Intuitive Surgical, Inc. (ISRG) Earnings Call Transcript & Summary

Okay. And we are back live here at 42nd Annual Goldman Sachs Healthcare Conference. I'm Amit Hazan, the medical technology analyst at Goldman. This is day 2 of the conference. And as always, one of the most exciting presentations that we have every year is talking to Intuitive Surgical. And this year is no different. So we've got Marshall Mohr, the CFO of the company, with us today; and Philip Kim, the Head of Investor Relations, and we'll get into the Q&A in a second. I want to turn it over to Phil for a quick disclosures, and then we'll get to it. Go ahead, Phil.

It's great to be with you this morning. Thank you, Amit, for hosting us. Before we get started, I'd like to mention that comments made this morning may be deemed to contain forward-looking statements. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties, which are described in detail in our SEC filings. Investors are cautioned not to place undue reliance on such forward-looking statements.

All right. With that, thanks, Phil, and welcome to both of you. We really -- I appreciate you both being here again this year.

I thought what we could do, what we have been doing with the other presentations so far at the conference is just starting with what's on folk's mind. I mean COVID is still a major variable in models and things and something that investors are thinking about. So if you don't mind, to the extent that you can, talk to us about recovery trends. Maybe set it up for us by reminding us of where you ended the first quarter as you reported. And how much can you tell us about progress in procedure recovery in your key regions since then?

Yes. So stepping back, it varies by geography, first of all, and the trends and the recovery varied by geography. So for example, in China, we've seen -- we saw the recovery earlier, and it has been sustained. And so we're seeing nice growth in terms of procedures in China. In the United States, you had a bumpy really first quarter, but then things started to come around. And by the end of the quarter, we had started to see substantive recovery. And as a result, we saw nice procedure growth in Q1. Our major market is the U.S. It still represents 70% of our total procedure volume. In Europe, it's mixed depending on the geography. And since that time, I think I would just ask you to think about what you read in the papers. You're seeing that and how vaccines are rolled out. I think how vaccines are rolled out will really play a big role here because you're seeing some lockdowns in certain geographies. In Japan, for example, where the vaccine rollout has been really slow. You're seeing the U.K. sort of vaccine rollout being quick, so we would expect to see some level of recovery in the U.K. In the United States, I think that, worldwide, we've also -- also, procedures have been affected by diagnostic trends. And so the diagnostic pipeline -- and we get information that lags, so the information we have is through February. But the diagnostic pipeline, frankly, is continuing to experience year-over-year declines through February anyway. PSA testing, colonoscopies, CT scans for lung cancer, and so that directly impacts the growth rates of our -- some of our larger procedure categories, including prostatectomies, colorectal procedures and lung cancer procedures. And we would expect that, over time, as COVID does wane and vaccines are rolled out, that diagnostic pipelines would return to normal. It's hard to predict when that will occur. And there is a backlog of patients waiting that we think will come to fruition. It will probably take between now and sometime well into 2022 before that all shakes out. But -- and that's assuming that there are no awful variant and resurgences that occur, but it will take a little bit of time. We've given guidance this quarter. So we felt more comfortable this quarter given the recoveries in the U.S. and other parts of the world. And so we gave a guidance of 22% to 26%. And those are our best estimates of what we think the increase year-over-year could be for this -- for 2021. And the ranges really depict if vaccines aren't rolled out at the level that the governments have said and if there were resurgences, then you would wind up at the low end of the range. If things work out the way that they had been trending at the end of the first quarter, then we think 26% is there to wind up.

That's a good recap. One tiny thing that puts you a little bit on is just the diagnostic piece, just the February comment. I would imagine, by now, you probably have some updated data on that, that's not directly tied to your procedures. I don't know if you're comfortable at all saying whether the trend -- as you suggested, we clearly have seen a whole lot of improvement in vaccination since February. So I would take your commentary to suggest that we're probably seeing a lot of improvement in diagnostic testing trends as well. Are you able to talk to anything beyond February on that part, where you're not actually selling a product?

We do. It does still lag a couple of months. So at this point, you're at the beginning of June, you probably have information through March, and maybe April is yet coming in the near term. But we try to -- when we get that information, we also look at it from the perspective of trying to compare it to where procedure trends are going and so forth, and we haven't completed that work yet.

Okay. Okay. Let's move on. I want to touch on a few items that are kind of related to the quarter-to-quarter gyrations, not necessarily COVID-related, and then hopefully save enough time to just talk and imagine the future for you in a bunch of different ways and categories. So I thought what we could do is just start with instrument and accessories and get to the price reductions and extended use that you announced. It's been almost 1 year, actually. It's just amazing how time flies. And that seemed to be a move to position you more competitively for things like areas like lap, cole, hernia, benign hysterectomy. And then you've said explicitly in the past, I think, that you think that there's some level of elasticity in that market. And then a couple of questions I want to ask around that. The first one is just, are you seeing any signs of improving utilization in those categories where price per procedure is now lower?

So to be clear, we -- just to recap so everybody is understanding the background here. We introduced instruments that have 12 to 18 lives. And those are in place of what previously had 10 uses per instrument. And along with the introduction of those instruments, we also reduced the pricing on some other selected instruments. So the idea being that we were targeting certain procedures where we believe that -- or where we see that reimbursements are lower and that we believe that there might be some level of elasticity. In the United States, the procedures targeted included cholecystectomies, inguinal hernias and benign hysterectomies. And so if you take now what it costs in a normal usage and an average usage for those procedures in terms of instrumentation today, with the extended use instruments and the lower pricing relative to where it was, we think that we're on par with what other minimally invasive modes of treatment would cost. And so we expect that there would be some level of elasticity. So this goes to your question, are we seeing any of that elasticity yet? We rolled out those instruments beginning in the U.S. in the beginning of Q4. So in October, we rolled out in Europe midway through the quarter, and we've rolled out in other markets since then. In the other markets, it's too early to tell. Even in Europe, I think it's a little too early to tell. In the U.S., while we see nice growth in those categories, we saw nice growth in those categories in Q1, it's hard to parse out how much of that is where are we in the recovery of COVID versus where are we in terms of expanded use because there's lower pricing. And so I think COVID convolutes the math, if you will. And -- but we'll continue to monitor it and see where it goes. I will tell you that the feedback that we get from particularly strained markets from a reimbursement perspective like France, the feedback from surgeons and from the hospital administrators has been really positive in terms of their view of what that could do for them in terms of doing additional procedures. Again, it's too early to tell whether that will really come to fruition or not, but their feedback has been one of thanks and positive.

Okay. Yes, that's good to hear. Let's talk a little bit about the capital side, and we can start with the U.S. market last couple of quarters. I mean if the fourth quarter really saw the system sale rebound back to growth, very impressive and systems lease rebounded a ton too. So it wasn't just a budget flush, as you say, at least from my view, I mean, leases did really well, too. And then the first quarter comes along and leases improve even more significantly, I think about 50%, but purchases were down 24%. So kind of overall trend is still really, really good on back to flat in 4Q, up 4% 1Q, but the building blocks may be a little bit mixed. And so what does this tell you about the interest in capital purchases, the interest in leases, the overall interest in robotics right now as we come out of the pandemic?

So there's several trends that I think that are taking place that all kind of come together to create what happened in the first quarter. So number one is procedures drive capital placements in our mature markets, and procedures, frankly, outperformed our expectations. And as a result, you wind up driving some level of capital placement that exceeded our expectations. In addition to that, we're seeing -- we're in the middle of a replacement cycle. I think the introduction of extended use instruments sort of -- I don't know that it fueled it that there's any kind of change in sort of the trajectory, but it helped that upgrade cycle continue. And so we're seeing Sis being traded in because they don't have -- we didn't propagate extended use instruments nor did we propagate some of our advanced instruments back to the Si system. So hospitals are trading those in order to either standardize or to be able to avail themselves of these later products. So that's a factor that occurred in Q1. The other thing -- the other trend that we're seeing, frankly, is that we're seeing multiple system purchases from large IDNs increase over time. So I think that's a positive sign. I think that, that is an indication. If you're an IDN or a hospital that owns multiple systems and now you're going to buy a bunch more, 3, 4, 5, whatever it is more, I think it's an indication that they believe that da Vinci surgery meets their quadrupling, both from a cost-to-treat perspective as well as a favorable outcome perspective. And so I think it was a positive sign overall in terms of how placements went into Q1.

Okay. Okay. Well, that's encouraging. And I'm encouraged. I don't know. I mean I think your job is to talk me down. I'm a sell-side analyst. So I want to give you another shot at this to talk me down. I hear the SP -- sorry, the opportunity for replacement. I hear the large IDNs, and I think positive things. And quite frankly, I just think about utilization, right? I kind of use your own line against you, if you will, when things were down last year, you talked about utilization being down, and that's why capital was down. Well, here we are in the first quarter, you've got utilization up 8%, not just over last year, which was an easy comp, but over 2019. So utilization is back. And by your own kind of definition, that would suggest a bullish signal for purchases. And so I've just laid out there again, those seem pretty good for capital as we think about the coming period. I know COVID has a lot of uncertainties, but any response to that?

Well, like I said, I think procedures do drive capital, and we did see a nice increase in procedures in Q1 that exceeded our expectations and it will drive capital. I think if you're looking at trying to predict where capital placements are going to go, what are the factors that impact future capital placements, that trade-in cycle I mentioned, of course, there's a limited number of Sis overall. So you'll see at least in terms of raw numbers, that will decline over time as the 1,300 Sis that are out in the world today are returned for a new fourth-generation product. And then I think you don't know what will happen from the standpoint of the pandemic and what variance will do or what resurgences will do around the world. And so those are the sort of the headwinds.

Yes. Okay. No, that's great. Just to close up on the capital piece, maybe we'll touch on the other regions. And it's interesting because obviously, COVID is still a major factor outside the U.S. And -- but for you, you're tied to countries or maybe it's not as much of a factor. So I wonder where you're more optimistic? And where you're still more cautious on the capital side outside the U.S. in your major markets?

Well, I think we saw 21 placements be done in the U.K. in Q1. That was far, far and above anything we've ever done in the U.K. in any particular quarter. And we were very clear in our call not to expect that level of placements. Going forward, I think there are markets where COVID is causing constraints in terms of procedures. And so you see that in India, you see that in Brazil, you see that in Taiwan. And then you have to think about there are countries where the vaccine is being rolled out very slowly. So there are lockdowns that are occurring in core portions of Japan as an example. And so I think that, as we move forward, those things will cause problems in those countries. Having said that, we're constrained in China. So we saw a nice placement number in China, 23 systems in Q1, but we're constrained by the quota. The quota is limited. We are waiting for the next quota, but we don't know when that will actually be issued. And if there were competition to come along in China, they would share in the remainder of the existing quota. So those are sort of the geographies that, to your question, that we think about potential headwinds.

Okay. So somewhat relatedly, let's maybe just touch on competition here. I think of a couple of things. Obviously, Medtronic is planning to get into Europe. They've now got formal guidance, at least for outside the U.S., to do $50 million to $100 million in sales or so over the next 12 months. And CMR has been out there for a little bit now, and I'm curious if you had seen them too. And -- but the real question for me is, is this a zero-sum game? Would those have been -- if Medtronic is able to get $50 million to $100 million in sales, would those have been customers that otherwise would have bought from you? Or is the market just expanding with your competition?

We'll see. We fully expect customers to purchase and try out competitive products. There's no question that, that will happen. There will be surgeons that want to be first. There will be surgeons that want to try, and we encourage that. And at the end of the day, I think the product that we'll win, it's not about the robot, it's about the ecosystem that surrounds that robot. So it's all about what is the training protocols? What is the breadth of instruments? What are the other things that come along with that surgery? What directs -- what improves the Quadruple Aim? What improves patient outcomes, reduces cost and create a positive experience for the patients and the surgeons? I think that's really what will drive ultimately how many of the competition -- how many systems of the competition will be out there and how many systems have -- versus how many systems of da Vinci will be out there. So it's about that ecosystem. But as the competitors enter the market, and you made a comment about -- you don't know if we've seen CMR, we see CMR in almost every tender in Europe at this point. And so as competitors come into the market, sales cycles lengthen. The tenders -- in most other countries, there's a tender process that the government imposes to purchase the systems for public hospitals, and those cycles have lengthened and will continue to lengthen. It will also put pressures on ASPs as customers evaluate the alternatives. Even if this is -- the alternative system isn't as good, they're still going to try to use that as leverage against our pricing. So those are what we can see as potential issues.

That's great color. I want to just spend a couple of minutes to touch on a couple of things that came up on the last call that just caught our eye, one is the telepresence program. So basically streaming cases. And you said that your telepresence program, I think, supported 45% of all case observations in the quarter, up from 5% last year. And so yes, that caught everybody's attention. So just a couple of related questions to that, just so we all understand what we're talking about here. I mean is there a revenue component to this yet? Or is this just kind of a cool differentiating feature that customers can use as a new training tool?

I'll let Philip answer the questions. Go ahead, Phil.

Yes. It's not revenue generating. So the telepresence is integrated infrastructure and technology that enables secure real-time remote collaboration and support for our customers. So if you think about case observations, it really makes -- improves the efficiency when you think about surgeon training and the experience of the surgeon, particularly in an environment with COVID where you can't travel.

Okay. But is this a foray then into remote capabilities and something that could be incremental to revenues then? Just imagining a world with this same technology can be used and maybe more meaningful for remote surgeries.

Yes. I think at this point in time, given -- at least with respect in the U.S., there's credentialing and regulatory restrictions. And so we obviously have the capabilities to do it. I think when you think about remote capabilities, you should think about training and proctoring. And more globally, if this becomes something that takes off, we definitely have the capabilities to pursue that.

Okay. So the other comment you made that was interesting was about surgical simulation. And that usage grew 46% last quarter. So what's the significance there?

Yes. It increases engagement of our surgeon user base and shows the value of the ecosystem. So if you think about training technologies like simulation, those are important areas where we're investing in. So just deepens the ecosystem.

Okay. All right. Fair enough. I want to move the discussion towards the pipeline and find various ways of being unsuccessful in getting you answer what I'd like to get, but I'm going to try. So let's start with R&D spend first. And I've asked you a similar question in the past, but I'm going to ask you to kind of in a COVID context because your R&D spending grew right through the pandemic, despite the pressures you saw on the top line. So I'm just wondering if you could just talk to the buckets of R&D spending that you're allocating those dollars to these days.

Apologize for the dog in the background. The -- yes. So if you step back for a second and you say, what is the opportunity to improve surgery through robotics? And I think that the fact that you see so many different potential competitors emerging and so forth is sort of an endorsement that computer-aided interventions is a big opportunity, and we'll -- and bigger than -- and we're in the early stages of getting into that opportunity. So we believe that this is the time to continue to invest to advance our technology such that we address a larger component of the market as well as accelerate into the market and improve the patient and do that through improvement of patient outcomes. The areas of investment specifically that we're working on are not a surprise. There are things that we've talked about in the past. It includes digital ecosystem, our Ion product, our SP product and OUS expansion. And those are the primary areas that we're making investments at this point.

Okay. Okay. So let me try to just talk to some of the opportunities that could develop and see where the discussion goes. So maybe start with the procedure side. And one way we think about it, sometimes we talk to investors about it, is kind of a barbell approach on the less complex side and the more complex side. And so on the less complex side, is there a technological need that's still yet to be met on kind of the higher volume, simpler procedure opportunities such as some of the bigger categories in general surgery? Or is it mostly just an economic formula at this point as being able to lower costs as we talked about earlier and lower that cost of procedure for procedures over time?

I'll let Philip start. Go ahead.

Yes. So if you look at what we did in Q1, I mean, we saw double-digit growth in some benign procedure -- benign general surgery categories, bariatrics, hernia, cole. This growth, it shows that surgeons are choosing da Vinci because it helps them achieve their quadruple aims, lower cost of treat, better patient experience, better surgeon experience, better outcomes. And so it's really this ecosystem, which we've talked about, and you know quite well, the instrument accessories, data, and it's helping them -- they're choosing these technologies in the simpler complex -- in the simpler procedures. And so we're continuing to add to that ecosystem to make -- to further advance usage there. The extended use program we already talked about earlier, which we highlighted various procedure categories within the benign procedure category, cole, benign hysterectomy and inguinal hernia. Those are examples. So ultimately, it will be a combination of both factors where we'll continue to innovate and we'll be able to add to the ecosystem and also lower cost. We've mentioned the virtuous cycle several times where we make improvements in manufacturing, gain scale, pass along lower cost and pass along those efficiencies to our customers, thereby driving penetration in the market. And that's something that we fully believe in, in the long term.

Just to put a finer point on it, if you take something like a cole, we can use any procedure hypothetically where there's clearly a large runway, right, to just 1 million -- almost 1 million procedures in the U.S. You're still doing really well, but a fraction of that. Is it the technological innovations of the future? Or is it the cost reductions that are going to get you that higher market share of that pie?

Yes. It's hard to parse out. I think that we're focused on both. We're focused on technological innovation that will help capture additional pieces of whether it be cole or other indications. And you asked about R&D spend, and that's what that R&D spend is intended to do is to expand our footprint by, again, addressing not to overuse the term, addressing the Quadruple Aim. Having said that, with extended use instruments and what we really did was -- is that's a part of what we call the virtuous cycle. And so there's a constant effort in trying to improve the quality, durability of instruments as an example. And we -- when we get to where we think we can share some of that improvement with the customer in the way of lower cost, we will do that. And that will generate additional gross margin dollars, maybe not gross margin percentage, but rather gross margin dollars, then we can reinvest that and continue that virtuous cycle. So that -- it's hard to parse out specifically how much will be the result of technological innovation versus how much will be cost, but we think that both are important in terms of expansion going forward.

And if you think about it from the other side of the barbell, the more complex side, it just strikes me that price is not as much of a factor here that it could be technology. So I think about areas like liver, thoracic, cardiac, where attempts are being made. Is there something that needs to happen technologically for robotics to do better in some of these more complex categories?

Yes. So first, let's just talk about where we are in those types of indications. So if you look at thoracic, actually, thoracic has grown quite nicely for us over the last couple few years. And we're seeing really nice uptake in terms of da Vinci usage. It has a little bit to do with we completed the instrumentation set that we believe optimize the procedure and enable a better outcome. We actually do a number of liver procedures. Now liver isn't a large cohort, relative to some of the other benign procedures or even some of the complex cancer procedures, but it's there. And we're doing liver procedures around the world. Frankly, there's a lot of liver procedures being done in places like China. And -- but having said that, to your question, do we think that we're done innovating? And the answer is no. And the complication rates, even with the use of da Vinci, which is better than the alternatives of laparoscopic and/or open, the complication rates are still where there is improvement to be made. And so we will continue to drive technologies, whether it be through less invasion into the body, meaning you're using single site or you're using something that attaches to an Ion product. Or whether it be that you come up with different types of instrumentation, different guidance systems, different information that you can supplement to the surgeon like Iris. And I -- and as we do that, then I think it will both improve outcomes and it will allow us to expand our market -- our footprint.

Okay. Let me ask one question on the hardware side. So this is kind of a multiport system type of question. And we're seeing a variety of form factors, not surprisingly maybe from your competitors on the hardware side of their systems. And you've already made some of these trade-offs over many, many years. I mean I think if I'm not mistaken, like ZEUS had arms coming from the surgery table 20 years ago, and you had been thinking about that. But when I review some of your more futuristic videos online, if you will, some of the things that you guys have put out. The multiport system looks kind of the same. I mean it may be it's sleeker console, but looks roughly the same from kind of just a hardware standpoint. So the question is, just given how far you've come here, are you mostly done innovating on the multiport robotic hardware side?

I think that what you've seen happen since we introduced -- part of the question, I'm sure, is driven by the fact that we introduced Xi in 2014. And here we sit in 2021, and we haven't introduced anything else. Part of that is that we're constantly innovating. We're driving the technology forward. A lot of that fits onto the existing platform, so you don't need to modify the platform to be able to provide that better capability. What I mean by that is that today's system -- today's Xi System is very different than the one we introduced several years ago. We didn't have stapling back then. We didn't have advanced energy instruments that we were attaching to it back then. Frankly, table motion was introduced just after we did the Xi. So we're able to -- we're driving forward in improving -- looking at ways to improve the patient outcomes and to expand the base, and we're able to do that without having to change the platform. Now there's always things that we're working on in the back room. And you should expect that we're always working on things that could result in exchanging that platform. We -- and so if we get to a point where there's enough change or there are critical changes that we believe are necessary and it results in having to deliver a new platform, we'll introduce it. And you'll see it. But at this point, like I said, a lot of the innovation has been on things that we really didn't need to change to the core platform. Now having said all of that, just remind you that in the meantime, we've introduced SP, we've introduced Ion, and those are also platforms that we believe have opportunities in the future to both improve patient outcomes and expand our footprint.

All right. No question. Totally understood on that. And so maybe let's talk a little bit about the imaging side and Iris. And I think what I'm curious about there, I mean, obviously, there's a lot going on already with pre-op images. But I'm curious how far we might be away from real-time imaging. I mean it exists today already with ultrasound kind of as a standalone, if you will, outside of the robotic platform. And so I'm wondering if that's an area of integration that you'll look to and that's kind of the next step for Iris that could be incremental for your surgeons in many surgeries?

Yes. With respect to real-time imaging, and we focus our innovations on feedback that we get from surgeons based on their pursuit of the Quadruple Aim. And with respect to real-time imaging, there's obviously value in some procedures. But how far we are away from that? Time will tell me, Amit. So...

Okay. Okay. I think I'm going to get a similar answer to the next question, but I'm going to try. So we often, here and there, talk about imaging agents. You've talked about it in recent years, and it will be some years, not so much discussion, some years more. But you've got a ureter identification compound in Phase II, I think, in the U.S., I hope I'm getting the roughly speaking, where they are correctly. You've got -- I think there's an ovarian cancer that's nearing filing for cancer identification, but nearing filing for FDA approval. So are we still too far to be thinking about imaging agents here as a potential on the da Vinci system for some surgeries? Is it still too far out?

Yes. So we're working on ureter imaging agents, Amit, but the regulatory process is long. And so it's a bit early to comment on the road map at this point. And so we will update you when we have something major to share.

We do think that it will have an impact. We do think that it's -- it will help improve, again, surgeon visualization and information the surgeon can use to improve surgery. So we'll continue to invest in this area, not to the level of the other 4 investment areas that I mentioned, but certainly try to drive it forward. And as Philip said, it's just a long regulatory process. It's more like a drug process.

Okay. Haptic feedback. It's something that just given your competition is something already that's being used these days a little bit more often. Has your thinking there evolved at all in terms of the value of haptic feedback to what you already have with 3D imaging?

It's interesting. I think that you hear -- so first of all, if we talk to da Vinci surgeons, those that have used the system and we ask them, what are the few things that you would like to see improved? Haptics is not as high on the list of some other things that we're working on. And if you go to non-da Vinci surgeons, you hear more about they need haptics and it's because what they're used to is either open or laparoscopic and they actually have that sensation. Those that use the da Vinci system have figured out that the visualization is really good and it's good enough. Having said that, we've -- Gary, I think, worked on haptics and haptics technologies back when he was a young engineer, and there are applications. The question is just is whether there's enough of an appetite for a need for it, an appetite for it and will surgeons and administrators pay for it? And because there will be an increase in the cost of the instrument because you have to put sensors on it. Some of the haptics can take the form of when the instrument touches tissue, the little red light goes on or a vibration occurs. I think when we think about haptics, we think about true haptics, meaning that you can actually have the sensation in the fingertips of the surgeon. And that is -- that will require modification of instruments such that the instruments will be more expensive. So the question is, will they be willing to pay for it? And we'll see. And whether it makes -- if it makes sense for us to introduce it if it was a high demand, I think we could go there pretty easily given the technology and the work we've done in the past.

Just a couple of quick questions on the P&L in the time we have left. R&D, we talked about it earlier, but in dollar terms, spend from '17 to '21 doubled, and it's 8% of sales going to 10% of sales. And I'm curious if you can talk to whether this is just now the new normal as a percent of sales. I mean is this what we should be expecting from Intuitive in the coming years?

In the shorter term, I wouldn't expect anything different. I think that these are complex technologies. These are complex problems we're trying to solve, and it takes a substantial amount of investment in R&D to be able to solve them. And you even heard in, I think, either in your conference or in a conference last week, Medtronic talked about a substantial increase in their R&D budget, and I think a good portion of that is attributable to their efforts in robotics. So this is not for the faint of heart. This is something that takes dollars. We think that the return on net investment has been -- justifies itself. And we think that the opportunities going forward will provide a return that justifies the investments we're making today. So we're not -- we would not suggest that anybody that's modeling financials going forward, that they start to model anything lower than where we are today.

Okay. Move down the P&L, and it's no secret your focus on top line and investment. I think everybody clearly gets that. But from a shareholder perspective, what is your commitment to kind of consistency of earnings growth?

So in the shorter term, our focus, like you said, is really about driving market penetration, driving market expansion. And we are looking at it from the perspective of if it takes additional investment and you sacrifice a bit of margin to be able to do it, we would do that. Having said that, we have enjoyed in the past. I think in our industry at the top, if not near the top and overall in the technology industry, near the top. So we've enjoyed substantive profitability at an operating profit level. And we'll make investment as necessary, but we would like to be in that top tier of companies at a profitability perspective.

Okay. The final word here, Marshall, goes to you on just your balance sheet, your cash position. You have been a really good buyer of your stock at different times, but you've only bought back shares in 2 of the last 6 quarters. Obviously, there's been a pandemic going around. No one can blame you. But how do you think about that cash position? And how should investors be thinking about your use of it here in the coming quarters and years?

Yes. Fair question. I think, number one, we look at our focus is on organic investments. But there will be opportunities to purchase technologies, new tuck-ins like you've seen us do in the past. The difference between the environment going forward and the environment of the past is that we were able to do those tuck-ins and provide the seller of that -- of those technologies, the licensor of those technologies, the opportunity to monetize it in robotic field. And we were the only ones participating in that field. Going forward, there's competition for it. There are -- as we've talked before, there's numerous companies trying to break into this field. And so we believe that those tuck-ins are probably going to cost us more money. We think that there, we're not going to invent everything. So we're going to find things that will be good for us to purchase. So part of the cash is sort of kept for that purpose. And then there's likely cash that we need to return to shareholders at some point in time. And we'll continue looking at the market and making decisions as we have in the past when there's a disconnection in terms of the market and what we think the company's value is, we'll step up the plate and return a substantive amount of cash to shareholders. You've seen us do, in my tenure, 3 large buybacks. And again, we haven't changed our philosophy. We'll continue those practices.

Let's end it there in the interest of time. Marshall, Phil, we really appreciate both of you coming to the conference again. I'm hoping we can do this live in California not too far from you next year. So let's hope for that. And in the meantime, good luck to you in the rest of the year and your meetings at the conference. Take care.

Thanks, Amit. Thanks for having us at the conference. We've enjoyed it.