Upgrades - Baird upgraded United Rentals (URI) to Outperform from Neutral with a price target of $1,050, up from $888, indicating stabilization in the rental industry after two years of deceleration [2] - Jefferies upgraded Sunrun (RUN) to Buy from Hold with a price target of $21, up from $11, expecting cash generation to materialize in the second half and strong growth through 2026 as U.S. Third-Party Owners gain market share [3] - HSBC upgraded Autodesk (ADSK) to Buy from Hold with a price target of $343, down from $388, noting Autodesk's potential to monetize artificial intelligence and likely margin expansion [4] - Jefferies upgraded Delta Air Lines (DAL) to Buy from Hold with a price target of $70, up from $62, citing a raised Q3 revenue outlook to 2%-4% from 0%-4% as a sign of confidence in topline growth for Q4 and 2026 [5] - Jefferies upgraded Carvana (CVNA) to Buy from Hold with a price target of $475, up from $385, based on consumer survey results and capacity analysis suggesting continued elevated growth [6] Downgrades - Northland double downgraded DraftKings (DKNG) to Underperform from Outperform with a price target of $33, down from $53, due to increasing headwinds from prediction markets [7] - RBC Capital downgraded GE Vernova (GEV) to Sector Perform from Outperform with a price target of $605, down from $631, as current valuations reflect strong demand and productivity improvements [7] - Evercore ISI downgraded Allstate (ALL) to In Line from Outperform with a price target of $233, up from $230, citing over-earning in auto insurance and limited scope for positive estimate revisions [7] - Goldman Sachs downgraded Doximity (DOCS) to Sell from Neutral with a price target of $64, up from $57, indicating the growth profile does not support the current valuation [7] - Goldman Sachs downgraded LivaNova (LIVN) to Neutral from Buy with a price target of $55, down from $56, due to decelerating sales growth and slowing margin expansion [7]

Company Overview - LivaNova demonstrates strong and durable growth in its core businesses, which include neuromodulation for epilepsy treatment and cardiopulmonary solutions [1][2] - The company has a diversified portfolio that positions it well in its respective markets [1] Market Expansion Strategy - LivaNova aims to expand into markets with significant unmet patient needs, focusing on high-growth areas where it has competitive advantages [2] - The neuromodulation sector is identified as a key opportunity for future growth [2]

Company Overview - LivaNova demonstrates strong and durable growth in its core businesses, which include neuromodulation for epilepsy treatment and cardiopulmonary solutions [1][2] - The company has a diversified portfolio and holds leadership positions in its respective markets [1][2] Market Expansion Strategy - LivaNova aims to expand into markets with significant unmet patient needs, focusing on high-growth areas where the company has competitive advantages [2]

Summary of LivaNova Conference Call Company Overview - **Company**: LivaNova - **Core Businesses**: Neuromodulation (epilepsy treatment) and cardiopulmonary business - **Growth Strategy**: Focus on expanding into markets with significant unmet needs, particularly in obstructive sleep apnea [2][3] Key Points on Core Business Performance - **Cardiopulmonary Growth**: - Sustained double-digit growth for 10 consecutive quarters, with a recent growth rate of 13% [4] - Growth drivers include an increase in open heart surgery procedures (estimated at 4-5%) and market share gains in oxygenators (increased from 30% to approximately 40% over two years) [4][5] - New heart-lung machine launched in 2023, expected to drive growth for the next 2.5 years [4][6] - **Oxygenators**: - Price increases contributed 300 basis points to growth last year [5] - Manufacturing capacity increased by 10% through process improvements [10] - Plans for further capacity expansion through 24/7 shifts [10][11] Expansion into New Markets - **Obstructive Sleep Apnea (OSA)**: - Significant opportunity due to large patient population and unmet needs [9] - Recent approval from CFDA in China for the Ascend machine, with a successful launch event [9] - Differentiated technology with six electrodes, allowing for improved clinical outcomes [21][22] Neuromodulation and Epilepsy Business - **CoreVNS Study**: - Largest global prospective VNS Therapy study showing impressive seizure freedom and reduction rates [16] - Positive feedback from key opinion leaders indicating a shift in treatment algorithms [16] - **Reimbursement Dynamics**: - Transition from level four to level five APC by CMS, resulting in a 48% increase in reimbursement for Medicare therapy patients [17] - 70% of U.S. implants are replacements, indicating a strong potential for growth [17] Future Growth Drivers - **New Oxygenator Launch**: - Expected to outperform existing products based on preclinical testing [14][15] - **Difficult-to-Treat Depression (DTD)**: - Ongoing CMS reconsideration process for VNS Therapy treatment, with promising clinical evidence from the RECOVER trial [28][31] - 43% reduction in suicidality and over 80% treatment compliance after 24 months [32] Capital Allocation and Long-term Strategy - **Cash Flow Generation**: - Free cash flow guidance raised to $140 to $160 million [39] - Priorities include supporting core business, investing in OSA, and exploring M&A opportunities in underserved markets [39][40] - **Market Positioning**: - LivaNova aims to leverage its capabilities in neuromodulation to address significant patient needs in both cardiovascular and neurological disorders [41][42] Conclusion - LivaNova is well-positioned for growth through its core businesses and expansion into new markets, with a strong focus on innovation and addressing unmet patient needs. The upcoming investor day on November 12 is anticipated to provide further insights into the company's strategic direction and growth opportunities [43][44]

Summary of LivaNova Conference Call Company Overview - **Company**: LivaNova - **Industry**: Medical Technology (Med Tech) Key Points and Arguments Business Growth and Performance - LivaNova has achieved nine out of ten quarters of double-digit growth, exceeding previous high single-digit growth goals [2][4] - The growth is well-distributed across various drivers, particularly in the cardiopulmonary and epilepsy segments [4][6] - The company has increased its market share in oxygenators from 30% to 40% over the last couple of years [5] Cardiopulmonary Segment - The launch of the new heart-lung machine, Essence, is a significant growth driver, with expectations of 60% placement penetration by 2024 and 80% by 2025 [12][14] - The price premium for the Essence machine is approximately double that of the previous generation, contributing to revenue growth [13] - The cardiopulmonary market is expected to continue growing due to an increase in open-heart surgical procedures and a healthy market environment [6][25] Epilepsy Market - The U.S. epilepsy market is growing at mid-single digits, while international markets are growing faster due to lower penetration [31] - The CORE VNS study shows promising outcomes, which could lead to earlier utilization of VNS therapy in treatment algorithms [32][33] - A proposed 48% increase in reimbursement for end-of-service implants could enhance the financial profile for physicians [36] Market Dynamics and Competitive Landscape - The open-heart procedure market has grown from a historical rate of 1-2% to approximately 4-5% due to pent-up demand from underdiagnosed patients during the COVID pandemic [23][24] - LivaNova has been able to capture market share due to competitors facing supply chain and quality issues [25][26] - The company is strategically taking price increases in a supply-constrained market, which has been a significant growth driver [27] Future Opportunities - LivaNova is focusing on obstructive sleep apnea (OSA) as a significant growth opportunity, with plans to outline strategies during the upcoming Investor Day [7][52] - The company is also exploring treatment-resistant depression (DTD) and has engaged with CMS regarding reimbursement opportunities [44][46] - The potential for automation in heart-lung machines is being explored, aiming to improve clinical outcomes and democratize medicine [20][21] Financial Outlook - The company is expected to provide guidance for 2026 in future communications, with current expectations of 6-7% top-line growth and 9-10% EPS growth [53] Additional Important Information - The upcoming Investor Day on November 12 will provide further insights into LivaNova's vision, strategy, and financial expectations [6][8] - The company is confident in its ability to maintain leadership in epilepsy while expanding into new markets like OSA and DTD [51][52]

Financial Data and Key Metrics Changes - LivaNova reported a 10% organic revenue growth compared to the previous year, driven by strong performance in the cardiopulmonary and neuromodulation segments [5][28] - Revenue for the quarter was $353 million, reflecting a 9% increase on a constant currency basis and a 10% increase on an organic basis [28] - Adjusted gross margin increased to 69% from 68% in the previous year, attributed to positive pricing and geographic mix [29] - Adjusted diluted earnings per share rose to $1.05 from $0.93 in the prior year [34] Segment Performance Changes - Cardiopulmonary segment revenue was $199 million, a 13% increase year-over-year, with heart-lung machine revenue growing in the low double digits [11][12] - Epilepsy segment revenue increased by 6% year-over-year, with U.S. revenue growing by 5% and Europe and rest of the world combined growing by 9% [13][14] - The company expects epilepsy revenue growth for the full year to be between 4.5% and 5.5%, up from previous guidance of 4% to 5% [16] Market Data and Key Metrics Changes - The cardiopulmonary segment anticipates a revenue growth of 12% to 13% for the full year, revised from 9% to 10% [12] - The company is preparing to launch the Essence product in China, which is expected to be a significant market for heart-lung machines [12][72] Company Strategy and Industry Competition - LivaNova is focused on expanding its portfolio into high-growth markets and addressing large patient populations with significant unmet needs, particularly in obstructive sleep apnea and difficult-to-treat depression [41] - The company is making progress towards CMS reimbursement reconsideration for VNS therapy in treatment-resistant depression, which could enhance market access [41][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining strong organic growth due to robust demand and disciplined execution across the portfolio [5] - The company is optimistic about the impact of the proposed CMS reimbursement changes for end-of-service procedures, which could significantly improve hospital economics [52][51] Other Important Information - The company has initiated a process with CMS to seek national Medicare coverage for VNS therapy in unipolar patients with treatment-resistant depression [21] - LivaNova's cash balance increased to $594 million, up from $429 million at the end of 2024, primarily due to the reclassification of restricted cash [34] Q&A Session Summary Question: Can you elaborate on the positive data from the epilepsy business and its implications for growth? - Management highlighted the large study demonstrating significant seizure reduction, which is expected to enhance patient access and drive growth [45][46] Question: What is the expected impact of the CMS proposal to boost end-of-service procedures to level five? - Management noted that this change could lead to a 48% increase in reimbursement, positively impacting procedure penetration and provider sustainability [51][52] Question: Can you break down the oxygenator business and underlying demand? - Management indicated healthy procedure growth and market share gains, with supply not yet catching up to demand [56][58] Question: How does the company view the commercialization of the obstructive sleep apnea program? - Management expressed confidence in internal commercialization capabilities while remaining open to potential partnerships [96][97]

Financial Data and Key Metrics Changes - LivaNova reported a 10% organic revenue growth compared to the previous year, driven by strong performance in the cardiopulmonary and neuromodulation segments [5][29] - Revenue for the quarter was $353 million, reflecting a 9% increase on a constant currency basis and a 10% increase on an organic basis [29] - Adjusted gross margin increased to 69% from 68% in the previous year, attributed to positive pricing and geographic mix [30] - Adjusted diluted earnings per share rose to $1.05 from $0.93 in the prior year [34] - Cash balance increased to $594 million from $429 million at year-end 2024, while total debt decreased to $431 million from $628 million [34][35] Segment Performance Changes - Cardiopulmonary segment revenue was $199 million, a 13% increase year-over-year, with heart-lung machine revenue growing in the low double digits [11][12] - Epilepsy segment revenue increased by 6%, with U.S. revenue growing by 5% and Europe and rest of the world combined growing by 9% [13][14] - The company expects cardiopulmonary revenue to grow 12-13% for the full year 2025, up from a previous forecast of 9-10% [12] - Epilepsy revenue growth forecast for 2025 was raised to 4.5-5.5% from 4-5% previously [16] Market Data and Key Metrics Changes - The company anticipates launching the Essence heart-lung machine in China in Q3 2025, which is expected to be a significant market for the product [12][72] - The CMS proposal to increase reimbursement for end-of-service procedures to level five could significantly impact procedure penetration, as it affects 70% of implants in the U.S. [52][53] Company Strategy and Industry Competition - LivaNova is focused on expanding its portfolio into high-growth markets, particularly in obstructive sleep apnea (OSA) and difficult-to-treat depression (DTD) [42] - The company is investing in its core businesses to sustain market leadership and clinical excellence, with a strong emphasis on innovation and regulatory achievements [42][27] - The company is optimistic about the competitive landscape, noting that it has gained market share in the cardiopulmonary segment [59] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to sustain growth and capitalize on opportunities in the epilepsy and cardiopulmonary segments [42] - The management highlighted the importance of recent clinical data in driving awareness and adoption of VNS therapy for drug-resistant epilepsy [20][49] - The company remains focused on addressing significant unmet needs in the market, particularly in OSA and DTD [42] Other Important Information - The company is working closely with CMS to seek national Medicare coverage for VNS therapy in treatment-resistant depression [22][24] - The company is also making significant investments in IT infrastructure and innovation to drive long-term efficiencies and scalability [32][39] Q&A Session Summary Question: Can you elaborate on the positive data from the epilepsy business and its implications for growth? - Management highlighted the large study demonstrating significant seizure reduction, which is expected to enhance patient access and drive growth [46][49] Question: What is the expected impact of the CMS proposal to boost end-of-service procedures to level five? - Management noted that this proposal could significantly improve reimbursement for providers, potentially increasing procedure penetration [52][53] Question: Can you break down the oxygenator business and its demand versus capacity? - Management indicated healthy procedure growth and market share gains, but noted that supply is not yet catching up with demand [59][60] Question: What are the expectations for the launch in China? - Management expressed confidence in the Essence product's launch in China, indicating it is a significant market for the company [72] Question: What are the plans for the obstructive sleep apnea program? - Management is confident in its ability to commercialize the OSA portfolio internally but remains open to partnerships if beneficial [96]

Core Viewpoint - LivaNova reported quarterly earnings of $1.05 per share, exceeding the Zacks Consensus Estimate of $0.84 per share, and showing an increase from $0.93 per share a year ago, indicating a strong earnings surprise of +25.00% [1][2] Financial Performance - The company achieved revenues of $352.5 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 6.56% and up from $318.6 million year-over-year [2] - Over the last four quarters, LivaNova has consistently surpassed consensus EPS estimates four times and topped revenue estimates three times [2] Stock Performance - LivaNova shares have declined approximately 8% since the beginning of the year, contrasting with the S&P 500's gain of 7.1% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.91 on revenues of $331.4 million, and for the current fiscal year, it is $3.65 on revenues of $1.32 billion [7] - The outlook for the Medical - Instruments industry, where LivaNova operates, is currently in the bottom 41% of Zacks industries, which may impact stock performance [8]

Financial Performance - Net revenue increased by 9.3% on a constant-currency basis and 10.3% organically in 2Q25[14] - Cardiopulmonary revenue grew by 12.7% in 2Q25, driven by strong consumables demand and Essenz Perfusion System sales[11, 24] - Neuromodulation revenue increased by 5.6% in 2Q25, with growth across all regions[11, 28] - Adjusted diluted EPS was $1.05 in 2Q25, favorably impacted by higher revenue and optimization of DTD program spend[11] - Adjusted free cash flow was $48 million in 2Q25, driven by stronger operating results and disciplined working capital management[11] - The company is raising the full-year 2025 revenue guidance by 200 basis points to 8.0% - 9.0% on a constant-currency basis and 9.0% - 10.0% on an organic basis[10] - The company is raising the full-year 2025 adjusted diluted earnings per share range to $3.70 - $3.80[10] - The company is raising the full-year 2025 adjusted free cash flow range to $140 million - $160 million[10] Clinical and Regulatory Milestones - Long-term, real-world evidence demonstrates efficacy of VNS Therapy in a wide range of seizure types in people with drug-resistant epilepsy[10] - Initiated process with CMS for reconsideration of national coverage for VNS Therapy for treatment-resistant depression[10, 11]

[Filing Information](index=1&type=section&id=Filing%20Information) LivaNova PLC filed its Form 10-Q for Q2 2025, reporting 54.6 million ordinary shares outstanding - LivaNova PLC filed its Form 10-Q for the quarterly period ended June 30, 2025 [1](index=1&type=chunk) - The company is a large accelerated filer, with ordinary shares traded on Nasdaq under **LIVN** [2](index=2&type=chunk)[3](index=3&type=chunk) - As of July 30, 2025, there were **54,601,073** ordinary shares outstanding [3](index=3&type=chunk) [Definitions](index=3&type=section&id=Definitions) This section defines key terms and abbreviations used throughout the report, including company references and plan names - Key terms defined include 'LivaNova', '2024 Restructuring Plan', '**2029 Notes**' (**$345.0 million**), 'DTD', and 'TRD' [7](index=7&type=chunk)[8](index=8&type=chunk)[10](index=10&type=chunk) [Intellectual Property, Trademarks, and Trade Names](index=6&type=section&id=Intellectual%20Property%2C%20Trademarks%2C%20and%20Trade%20Names) LivaNova's intellectual property includes trademarks for its Neuromodulation, Cardiopulmonary, and advanced circulatory support systems - Trademarks cover Neuromodulation systems (e.g., **VNS Therapy System**, **SenTiva**), Cardiopulmonary products (e.g., **Essenz**, **S5 Pro**), advanced circulatory support systems (e.g., **TandemLife**, **LifeSPARC**), and obstructive sleep apnea systems (e.g., **ImThera**, **aura6000**) [11](index=11&type=chunk)[12](index=12&type=chunk) [Cautionary Note About Forward-Looking Statements](index=7&type=section&id=Cautionary%20Note%20About%20Forward-Looking%20Statements) This section warns readers about the inherent uncertainties and risks associated with forward-looking statements, advising against undue reliance - Forward-looking statements are identified by specific words and are based on inherently uncertain estimates and assumptions [13](index=13&type=chunk) - Key risks include global market volatility, supply chain pressures, cybersecurity, R&D failures, regulatory non-compliance, litigation, and tax law changes [13](index=13&type=chunk) - Readers are cautioned not to place undue reliance, and the Company undertakes no obligation to update or revise these statements [15](index=15&type=chunk) [PART I. FINANCIAL INFORMATION](index=8&type=section&id=PART%20I.%2E%20FINANCIAL%20INFORMATION) This part presents LivaNova's unaudited condensed consolidated financial statements, management's discussion, market risk disclosures, and controls - All financial information is prepared in accordance with **U.S. GAAP**, with **USD** as the reporting currency [16](index=16&type=chunk) - The financial statements are unaudited and prepared in accordance with **U.S. GAAP** for interim financial information [27](index=27&type=chunk) - Management believes the condensed consolidated financial statements reflect all necessary adjustments for a fair statement of operating results [27](index=27&type=chunk) [ITEM 1. Financial Statements (unaudited)](index=8&type=section&id=ITEM%201.%20Financial%20Statements%20%28unaudited%29) This section provides unaudited condensed consolidated financial statements and detailed notes on accounting policies, derivatives, and contingencies [Condensed Consolidated Statements of Income (Loss)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20%28Loss%29) This statement presents LivaNova's net revenue, gross profit, operating income, and net income (loss) for the reported periods Condensed Consolidated Statements of Income (Loss) (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net revenue | $352,524 | $318,575 | $669,379 | $613,487 | | Gross profit | $238,988 | $214,878 | $455,242 | $418,086 | | Operating income | $54,183 | $40,166 | $102,800 | $56,412 | | SNIA environmental liability expense | $(1,677) | — | $(362,070) | — | | Net income (loss) | $27,161 | $16,333 | $(300,161) | $(25,610) | | Basic income (loss) per share | $0.50 | $0.30 | $(5.51) | $(0.47) | | Diluted income (loss) per share | $0.50 | $0.30 | $(5.51) | $(0.47) | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) This statement details net income (loss) and other comprehensive income (loss) components, including foreign currency translation adjustments Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $27,161 | $16,333 | $(300,161) | $(25,610) | | Foreign currency translation adjustment | $50,841 | $(7,613) | $88,283 | $(24,936) | | Comprehensive income (loss) | $78,002 | $8,720 | $(211,878) | $(50,546) | [Condensed Consolidated Balance Sheets](index=10&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of LivaNova's assets, liabilities, and stockholders' equity at specific points in time Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $1,066,142 | $1,127,186 | | Total Assets | $2,506,702 | $2,506,389 | | Total Current Liabilities | $827,100 | $392,125 | | SNIA environmental liability | $392,268 | — | | Long-term debt obligations | $348,489 | $549,624 | | Total Liabilities | $1,383,863 | $1,186,131 | | Total Stockholders' Equity | $1,122,839 | $1,320,258 | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement details the cash inflows and outflows from operating, investing, and financing activities for the reported periods Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $86,886 | $53,337 | | Net cash used in investing activities | $(19,596) | $(18,932) | | Net cash (used in) provided by financing activities | $(213,403) | $25,277 | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(129,918) | $55,249 | | Cash, cash equivalents, and restricted cash at end of period | $593,638 | $633,121 | [Notes to the Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the condensed consolidated financial statements, covering various accounting aspects and significant events [Note 1. Unaudited Condensed Consolidated Financial Statements](index=12&type=section&id=Note%201.%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This note details the basis of presentation for the unaudited financial statements, including cybersecurity incident costs and error corrections - LivaNova incurred **$13.0 million** in direct costs from a November 2023 cybersecurity incident through June 30, 2025, with **$9.6 million** reimbursed by insurance [28](index=28&type=chunk)[106](index=106&type=chunk) - An immaterial error in classifying Cardiopulmonary employee costs was corrected, with no impact on operating or net income [29](index=29&type=chunk)[98](index=98&type=chunk) [Note 2. Derivatives and Risk Management](index=13&type=section&id=Note%202.%20Derivatives%20and%20Risk%20Management) This note describes LivaNova's use of derivative contracts to manage foreign exchange and equity price risks - LivaNova uses FX derivative contracts to reduce FX fluctuations and Capped Call Transactions to manage equity price risk from its **2025** and **2029 Notes** [31](index=31&type=chunk)[32](index=32&type=chunk) - All derivatives are measured at fair value and are not designated as hedging instruments; changes in fair value are included in earnings [33](index=33&type=chunk) - Net gains from freestanding FX derivatives were **$25.4 million** for the six months ended June 30, 2025, compared to **$4.9 million** in the prior year [34](index=34&type=chunk) [Note 3. Fair Value Measurements](index=14&type=section&id=Note%203.%20Fair%20Value%20Measurements) This note explains the fair value measurements of derivative assets and liabilities, particularly for capped calls and contingent consideration - Capped call and embedded derivatives for **2025** and **2029 Notes** are **Level 3** fair value measurements due to significant unobservable inputs like stock price volatility [43](index=43&type=chunk)[46](index=46&type=chunk) - ImThera contingent consideration arrangements are **Level 3** fair value measurements, using unobservable inputs such as discount rates and payment probabilities [47](index=47&type=chunk) Fair Value of Derivative Assets and Liabilities (in thousands) | Type | June 30, 2025 Fair Value | December 31, 2024 Fair Value | | :--- | :--- | :--- | | Total derivative assets | $32,334 | $27,097 | | Total derivative liabilities | $49,462 | $54,734 | [Note 4. Financing Arrangements](index=17&type=section&id=Note%204.%20Financing%20Arrangements) This note details LivaNova's long-term debt obligations, including Term Facilities and convertible senior notes Long-Term Debt Obligations (in thousands, except interest rates) | Debt Type | June 30, 2025 | December 31, 2024 | Maturity | Interest Rate | | :--- | :--- | :--- | :--- | :--- | | Term Facilities | $107,722 | $313,014 | July 2027 | 7.36% | | 2029 Notes | $266,569 | $258,043 | March 2029 | 2.50% | | 2025 Notes | $55,713 | $53,887 | December 2025 | 3.00% | | Total long-term debt obligations | $348,489 | $549,624 | | | - An early repayment of **$200 million** on Term Facilities on May 2, 2025, resulted in a **$2.7 million** loss on debt extinguishment [51](index=51&type=chunk)[52](index=52&type=chunk) - The **2025 Notes** will be exchangeable at the holder's option from September 15, 2025, until shortly before maturity [54](index=54&type=chunk) [Note 5. Commitments and Contingencies](index=18&type=section&id=Note%205.%20Commitments%20and%20Contingencies) This note outlines LivaNova's various commitments and contingencies, including environmental liabilities, product litigation, and regulatory payback measures - LivaNova has an estimated liability of **$40.4 million** (**€34.5 million**) for the Saluggia site, with a maximum estimated loss of **$55.3 million** (**€47.2 million**) [57](index=57&type=chunk) - The Italian Supreme Court ruled LivaNova jointly liable for SNIA's environmental liabilities, resulting in a current liability of **€334.8 million** (**$392.3 million**) as of June 30, 2025 [64](index=64&type=chunk) - The provision for **3T Heater-Cooler** device product liability litigation was **$15.4 million** as of June 30, 2025, with **60** claims worldwide [67](index=67&type=chunk) - The Italian MedTech payback measure liability was **$19.7 million** as of June 30, 2025; a new decree may allow settlement at **25%** of original amounts [69](index=69&type=chunk) - A class action settlement for the November 2023 cybersecurity incident was approved on April 4, 2025, with an accrual of **$1.2 million** [71](index=71&type=chunk) [Note 6. Stockholders' Equity](index=21&type=section&id=Note%206.%20Stockholders%27%20Equity) This note details the changes in LivaNova's stockholders' equity, including net loss and comprehensive income adjustments Changes in Stockholders' Equity (in thousands) | Metric | December 31, 2024 | Six Months Ended June 30, 2025 Changes | June 30, 2025 | | :--- | :--- | :--- | :--- | | Total Stockholders' Equity | $1,320,258 | $(197,419) | $1,122,839 | | Net loss | $(903,250) (Accumulated Deficit) | $(300,161) | $(1,203,411) | | Accumulated other comprehensive income (loss) | $(80,170) | $88,283 | $8,113 | | Additional paid-in capital | $2,220,658 | $14,119 | $2,234,777 | [Note 7. Stock-Based Incentive Plans](index=22&type=section&id=Note%207.%20Stock-Based%20Incentive%20Plans) This note describes the company's equity-based compensation plans and the associated stock-based compensation expense - Shareholders approved the **2025 Director Incentive Plan** (**300,000 shares**) and the **Second A&R 2022 Plan** (**2,200,000 shares**) for equity-based compensation [76](index=76&type=chunk)[77](index=77&type=chunk) Stock-Based Compensation Expense (in thousands) | Type of Arrangement | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Service-based RSUs | $8,069 | $9,374 | | Service-based SARs | $6,134 | $6,523 | | Market performance-based RSUs | $929 | $1,046 | | Operating performance-based RSUs | $1,282 | $864 | | Employee share purchase plan | $543 | $618 | | Total | $16,957 | $18,425 | [Note 8. Income Taxes](index=23&type=section&id=Note%208.%20Income%20Taxes) This note discusses LivaNova's effective income tax rate and the potential impacts of new accounting pronouncements - Effective income tax rate for H1 2025 was **(6.3)%**, compared to **(102.6)%** in the prior year, influenced by pre-tax income, SNIA liability, and valuation allowances [82](index=82&type=chunk)[141](index=141&type=chunk) - LivaNova is evaluating the potential impacts of the **U.S. OBBBA** (One Big Beautiful Bill Act) enacted on July 4, 2025, on R&D expense deductions and other tax items [83](index=83&type=chunk)[142](index=142&type=chunk) [Note 9. Income (Loss) Per Share](index=24&type=section&id=Note%209.%20Income%20%28Loss%29%20Per%20Share) This note presents basic and diluted income (loss) per share calculations and explains exclusions from diluted EPS Basic and Diluted Income (Loss) Per Share | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Basic income (loss) per share | $0.50 | $0.30 | $(5.51) | $(0.47) | | Diluted income (loss) per share | $0.50 | $0.30 | $(5.51) | $(0.47) | - The **2029 Notes** and certain share-based compensation awards were excluded from diluted EPS for H1 2025 due to their anti-dilutive effect [84](index=84&type=chunk) [Note 10. Geographic and Segment Information](index=24&type=section&id=Note%2010.%20Geographic%20and%20Segment%20Information) This note provides a breakdown of LivaNova's net revenue and segment income by its Cardiopulmonary and Neuromodulation segments and geographic regions - LivaNova's two reportable segments are **Cardiopulmonary** (HLMs, oxygenators) and **Neuromodulation** (VNS Therapy for DRE/DTD, aura6000 for OSA) [86](index=86&type=chunk)[87](index=87&type=chunk) Net Revenue by Operating Segment and Geographic Region (in thousands) | Segment/Region | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :--- | :--- | :--- | :--- | | Cardiopulmonary | $375,592 | $329,605 | 14.0% | | Neuromodulation | $290,563 | $276,748 | 5.0% | | Total Net Revenue | $669,379 | $613,487 | 9.1% | Segment Income (in thousands) | Segment | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :--- | :--- | :--- | :--- | | Cardiopulmonary | $56,098 | $34,338 | 63.4% | | Neuromodulation | $108,373 | $101,490 | 6.8% | | Total Segment Income | $164,471 | $135,828 | 21.1% | - Goodwill increased to **$793.365 million** as of June 30, 2025, from **$750.006 million** at December 31, 2024, primarily due to foreign currency adjustments in Cardiopulmonary [91](index=91&type=chunk) [Note 11. Supplemental Financial Information](index=27&type=section&id=Note%2011.%20Supplemental%20Financial%20Information) This note provides additional financial details, including inventory components, accrued liabilities, and foreign exchange and other income/expense Components of Inventories (in thousands) | Component | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Raw materials | $77,047 | $71,949 | | Work-in-process | $16,333 | $12,322 | | Finished goods | $71,970 | $63,295 | | Total Inventories | $165,350 | $147,566 | Components of Accrued Liabilities and Other (in thousands) | Component | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Italian MedTech payback measure | $19,690 | $15,981 | | Legal and professional costs | $18,972 | $17,379 | | Interest payable | $5,245 | $9,479 | | Restructuring liabilities | — | $2,003 | | Other accrued expenses | $26,057 | $33,463 | | Total Accrued Liabilities and Other | $103,240 | $118,485 | Foreign Exchange and Other Income/(Expense) (in thousands) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Embedded derivative fair value adjustment (2025 Notes) | $1,552 | $(1,363) | | Embedded derivative fair value adjustment (2029 Notes) | $3,726 | $(7,935) | | Capped call fair value adjustment (2025 Notes) | $(1,321) | $(8,533) | | Capped call fair value adjustment (2029 Notes) | $(2,077) | $477 | | Investment revaluation - Ceribell, Inc. | $(3,622) | — | | Impairment of investment in ShiraTronics, Inc. | — | $(5,750) | | Interest income | $10,626 | $14,358 | | FX fluctuations | $(1,850) | $(3,105) | | Total | $7,161 | $(12,116) | - The **SNIA Litigation Guarantee** was terminated on March 31, 2025, releasing **$294.698 million** in restricted cash [96](index=96&type=chunk) [Note 12. New Accounting Pronouncements](index=29&type=section&id=Note%2012.%20New%20Accounting%20Pronouncements) This note outlines recently issued accounting standards that will impact future financial disclosures, including income taxes and expense disaggregation - **ASU No. 2023-09** (Income Taxes) will be effective after December 15, 2024, expanding income tax disclosures [97](index=97&type=chunk) - **ASU No. 2024-03** (Expense Disaggregation) will be effective after December 15, 2026, requiring additional disclosures on expense categories [97](index=97&type=chunk) [Note 13. Revision of Previously Issued Financial Statements](index=29&type=section&id=Note%2013.%20Revision%20of%20Previously%20Issued%20Financial%20Statements) This note details the correction of an immaterial error in classifying Cardiopulmonary employee costs, with no impact on income - An immaterial error in classifying Cardiopulmonary employee costs between cost of sales and SG&A was corrected, with no impact on operating or net income [98](index=98&type=chunk)[99](index=99&type=chunk) Summary of Corrections to Impacted Financial Statement Line Items (in thousands) | Line Item | As Previously Reported (FY2024) | Adjustment (FY2024) | As Revised (FY2024) | | :--- | :--- | :--- | :--- | | Cost of sales | $382,564 | $17,389 | $399,953 | | Gross profit | $870,873 | $(17,389) | $853,484 | | Selling, general, and administrative | $526,265 | $(17,389) | $508,876 | [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on LivaNova's financial performance, covering business segments, macroeconomic impacts, and operational results - LivaNova is a global medical technology company focused on neurological and cardiac conditions, with shares listed on Nasdaq under '**LIVN**' [102](index=102&type=chunk) - Macroeconomic factors like FX volatility, inflation, geopolitical instability, and supply chain challenges continue to impact the business [103](index=103&type=chunk) - The cybersecurity incident incurred **$13.0 million** in direct costs through June 30, 2025, with **$9.6 million** reimbursed by insurance [106](index=106&type=chunk) [Business Segments Overview](index=32&type=section&id=Business%20Segments%20Overview) This section describes LivaNova's Cardiopulmonary and Neuromodulation segments, highlighting key products and clinical trial outcomes - Cardiopulmonary segment designs, develops, manufactures, markets, and sells products like **Heart-Lung Machines (HLMs)** and oxygenators [108](index=108&type=chunk) - Neuromodulation segment focuses on **VNS Therapy** for Drug-Resistant Epilepsy (DRE) and Difficult-to-Treat Depression (DTD), and the **aura6000 System** for Obstructive Sleep Apnea (OSA) [110](index=110&type=chunk)[111](index=111&type=chunk)[113](index=113&type=chunk)[115](index=115&type=chunk) - **CORE-VNS** study for DRE showed early and lasting effectiveness of VNS Therapy, with **36-month** data validating its use for severe focal seizures [112](index=112&type=chunk) - **OSPREY** clinical trial for OSA showed a **65% responder rate** at **12 months** with the aura6000 System, demonstrating significant reductions in AHI and ODI [114](index=114&type=chunk) - LivaNova initiated the process with **CMS** to seek reconsideration of national Medicare coverage for **VNS Therapy** in unipolar patients with TRD, supported by peer-reviewed articles [117](index=117&type=chunk)[118](index=118&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) This section analyzes LivaNova's net revenue and segment income performance, noting the impact of the SNIA environmental liability Net Revenue by Operating Segment (in thousands) | Segment | Q2 2025 Net Revenue | Q2 2024 Net Revenue | % Change (QoQ) | H1 2025 Net Revenue | H1 2024 Net Revenue | % Change (YoY) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Cardiopulmonary | $199,272 | $173,714 | 14.7% | $375,592 | $329,605 | 14.0% | | Neuromodulation | $151,670 | $142,876 | 6.2% | $290,563 | $276,748 | 5.0% | | Total Net Revenue | $352,524 | $318,575 | 10.7% | $669,379 | $613,487 | 9.1% | Segment Income (in thousands) | Segment | Q2 2025 Segment Income | Q2 2024 Segment Income | % Change (QoQ) | H1 2025 Segment Income | H1 2024 Segment Income | % Change (YoY) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Cardiopulmonary | $31,407 | $19,627 | 60.0% | $56,098 | $34,338 | 63.4% | | Neuromodulation | $56,020 | $54,812 | 2.2% | $108,373 | $101,490 | 6.8% | | Total Segment Income | $87,427 | $74,439 | 17.4% | $164,471 | $135,828 | 21.1% | - A **$(362.070) million** SNIA environmental liability expense was recorded for the six months ended June 30, 2025 [120](index=120&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk) - Interest expense decreased due to an early repayment of **$200 million** on Term Facilities [137](index=137&type=chunk) [Cost of Sales and Expenses Analysis](index=35&type=section&id=Cost%20of%20Sales%20and%20Expenses%20Analysis) This section analyzes changes in cost of sales, SG&A, R&D, and other operating expenses, highlighting key drivers for each Costs and Expenses as a Percentage of Net Revenue | Expense Category | H1 2025 % of Net Revenue | H1 2024 % of Net Revenue | Change (pp) | | :--- | :--- | :--- | :--- | | Cost of sales | 32.0% | 31.9% | 0.1% | | Selling, general, and administrative | 39.9% | 40.9% | (1.0)% | | Research and development | 12.7% | 14.7% | (2.0)% | | Other operating expenses | 0.1% | 3.3% | (3.2)% | - SG&A expense decreased primarily due to lower costs from the November 2023 cybersecurity incident and related insurance recoveries [130](index=130&type=chunk) - R&D expense decreased primarily due to a **$9.4 million** reduction in costs associated with the DTD program for the six-month period [132](index=132&type=chunk) - Other operating expenses decreased due to an **$11.5 million** reduction in restructuring costs and an **$8.5 million** reduction in the **3T Heater-Cooler** litigation provision for the six-month period [134](index=134&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses LivaNova's short-term liquidity and working capital, noting the impact of the SNIA environmental liability - LivaNova's available short-term liquidity as of June 30, 2025, was **$818.6 million**, comprising **$593.6 million** in cash and equivalents and **$225.0 million** in revolving credit facility availability [145](index=145&type=chunk) - The decrease in working capital is primarily due to the increase in current liabilities, notably the **SNIA environmental liability** [24](index=24&type=chunk)[64](index=64&type=chunk)[145](index=145&type=chunk) Working Capital (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Current assets | $1,066,142 | $1,127,186 | | Current liabilities | $827,100 | $392,125 | | Working Capital | $239,042 | $735,061 | [Cash Flows Analysis](index=37&type=section&id=Cash%20Flows%20Analysis) This section analyzes the changes in cash flows from operating, investing, and financing activities for the reported periods Net Cash Flows (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Operating activities | $86,886 | $53,337 | +$33,549 | | Investing activities | $(19,596) | $(18,932) | -$(664) | | Financing activities | $(213,403) | $25,277 | -$(238,680) | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(129,918) | $55,249 | -$(185,167) | - Operating cash flow increased due to higher customer collections and lower restructuring payments [147](index=147&type=chunk) - Financing cash flow shifted from positive to negative primarily due to a **$200 million** early repayment of Term Facilities and the release of restricted cash from the **SNIA Litigation Guarantee** termination [149](index=149&type=chunk)[96](index=96&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) LivaNova is exposed to market risks from foreign currency, equity prices, interest rates, and supplier concentration, managed through operations and derivatives - LivaNova is exposed to market risks from foreign currency exchange rates, equity price risk, interest rate risks, and concentration of procurement suppliers [150](index=150&type=chunk) - These risks are managed through regular operating and financing activities and, at times, derivative financial instruments [150](index=150&type=chunk) [ITEM 4. Controls and Procedures](index=38&type=section&id=ITEM%204.%20Controls%20and%20Procedures) LivaNova's CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control - LivaNova's CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025 [152](index=152&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025 [153](index=153&type=chunk) [PART II. OTHER INFORMATION](index=38&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information including Iran dealings, and a list of exhibits [ITEM 1. Legal Proceedings](index=38&type=section&id=ITEM%201.%20Legal%20Proceedings) Material legal and regulatory proceedings and settlements are detailed in Note 5 of the condensed consolidated financial statements - Material legal and regulatory proceedings are detailed in '**Note 5. Commitments and Contingencies**' [154](index=154&type=chunk) [ITEM 1A. Risk Factors](index=38&type=section&id=ITEM%201A.%20Risk%20Factors) No material changes to LivaNova's risk factors were reported since the 2024 Annual Report on Form 10-K and Q1 2025 Form 10-Q - No material changes to risk factors were reported since the **2024 Form 10-K** and **Q1 2025 Form 10-Q** [155](index=155&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section confirms that there were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds to report [156](index=156&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=38&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) This section confirms that there were no defaults upon senior securities to report for the period - No defaults upon senior securities to report [157](index=157&type=chunk) [ITEM 4. Mine Safety Disclosures](index=38&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to LivaNova's operations - Mine safety disclosures are not applicable [158](index=158&type=chunk) [ITEM 5. Other Information](index=39&type=section&id=ITEM%205.%20Other%20Information) This section covers trading arrangements and details LivaNova's medical device sales in Iran through non-U.S. subsidiaries - No directors or officers adopted, terminated, or modified **Rule 10b5-1** or non-Rule 10b5-1 trading arrangements [159](index=159&type=chunk) - LivaNova's non-U.S. subsidiaries sold medical devices in Iran, generating **$3.5 million** in gross revenue and **$1.7 million** in net profits for Q2 2025, and **$8.8 million** in gross revenue and **$4.8 million** for H1 2025 [160](index=160&type=chunk)[161](index=161&type=chunk) - LivaNova believes its activities in Iran are consistent with applicable sanctions laws and intends to continue its business there [162](index=162&type=chunk) [ITEM 6. Exhibits](index=40&type=section&id=ITEM%206.%20Exhibits) This section lists all exhibits filed with the report, including incentive plans, grant agreements, and CEO/CFO certifications - Exhibits include the **Second Amended and Restated LivaNova PLC 2022 Incentive Award Plan**, the **2025 Director Incentive Award Plan**, and related grant agreements [165](index=165&type=chunk) - Certifications from the CEO and CFO pursuant to **Sections 302** and **906** of the Sarbanes-Oxley Act of 2002 are included [165](index=165&type=chunk) - Interactive Data Files (**XBRL**) for financial statements are provided [165](index=165&type=chunk) [Signatures](index=41&type=section&id=Signatures) The report was signed by LivaNova's CEO, Vladimir Makatsaria, and CFO, Alex Shvartsburg, on August 6, 2025 - The report was signed by **Vladimir Makatsaria**, CEO, and **Alex Shvartsburg**, CFO, on **August 6, 2025** [169](index=169&type=chunk)[170](index=170&type=chunk)