Jamie Samath
Chief Financial Officer at Intuitive Surgical
Good afternoon. I will describe the highlights of our performance on a non-GAAP or pro forma basis. I will also summarize our GAAP performance later in my prepared remarks. A reconciliation between our pro forma and GAAP results is posted on our website.
Q4 and 2022 revenue and procedures are in line with our preliminary press release of January 11th. I will briefly review full-year 2022 performance before describing our Q4 results in greater detail. 2022 procedures grew by 18% as compared to 2021 or 15% on a three-year compound annual growth rate basis. During the year, we placed 1,264 systems at customers, down 6% year-over-year, driven by a decline in trading volumes of 165 systems due to the declining population of SIs in the field.
Recurring revenue, which is correlated to ongoing use of our products represented 79% of total revenue and grew 15% over the prior year. Total revenue of $6.2 billion, increased 9% year-over-year and grew approximately 12% on a constant-currency basis. Pro forma operating margin was 35% of revenue and reflected the impact of several headwinds. FX, supply chain challenges and inflation, together adversely impacted 2022 pro forma operating margin by approximately 1 percentage point. During the year, we repurchased $2.6 billion of our stock or approximately 11.2 million shares and we have a remaining authorization to repurchase our shares of $1.5 billion.
Turning to Q4, with respect to capital performance, we placed 369 systems, 4% lower than the 385 systems we placed in the fourth quarter of last year. There were 110 trading transactions in the quarter as compared to 117 last year. 51 of the 110 trading transactions were with OUS customers, higher than recent trends, primarily driven by customers in Japan and Brazil. As of the end of Q4, there were approximately 620 SIs remaining in the installed base, of which 134 are in the U.S. Given the continuing decline of older generation systems in the field, we expect trading volumes to decline significantly in 2023.
Q4 revenue was $1.66 billion, an increase of 7% from last year. On a constant-currency basis, fourth-quarter revenue grew approximately 10%. For full-year 2022, revenue denominated in non-USD currencies represented 24% of total revenue. The US dollar has weakened recently. And as a result, on a revenue-weighted basis using current rates, the US dollar is approximately 100 basis points stronger than the average rates realized in 2022.
Additional revenue statistics and trends are as follows. In the US, we placed 181 systems in the fourth quarter, lower than the 235 systems we placed last year, reflecting cautious capital spending by customers, given the macroeconomic environment and a decline of 21 systems associated with trade-in transactions. Average system utilization in the US increased by 6%, reaching an all-time high. Outside the US, we placed 188 systems in Q4 compared with 150 systems last year. Current quarter system placements included 70 into Europe, 51 into Japan and 14 into China compared with 63 into Europe, 37 into Japan and 14 into China in the fourth quarter of 2021. As of the end of 2022 there were 34 systems remaining under the current quota in China.
There are now four local competitors that are registered in China and they are active in tenders under the existing quota. Delays in the granting of a new quota in China will constrain our ability to further grow the installed base and limit capacity for procedure growth. Leasing represented 42% of Q4 placements compared with 37% last quarter and last year. The higher lease mix was primarily driven by the mix of customers in the US who preferred to lease and reflected in part an increase in placements acquired under usage-based arrangements. While leasing will fluctuate from quarter to quarter, we continue to expect that the proportion of placements under operating leases will increase over time.
Q4 system average selling prices were $1.43 million as compared to $1.45 million last year. System ASPs were negatively impacted by FX, partially offset by a favorable regional mix and higher mix of Xi [Phonetic] placements. We recognized $17 million of lease buyout revenue in the fourth quarter compared with $17 million last quarter and $26 million in Q4 of 2021. Da Vinci instrument and accessory revenue per procedure was approximately $1,820 compared with approximately $1,800 last quarter and $1,940 last year. On a year-over-year basis, FX negatively impacted I&A per procedure by approximately $50 and customer ordering patterns had a negative impact of approximately $40 per procedure, as customers, particularly in the U.S. and China reduced their inventory levels.
Turning to our Ion platform, in 2022, we tripled procedures to just over 23,000 and doubled system placements to 192 as compared to 2021. In Q4, we placed 67 Ion systems as compared to 31 in Q4 of 2021. The installed base of Ion systems is now 321 systems, of which 132 are under operating lease arrangements. Fourth quarter Ion procedures of approximately 7,900 increased 169% as compared to last year. Leveraging previous investments we've made in our da Vinci ecosystem, during the quarter, we commenced the launch of My Intuitive app for Ion users, providing them real-time access and insights of their Ion usage statistics.
Moving on to the rest of the P&L, pro forma gross margin for the fourth quarter of 2022 was 68.2% compared with 17.1% for the fourth quarter of 2021 and 69.8% last quarter. As a reminder, last quarter's gross margin included a one-time benefit of approximately 50 basis points relating to the favorable conclusion of certain indirect tax matters. Pro forma gross margin was lower than last year, primarily due to increased fixed cost relative to revenue, the stronger U.S. dollar and higher component pricing.
The supply chain environment was challenging in Q4 and indicators of supply and inventory held did not improve as compared to last quarter. Higher fixed costs relative to revenue reflect a combination of manufacturing related inefficiencies given the environment and investments for future growth. Fourth quarter pro forma operating expenses increased 19% compared with last year, driven by increased headcount, higher travel costs, increased customer training activities and higher R&D related project costs.
Fourth quarter 2021 operating expenses included a $30 million contribution to the Intuitive Foundation, which can support their efforts for the next couple of years and did not repeat in 2022. The pace at which we are increasing headcount continue to moderate in Q4 with net additions of about 330 employees in the quarter compared to a net increase of approximately 530 employees last quarter. More than half of the employees we added in Q4 were production staff at our instrument factory in Mexico to support procedure growth.
While we are slowing our hiring pace and pursuing leverage in our enabling functions, we are planning for balanced growth in operating expenses in 2023, given the opportunity to advance our next-generation robotics capabilities and the relatively earlier stage of our investments in Ion, SP and digital. In 2023, we expect a significant increase in expenses related to clinical trials. Brian will provide our outlook for operating expenses later in this call.
As we look forward to our growth plans over the next several years, we are planning to make significant capital expenditures. Capital expenditures for 2022 were $532 million and we expect 2023 capital expenditures in a range of $800 million to $1 billion. Of which, approximately two-thirds will be for facilities to expand our manufacturing capacity. Our manufacturing investment plans include advanced proprietary facilities for production of new products and the Ion platform in California and da Vinci systems in Georgia.
Internationally, we are increasing our product development capacity in Germany, building a new low-cost endoscope manufacturing facility in Bulgaria and establishing manufacturing capacity for domestic Xi production in China. We will also be expanding the footprint of our high-volume, low-cost instrument site in Mexico to support procedure growth across all of our platforms. These investments allow us to consolidate our manufacturing into larger centralized hubs such as our headquarter campus in Sunnyvale, California and our East Coast hub, just outside of Atlanta where we will co-locate surgeon training, technology development and manufacturing capacity. These are multi-year investments. And as a result, we expect depreciation expense to increase in 2023 and increase more significantly in 2024.
Pro forma other income was $21.8 million for Q4, higher than $7.2 million in the prior quarter, primarily due to lower foreign exchange losses from remeasurement of the balance sheet and higher interest income. Our pro forma effective tax rate for the fourth quarter was 18.2%, lower than prior quarters, primarily as a result of a more favorable geographical earnings mix and a discrete tax benefit of $7 million associated with the foreign tax amount. Fourth quarter 2022 pro forma net income was $439 million or $1.23 per share compared with $473 million or $1.29 per share for the fourth quarter of last year.
I will now summarize our GAAP results. GAAP net income was $325 million or $0.91 per share for the fourth quarter of 2022 compared with GAAP net income of $381 million or $1.04 per share for the fourth quarter of 2021. The adjustments between pro forma and GAAP net income are outlined and quantified on our website and include excess tax benefits associated with employee stock awards, employee stock-based compensation, amortization of intangibles, litigation charges and gains and losses on strategic investments. We ended the year with cash and investments of $6.7 billion compared with $7.4 billion at the end of Q3. The sequential reduction in cash and investments reflected share repurchases of $1 billion and capital expenditures, partially offset by cash from operating activities.
And with that, I would like to turn it over to Brian, who will discuss clinical highlights and provide our outlook for 2023.
