LivaNova PLC (NASDAQ:LIVN) Q4 2024 Earnings Conference Call February 25, 2025 8:00 AM ET Company Participants Briana Gotlin - Vice President, Investor Relations Vladimir Makatsaria - Chief Executive Officer Ahmet Tezel - Chief Innovation Officer Alex Shvartsburg - Chief Financial Officer Conference Call Participants Rick Wise - Stifel Michael Polark - Wolfe Research Matt Taylor - Jefferies David Rescott - Baird Matt Miksic - Barclays David Roman - Goldman Sachs Adam Maeder - Piper Sandler Operator Good day, ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________________________ ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Form 10-K For the fiscal year ended December 31, 2024 (Mark One) or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission file number: 001-37599 LivaNova PLC (Exact name of registrant as specified in its charter) England and Wales ...

1 Real patients treated with VNS Therapy (Left to Right: Breanna; Candace; Jose, father of patient David) Safe Harbor Certain statements in this material, other than statements of historical or current fact, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Exchange Act. These statements include, but are not limited to, LivaNova's plans, objectives, strategies, financial performance and outlo ...

Core Insights - LivaNova reported quarterly earnings of $0.81 per share, exceeding the Zacks Consensus Estimate of $0.80 per share, but down from $0.87 per share a year ago, indicating an earnings surprise of 1.25% [1] - The company posted revenues of $321.8 million for the quarter ended December 2024, slightly missing the Zacks Consensus Estimate by 0.48%, compared to $310.1 million in the same quarter last year [2] - LivaNova has surpassed consensus EPS estimates in all four of the last quarters and has topped revenue estimates three times during the same period [2] Earnings Outlook - The future performance of LivaNova's stock will largely depend on management's commentary during the earnings call and the trends in earnings estimate revisions [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.78 on revenues of $306.25 million, while for the current fiscal year, the estimate is $3.64 on revenues of $1.32 billion [7] Industry Context - The Medical - Instruments industry, to which LivaNova belongs, is currently ranked in the top 32% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - The performance of LivaNova's stock may also be influenced by the overall industry outlook, as empirical research indicates that top-ranked industries outperform lower-ranked ones significantly [8]

Revenue Performance - Fourth-quarter 2024 revenue was $321.8 million, representing a 3.8% increase on a reported basis and a 6.8% increase on an organic basis compared to the prior-year period[4]. - Full-year 2024 revenue reached $1.25 billion, an 8.7% increase on a reported basis and a 10.7% increase on an organic basis compared to 2023[4]. - LivaNova's net revenue for Q4 2024 was $321.8 million, representing a 3.8% increase compared to $310.1 million in Q4 2023[34]. - For the full year 2024, net revenue reached $1,253.4 million, an 8.7% increase from $1,153.5 million in 2023[43]. - Organic net revenue for the year ended December 31, 2024, was $1,241.8 million, reflecting a 10.1% growth compared to $1,128.4 million in 2023[56]. Earnings and Profitability - Fourth-quarter 2024 U.S. GAAP diluted earnings per share was $1.02, up from $0.30 in the fourth quarter of 2023[10]. - Full-year 2024 adjusted diluted earnings per share was $3.38, compared to $2.80 for the full-year 2023[14]. - The company reported a net income of $55.9 million for Q4 2024, a significant increase from $16.3 million in Q4 2023[38]. - Diluted EPS for 2024 was $1.16, up from $0.30 in 2023, with adjusted diluted EPS reaching $3.38 compared to $0.87[49]. - Adjusted operating income for the year was $239.2 million, compared to $169.3 million in 2023, reflecting a strong operational performance[44]. Operating Performance - Fourth-quarter 2024 operating income was $37.0 million, a significant improvement from an operating loss of $88.0 million in the fourth quarter of 2023[9]. - Operating income for 2024 was $129.1 million, significantly improved from an operating loss of $88.0 million in 2023, with adjusted operating income at $239.2 million[49]. - Gross profit margin improved to 68.2% in Q4 2024, up from 61.3% in Q4 2023[41]. - Gross profit margin increased to 69.5% in 2024 from 66.9% in 2023, while adjusted gross profit margin rose to 70.2% from 69.6%[45]. - Operating income margin increased to 10.3% in 2024 from a loss of 5.9% in 2023, while adjusted operating margin rose to 19.1% from 14.7%[45]. Cash Flow and Financial Position - Full-year 2024 net cash provided by operating activities was $183.0 million, with adjusted free cash flow of $162.9 million[4]. - The company generated $183.0 million in net cash from operating activities in 2024, a significant increase from $74.9 million in 2023[54]. - The total current assets increased to $1,127.2 million as of December 31, 2024, up from $988.2 million in 2023, primarily driven by an increase in cash and cash equivalents from $266.5 million to $428.9 million[52]. - The company reported a net increase in cash, cash equivalents, and restricted cash of $145.7 million in 2024, compared to $62.3 million in 2023[54]. - Adjusted free cash flow for the year ended December 31, 2024, was $162.9 million after accounting for various adjustments[57]. Segment Performance - The cardiopulmonary segment reported a 13.1% increase in revenue for full-year 2024, driven by strong demand for the Essenz Perfusion System[12]. - Cardiopulmonary segment revenue increased by 9.9% year-over-year to $181.7 million, with the Rest of World showing the highest growth at 18.6%[34]. - Neuromodulation segment revenue remained relatively stable, with a slight increase of 0.5% to $137.6 million, while Europe experienced a decline of 14.6%[34]. - The company reported a significant decline in ACS revenue, down 98.7% in Q4 2024 compared to Q4 2023[56]. Future Outlook - The company expects full-year 2025 revenue growth between 5.0% and 6.0% on a constant-currency basis and between 6.0% and 7.0% on an organic basis[16]. - Adjusted diluted earnings per share for 2025 is projected to be in the range of $3.65 to $3.75[17]. - The company plans to continue focusing on R&D investments to drive future growth despite facing challenges in the market[30]. - The company plans to continue focusing on market expansion and new product development to drive future growth[46].

Core Viewpoint - LivaNova (LIVN) shares have increased by 2.2% recently, with analysts suggesting a potential upside of 37.2% based on a mean price target of $72 [1][9]. Price Targets and Analyst Estimates - The mean estimate consists of nine short-term price targets, with a standard deviation of $8.15, indicating variability among analysts [2]. - The lowest estimate of $61 suggests a 16.2% increase, while the highest estimate predicts a 71.5% surge to $90 [2]. - A low standard deviation signifies strong agreement among analysts regarding the stock's price movement [7]. Earnings Estimates and Analyst Agreement - Analysts have shown increasing optimism about LivaNova's earnings prospects, with a positive trend in earnings estimate revisions [9]. - Over the past 30 days, three earnings estimates have been revised upward, leading to a 10.3% increase in the Zacks Consensus Estimate [10]. - LivaNova holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimates [11]. Caution on Price Targets - While price targets are often sought after, they can mislead investors, as empirical research indicates they rarely predict actual stock price movements [5][6]. - Analysts may set overly optimistic price targets due to business incentives, which can inflate expectations [6]. - Investors should approach price targets with skepticism and not rely solely on them for investment decisions [8].

Core Insights - LivaNova's OSPREY trial for the aura6000 nerve stimulation system has shown promising results for treating obstructive sleep apnea (OSA) by meeting primary safety and efficacy endpoints [1][2] - The trial demonstrated significant reductions in apnea-hypopnea index (AHI) and oxygen desaturation index (ODI), indicating the device's effectiveness in managing OSA [3][4] - The company plans to submit trial data to the FDA for premarket approval, which could position the aura6000 as a novel treatment option for patients who struggle with conventional therapies [6][7] Trial Results - The primary endpoint of the trial was responder rates, with the treatment group achieving a significantly higher rate than the sham group, meeting the statistical threshold of p<0.025 [2] - The aura6000 system led to a 66.2% reduction in AHI, with the median AHI decreasing from 34.3 to 11.6 over six months [3] - ODI showed a 63.3% reduction, with the median dropping from 34.9 to 12.8 during the same period [3] Safety Profile - The OSPREY trial reported no serious adverse device-related or procedure-related events, indicating a favorable safety profile for the aura6000 system [4] Future Prospects - The trial will continue to collect 12-month data, with results expected in early 2025, which will provide insights into the therapy's long-term efficacy and safety [5] - Approval of the aura6000 system could significantly enhance LivaNova's business prospects in the growing sleep apnea device market, projected to reach $9.3 billion by 2029 [9][10] Market Context - The global sleep apnea device market was valued at approximately $6.5 billion in 2023, with a projected CAGR of 7.3% driven by factors such as expanded reimbursement coverage and increased adoption of telemedicine and AI [9]

Core Viewpoint - LivaNova (LIVN) has received an upgrade to a Zacks Rank 1 (Strong Buy), indicating a positive outlook on its earnings estimates, which is a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Price Movement - The Zacks rating system is based on changes in earnings estimates, which are strongly correlated with near-term stock price movements [4][6]. - Institutional investors often rely on earnings estimates to determine the fair value of stocks, leading to buying or selling actions that affect stock prices [4]. Recent Performance and Projections - LivaNova is projected to earn $3.37 per share for the fiscal year ending December 2024, reflecting a year-over-year increase of 20.4% [8]. - Over the past three months, the Zacks Consensus Estimate for LivaNova has risen by 10.3%, indicating a positive trend in earnings expectations [8]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [7]. - LivaNova's upgrade to Zacks Rank 1 places it in the top 5% of Zacks-covered stocks, suggesting potential for market-beating returns in the near term [10].

LivaNova (LIVN) closed the last trading session at $52.10, gaining 0% over the past four weeks, but there could be plenty of upside left in the stock if short-term price targets set by Wall Street analysts are any guide. The mean price target of $72 indicates a 38.2% upside potential.The mean estimate comprises nine short-term price targets with a standard deviation of $8.15. While the lowest estimate of $61 indicates a 17.1% increase from the current price level, the most optimistic analyst expects the sto ...

Financial Performance - LivaNova reported a total revenue of $287.5 million for the quarter, reflecting a 10% increase year-over-year[2]. - The company achieved a gross margin of 65%, up from 62% in the previous year, indicating improved operational efficiency[2]. - LivaNova's Neuromodulation segment generated $150 million in revenue, representing a 15% growth compared to the same quarter last year[2]. - The Cardiopulmonary segment saw a revenue increase of 8%, totaling $137.5 million for the quarter[2]. - Net income for the nine months ended September 30, 2024, was $32,953,000, compared to a loss of $7,318,000 for the same period in 2023, representing a significant turnaround[13]. - Comprehensive income for the nine months ended September 30, 2024, was $59,069,000, compared to a loss of $26,540,000 in the prior year[13]. - Total revenue for the nine months ended September 30, 2024, reached $931.607 million, compared to $843.413 million for the same period in 2023, reflecting an increase of 10.4%[78]. - Operating income for the three months ended September 30, 2024, was $35.618 million, compared to $4.458 million in Q3 2023, indicating a substantial improvement in profitability[80]. - Basic earnings per share for Q3 2024 was $0.61, compared to a loss of $0.14 in Q3 2023, while diluted earnings per share was $0.60 versus a loss of $0.14 in the same period[10][76]. Cash and Assets - Cash and cash equivalents increased to $346,366,000 as of September 30, 2024, from $266,504,000 at the end of 2023, reflecting a growth of 30%[14]. - Total assets rose to $2,521,958,000 as of September 30, 2024, compared to $2,429,563,000 at the end of 2023, indicating an increase of approximately 3.8%[14]. - Total stockholders' equity increased to $1,310,044,000 as of September 30, 2024, from $1,277,628,000 at the end of 2023, showing a growth of 2.5%[15]. - Net cash provided by operating activities for the nine months ended September 30, 2024, was $104,331,000, significantly higher than $20,956,000 for the same period in 2023[16]. - Cash, cash equivalents, and restricted cash at the end of the period increased to $666.576 million as of September 30, 2024, compared to $532.722 million at the end of September 2023, marking an increase of approximately 25%[16]. Research and Development - LivaNova plans to invest $50 million in R&D for new product development in the next fiscal year[2]. - Research and development costs increased to $6.2 million as of September 30, 2024, from $2.5 million in the previous year[90]. - The company is focused on enhancing its core Cardiopulmonary and Neuromodulation segments as part of its restructuring plan initiated in early 2024[3]. Restructuring and Strategic Initiatives - The company has initiated a restructuring plan aimed at enhancing focus on its core segments, expected to yield $30 million in annual savings[2]. - LivaNova's restructuring plan aims to enhance focus on its core Cardiopulmonary and Neuromodulation segments by winding down the ACS segment[20]. - The company plans to discontinue operations for certain ACS products by the end of 2024 as part of its restructuring plan[77]. Debt and Financial Obligations - Long-term debt obligations increased to $604,287,000 as of September 30, 2024, from $568,543,000 at the end of 2023, reflecting a rise of 6.3%[14]. - The company issued $345.0 million of 2.50% notes due 2029, with net proceeds of $332.1 million after deducting issuance costs[47][48]. - The effective interest rate for the 2029 Notes is 9.79% as of September 30, 2024[48]. - The company has a revolving credit facility of $225.0 million, maturing on March 8, 2029, available for working capital[45]. Legal and Compliance Matters - The provision for product liability litigation increased to $19.2 million as of September 30, 2024, up from $13.9 million as of December 31, 2023, due to new claims information[58]. - The company is involved in various pending legal actions that may materially affect its financial position, but outcomes are uncertain[63]. - The company has not recognized a liability related to the environmental litigation as any potential loss is not currently probable[57]. Market Expansion and Future Outlook - The company is focusing on expanding its market presence in Europe and Asia, targeting a 20% market share increase by 2025[2]. - LivaNova's recent acquisition of ImThera Medical is projected to contribute an additional $25 million in revenue by 2025[2]. - The company has set a performance guidance of $1.2 billion in total revenue for the upcoming fiscal year, with an expected growth rate of 12%[2]. Cybersecurity Incident - LivaNova incurred direct costs of $10.8 million related to a cybersecurity incident, with $2.5 million and $8.2 million incurred during the three and nine months ended September 30, 2024, respectively[18]. - The company expects to incur additional costs related to the cybersecurity incident in the future, with insurance coverage likely insufficient to cover all expenses[18]. - A settlement related to a cybersecurity incident led to an accrual of $1.2 million during the quarter ended September 30, 2024[62].