Inc.'s Annual Report on Form 10-K for the year ended December 31, [removed: 2019,] [added: 2020,] formatted in Inline XBRL and contained in Exhibit 101. | | | [removed: | | |]

(1)Incorporated by reference to Exhibit 3.1 filed with the Company’s Quarterly Report on Form 10-Q filed on [removed: October 20, 2017] [added: July 23, 2020] (File No. 000-30713).

(2)Incorporated by reference to Exhibit 3.1 filed with the Company’s Current Report on Form 8-K filed on [removed: December 13, 2016] [added: February 1, 2021] (File No. 000-30713).

(8)Incorporated by reference to Exhibit [removed: 10.2] [added: 10.1] filed with the Company’s Current Report on Form 8-K filed on April [removed: 26, 2017] [added: 28, 2020] (File No. 000-30713).

[removed: (10)Incorporated] [added: (12)Incorporated] by reference to Exhibit 10.2 filed with the Company’s Quarterly Report on Form 10-Q filed on July 23, [removed: 2009] [added: 2020] (File No. 000-30713).

[removed: (11)Incorporated] [added: (10)Incorporated] by reference to Exhibit 10.9 filed with the Company’s 2015 Annual Report on Form 10-K filed on February 2, 2016 (File No. 000-30713).

[removed: (12)Incorporated] [added: (11)Incorporated] by reference to Exhibit 10.10 filed with the Company’s 2015 Annual Report on Form 10-K filed on February 2, 2016 (File No. 000-30713).

[removed: (13)Incorporated] [added: (14)Incorporated] by reference to Exhibit [removed: 10.11] [added: 10.13] filed with the Company’s [removed: 2015] [added: 2016] Annual Report on Form 10-K filed on February [removed: 2, 2016] [added: 6, 2017] (File No. 000-30713).

[removed: (14)Incorporated] [added: (13)Incorporated] by reference to Exhibit [removed: 10.12] [added: 10.3] filed with the Company’s [removed: 2015 Annual] [added: Quarterly] Report on Form [removed: 10-K] [added: 10-Q] filed on [removed: February 2, 2016] [added: July 23, 2020] (File No. 000-30713).

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| 10.2(4) | | | | | | [2000 Non-Employee Directors’ Stock Option Plan.](http://www.sec.gov/Archives/edgar/data/1035267/000089161800001640/0000891618-00-001640.txt) * | | | | | |

| 10.12(14) | | | | | | [Form of Intuitive Surgical, Inc. 2010 Incentive Award Plan Restricted Stock Unit Grant Notice.](http://www.sec.gov/Archives/edgar/data/1035267/000103526716000130/isrg-20151231xex1012.htm) * | | | | | |

| 21.1 | | | | | | [Intuitive Surgical, Inc. Subsidiaries.](https://www.sec.gov/Archives/edgar/data/1035267/000103526720000032/isrg-20191231xex211q42.htm) | | | | | |

(15)Incorporated by reference to Exhibit 10.13 filed with the Company’s 2016 Annual Report on Form 10-K filed on February 6, 2017 (File No. 000-30713).

| INTUITIVE SURGICAL, INC. | | | | | | | | | [removed: | | | | | |]

| By: | | | | | | /S/ GARY S. GUTHART | | | [removed: | | | | | |]

| | | | | | | Gary S. Guthart, Ph.D. President and Chief Executive Officer | | | [removed: | | | | | |]

Date: February [removed: 7, 2020][added: 9, 2021]

| Signature | | | | | | Title | | | | | | Date | | | [removed: | | | | | |]

| /S/ GARY S. GUTHART | | | | | | President, Chief Executive Officer, and Director (Principal Executive Officer) | | | | | | February [removed: 7, 2020 | | | | | |] [added: 9, 2021] | | |

| Gary S. Guthart, Ph.D. | | | | | | | | | | | | | | | [removed: | | | | | |]

| /S/ MARSHALL L. MOHR | | | | | | Executive Vice President and Chief Financial Officer (Principal Financial Officer) | | | | | | February [removed: 7, 2020 | | | | | |] [added: 9, 2021] | | |

| Marshall L. Mohr | | | | | | | | | | | | | | | [removed: | | | | | |]

| /S/ JAMIE E. SAMATH | | | | | | Senior Vice President, Finance (Principal Accounting Officer) | | | | | | February [removed: 7, 2020 | | | | | |] [added: 9, 2021] | | |

| Jamie E. Samath | | | | | | | | | | | | | | | [removed: | | | | | |]

| /S/ [removed: LONNIE M. SMITH] [added: CRAIG H. BARRATT] | | | | | | Chairman of the Board of Directors | | | | | | February [removed: 7, 2020 | | | | | |] [added: 9, 2021] | | |

| Craig H. Barratt, Ph.D. | | | | | | | | | | | | | | | [removed: | | | | | |]

| /S/ AMAL M. JOHNSON | | | | | | Director | | | | | | February [removed: 7, 2020 | | | | | |] [added: 9, 2021] | | |

| Amal M. Johnson | | | | | | | | | | | | | | | [removed: | | | | | |]

| /S/ DON R. KANIA | | | | | | Director | | | | | | February [removed: 7, 2020 | | | | | |] [added: 9, 2021] | | |

| Don R. Kania, Ph.D. | | | | | | | | | | | | | | | [removed: | | | | | |]

| /S/ AMY L. LADD | | | | | | Director | | | | | | February [removed: 7, 2020 | | | | | |] [added: 9, 2021] | | |

| Amy L. Ladd, Ph.D. | | | | | | | | | | | | | | | [removed: | | | | | |]

| /S/ KEITH R. LEONARD JR. | | | | | | Director | | | | | | February [removed: 7, 2020 | | | | | |] [added: 9, 2021] | | |

| Keith R. Leonard Jr. | | | | | | | | | | | | | | | [removed: | | | | | |]

| /S/ ALAN J. LEVY | | | | | | Director | | | | | | February [removed: 7, 2020 | | | | | |] [added: 9, 2021] | | |

| Alan J. Levy, Ph.D. | | | | | | | | | | | | | | | [removed: | | | | | |]

| /S/ JAMI DOVER NACHTSHEIM | | | | | | Director | | | | | | February [removed: 7, 2020 | | | | | |] [added: 9, 2021] | | |

| Jami Dover Nachtsheim | | | | | | | | | | | | | | | [removed: | | | | | |]

| /S/ MARK J. RUBASH | | | | | | Director | | | | | | February [removed: 7, 2020 | | | | | |] [added: 9, 2021] | | |

| Mark J. Rubash | | | | | | | | | | | | | | | [removed: | | | | | |]

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Power of Attorney

Each person whose individual signature appears below hereby authorizes and appoints Gary Guthart, Ph.D., and Marshall Mohr, and each of them, with full power of substitution and re-substitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place, and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this annual report on Form 10‑K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue thereof.

| /S/ JOSEPH C. BEERY | | | | | | Director | | | | | | February 9, 2021 | | |

| Joseph C. Beery | | | | | | | | | | | | | | |

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| Lonnie M. Smith | | | | | | | | | | | | | | | | | | | | |

| /S/ CRAIG H. BARRATT | | | | | | Director | | | | | | February 7, 2020 | | | | | | | | |