FINAL PROJECT INTUITIVE SURGICAL (NASDAQ: ISRG) MAJ Rob Shaw CPT Eun Suk Choi

Company Overview (1 of 4) Global technology leader in minimally invasive robotic-assisted surgery. da Vinci System Magnified 3D HD vision system $1.5-2 million per unit Original prototype created in late 1980s Company formed in 1995 FDA approved use in 2000, went public in June 2000 Laparoscopic Thoracoscopic Cardiac Urologic Gynecologic Pediatric Transoral otolaryngology 450,000 surgeries in 2013 Purchased only competitor (Zeus) in 2003 Only FDA-approved robotic surgical instrument manufacturer Global technology leader in minimally invasive robotic-assisted surgery. da Vinci System Magnified 3D HD vision system $1.5-2 million per unit Original prototype created in late 1980s Company formed in 1995 FDA approved use in 2000, went public in June 2000 Laparoscopic Thoracoscopic Cardiac Urologic Gynecologic Pediatric Transoral otolaryngology 450,000 surgeries in 2013 Purchased only competitor (Zeus) in 2003 Only FDA-approved robotic surgical instrument manufacturer Gary S. Guthart, PhD, President/CEO Source: Intuitive Surgical 2013 Annual Report 2

Company Overview (2 of 4) 3

Other products Firefly fluorescence imaging products EndoWrist instruments EndoWrist One vessel sealer EndoWrist Stapler 45 Other products Firefly fluorescence imaging products EndoWrist instruments EndoWrist One vessel sealer EndoWrist Stapler 45 Company Overview (3 of 4) Source: Intuitive Surgical 2013 Annual Report 4

2792 employees2792 employees 325 R&D325 R&D 1018 Manufacturing1018 Manufacturing 1449 Marketing, Sales, Administrative1449 Marketing, Sales, Administrative Mission/Vision: We’re Changing the Experience of Surgery… for One Patient at a TimeMission/Vision: We’re Changing the Experience of Surgery… for One Patient at a TimeLocationSizeOwn/LeaseFunctions Sunnyvale, CA 899,000Own HQ, R&D, S&S, Manufacturing Norcross, GA 92,000Own East Coast Sales, Training Campus Aubonne, Switzerland 15,000Own Int’l HQ Milford, CT 17,000Lease Vacant, Looking for Lessee Mexicali, Mexico 74,000Lease Manufacture EndoWrist instruments Company Overview (4 of 4) Source: Intuitive Surgical 2013 Annual Report 5

Operational Overview (1 of 2) Sub-Industry: Medical Appliances and Equipment Manufacture equipment and supplies, including surgical and medical instruments, dental equipment, and surgical appliances Manufacture equipment and supplies, including surgical and medical instruments, dental equipment, and surgical appliances companies companies Market size of $110 billion Market size of $110 billion 9.5% net profit margin 9.5% net profit margin P/E = (ISRG = 38.7) P/E = (ISRG = 38.7) ROE = 9.3% (ISRG = 19.2%) ROE = 9.3% (ISRG = 19.2%) Major competitors include: Baxter, West Pharmaceutical, Covidien, Thermo Fisher, Cooper Sub-Industry: Medical Appliances and Equipment Manufacture equipment and supplies, including surgical and medical instruments, dental equipment, and surgical appliances Manufacture equipment and supplies, including surgical and medical instruments, dental equipment, and surgical appliances companies companies Market size of $110 billion Market size of $110 billion 9.5% net profit margin 9.5% net profit margin P/E = (ISRG = 38.7) P/E = (ISRG = 38.7) ROE = 9.3% (ISRG = 19.2%) ROE = 9.3% (ISRG = 19.2%) Major competitors include: Baxter, West Pharmaceutical, Covidien, Thermo Fisher, Cooper Source: 6

Operational Overview (2 of 2) Major Issues: Uncertainty regarding implementation of ACA Uncertainty regarding implementation of ACA 2.3% excise tax starting in % excise tax starting in 2013 Coverage expansion may equate higher sales Coverage expansion may equate higher sales Public debate regarding da Vinci procedures Public debate regarding da Vinci procedures Resulting decline in system sales Resulting decline in system sales 546 da Vinci sales in 2013 vs. 620 sales in da Vinci sales in 2013 vs. 620 sales in 2012 Major Issues: Uncertainty regarding implementation of ACA Uncertainty regarding implementation of ACA 2.3% excise tax starting in % excise tax starting in 2013 Coverage expansion may equate higher sales Coverage expansion may equate higher sales Public debate regarding da Vinci procedures Public debate regarding da Vinci procedures Resulting decline in system sales Resulting decline in system sales 546 da Vinci sales in 2013 vs. 620 sales in da Vinci sales in 2013 vs. 620 sales in 2012 Source: Intuitive Surgical 2013 Annual Report 7

Financial Overview Income & Cash Flow Statements Source: 8

Financial Overview Balance Sheet Source: 9

Profitability Ratios Total margin = Net income Total revenue ROA = ROA = Net income Total assets ROE = Net income Total equity Source: Gapenski, L. C. (2007). Healthcare Finance: An Introduction to Accounting and Financial Management (4th ed.). Chicago: Health Administration Press. Financial Overview Ratios (1 of 2) Financial Overview Ratios (1 of 2) 10

Liquidity Ratios Current Ratio = Current Assets Current Liabilities DCOH = Cash + Marketable securities (Expenses – Depreciation – Provision for Uncollectables) / 365 (Expenses – Depreciation – Provision for Uncollectables) / 365 Source: Gapenski, L. C. (2007). Healthcare Finance: An Introduction to Accounting and Financial Management (4th ed.). Chicago: Health Administration Press. Financial Overview Ratios (2 of 2) Financial Overview Ratios (2 of 2) 11

Financial Overview Competitors Competitors Source: 12

DCOH too high, place cash in long-term investments and R&D DCOH too high, place cash in long-term investments and R&D Consider expanding product line Consider expanding product line Build international market beyond Europe and Japan, ie. China/S. Korea Build international market beyond Europe and Japan, ie. China/S. Korea Improve public image to overcome bad PR Improve public image to overcome bad PR RecommendationsRecommendations 13

QuestionsQuestions 14