LivaNova(LIVN) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) The company reported a Q1 net loss of $327.3 million due to a one-time litigation expense, despite 7.4% revenue growth Condensed Consolidated Statements of Income (Loss) (in thousands, except per share amounts) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net revenue | $316,855 | $294,912 | | Gross profit | $220,775 | $207,390 | | Operating income | $48,617 | $16,246 | | SNIA environmental liability expense | ($360,393) | $0 | | Net loss | ($327,322) | ($41,943) | | Diluted loss per share | ($6.01) | ($0.78) | Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $738,437 | $428,858 | | Total Assets | $2,558,746 | $2,506,389 | | SNIA environmental liability | $360,393 | $0 | | Total Liabilities | $1,524,448 | $1,186,131 | | Total Stockholders' Equity | $1,034,298 | $1,320,258 | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $23,966 | $9,981 | | Net cash used in investing activities | ($10,628) | ($6,363) | | Net cash (used in) provided by financing activities | ($4,421) | $37,147 | - On May 2, 2025, LivaNova made an early repayment of $200 million of principal borrowings under its Term Facilities[91] Note 5. Commitments and Contingencies The company details significant legal liabilities, including a new $360.4 million charge for the SNIA environmental litigation - As a result of the Italian Supreme Court's decision on March 14, 2025, the Company recorded a current liability of €333.3 million ($360.4 million) for the SNIA environmental litigation[62][63] - Following the court decision, the SNIA Litigation Guarantee was terminated on March 31, 2025, and the restriction on the cash deposit held as collateral was released[64] - The provision for the 3T Heater-Cooler product liability litigation was $16.2 million as of March 31, 2025[65] - The reserve for the Italian MedTech payback measure was $17.6 million as of March 31, 2025[67] Note 10. Geographic and Segment Information Both Cardiopulmonary and Neuromodulation segments reported revenue and income growth, with the U.S as the largest market Net Revenue by Segment (in thousands) | Segment | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Cardiopulmonary | $176,320 | $155,891 | 13.1% | | Neuromodulation | $138,893 | $133,872 | 3.8% | | Total | $315,213 | $289,763 | 8.8% | Segment Income (in thousands) | Segment | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Cardiopulmonary | $24,691 | $14,711 | 67.8% | | Neuromodulation | $52,353 | $46,678 | 12.2% | | Total Segment Income | $77,044 | $61,389 | 25.5% | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses revenue growth drivers, operating expense reductions, and the impact of the $360.4 million SNIA liability - Cardiopulmonary revenue increased 13.1% to $176.3 million, driven by Essenz Perfusion System sales and strong consumables demand[112] - Neuromodulation revenue increased 3.8% to $138.9 million, with strength in Europe and Rest of World regions[114] - R&D expense decreased, primarily due to a $5.3 million reduction in costs associated with the company's Difficult-to-Treat Depression (DTD) program[119] - The company recorded a $360.4 million liability for the SNIA environmental litigation following an adverse ruling by the Italian Supreme Court[123] - The company believes its liquidity, including $738.4 million in cash and $225 million in available credit, is sufficient to cover the SNIA liability and fund operations[131][133] Obstructive Sleep Apnea (OSA) The OSPREY clinical trial for the aura6000 System showed positive 12-month top-line data for treating OSA - Announced 12-month top-line data from the OSPREY clinical trial for the aura6000 System for treating OSA[105] - The treatment arm responder rate was 65%, with responders defined as having at least a 50% improvement from baseline AHI and an AHI value below 20[105] Depression The RECOVER clinical study for DTD did not meet its primary endpoint, but the company plans a CMS submission - The RECOVER clinical study for DTD did not meet its primary endpoint for the unipolar cohort[107] - The company plans to initiate a reconsideration submission process with CMS after the final critical manuscript is published[107] Liquidity and Capital Resources The company's available short-term liquidity totaled $963.4 million, deemed sufficient to fund operations and commitments Liquidity and Debt Summary (in thousands) | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $738,437 | $428,858 | | Availability under Credit Agreement | $225,000 | $225,000 | | Available Short-term Liquidity | $963,437 | $653,858 | | Working Capital | $429,578 | $735,061 | | Total Debt Obligations | $628,793 | $627,628 | - Cash provided by operating activities increased by $14.0 million year-over-year, mainly due to higher customer collections and lower payments for restructuring[135] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from foreign currency, interest rates, and supplier concentration - The company is exposed to market risks from foreign currency exchange rates, equity price risk, interest rates, and supplier concentration[138] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes in internal controls - The CEO and CFO concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective[140] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[141] PART II. OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 5 for details on material legal proceedings like the SNIA litigation and 3T cases - For a description of material pending legal proceedings, the report refers to "Note 5. Commitments and Contingencies" in the condensed consolidated financial statements[142] Item 1A. Risk Factors The company highlights an updated risk concerning adverse changes in global trade policies, tariffs, and import/export costs - A key risk factor highlighted is that adverse changes in export/import costs, trade restrictions, and global tariffs could materially harm the business[144] - A significant number of Cardiopulmonary products are sourced from Italy and Germany, while Neuromodulation products are made in the U.S. and distributed internationally, making the company vulnerable to tariffs and trade disputes[144] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report for the period - None[146] Item 5. Other Information The company reports no new officer trading plans and discloses continued lawful sales to distributors in Iran - No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement during the quarter[149] - Two non-U.S. subsidiaries sell medical devices in Iran, with gross revenue of $5.1 million and net profits of $3.0 million for Q1 2025[151]