LivaNova (NasdaqGS:LIVN) FY Conference December 02, 2025 01:30 PM ET Company ParticipantsPhil Kowalczyk - Chief Strategy and Corporate Development OfficerAlex Shvartsburg - CFOModeratorAll right, perfect. We're going to get going here. Welcome to the 2025 Piper Sandler Healthcare Conference. My name is Adam Maeder. I think we're live. Okay, clock's not running, but, but we are live. I'm one of the analysts here at Piper Sandler. Introducing the management team from LivaNova. With us, we have Alex Shvartsbur ...

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]

Financial Data and Key Metrics Changes - The company achieved $317 million in revenue for Q1 2025, reflecting a 9% increase on a constant currency basis and a 10% increase on an organic basis compared to the prior year [29][30] - Adjusted operating income rose to $65 million, up from $53 million in Q1 2024, resulting in an adjusted operating income margin of 20% compared to 18% in the prior year [31][32] - Adjusted diluted earnings per share increased to $0.88 from $0.73 in Q1 2024, driven by operating income growth despite a higher effective tax rate [32] Business Line Data and Key Metrics Changes - Cardiopulmonary segment revenue was $176 million, a 15% increase year-over-year, with heart-lung machine revenue growing approximately 30% [12][13] - Epilepsy revenue increased by 4%, with Europe and the rest of the world regions growing a combined 13% [15][17] - The company expects cardiopulmonary revenue to grow 9% to 10% for the full year 2025, up from a previous forecast of 7% to 8% [13][14] Market Data and Key Metrics Changes - The U.S. Epilepsy business experienced a 2% growth year-over-year, impacted by procedure deferrals due to a voluntary field safety notification [16][17] - The company anticipates low single-digit growth in the U.S. for epilepsy, while Europe and the rest of the world are expected to grow in the low double digits [17][19] Company Strategy and Development Direction - The company is focused on expanding its portfolio in areas of high unmet clinical need, particularly in neuromodulation and OSA [52][43] - The recent twelve-month data from the OSREY trial positions OSA as a significant long-term growth opportunity [8][43] - The company is investing in additional manufacturing capacity to support growth in cardiopulmonary and neuromodulation segments [14][39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to manage tariff impacts, estimating a negligible effect on adjusted operating income for the year [39][75] - The Italian Supreme Court's decision regarding the SNEA matter is seen as a positive development, allowing for greater capital allocation flexibility [36][43] - The company raised its overall organic growth outlook by 100 basis points to between 7% and 8% for 2025, reflecting strong first-quarter performance [19][40] Other Important Information - The company recorded a liability of $360 million related to the SNEA litigation, which is expected to retire a long-standing overhang [9][35] - Adjusted free cash flow for the quarter was $20 million, up from $11 million in the prior year, driven by stronger operating results [33][37] Q&A Session Summary Question: Can you help us understand the OSSPREY data in a competitive context? - Management highlighted the strength of the clinical data, noting that the trial included more severe patients and achieved a rapid therapeutic response [47][48] Question: What is the outlook for the HLM business and Essence rollout? - Management indicated strong demand for oxygenators and a significant increase in Essence placements, with regulatory approval in China being a major milestone [54][56] Question: Can you elaborate on the changes in the OUS Neuromodulation business? - Management noted improved commercial execution in Europe, with a focus on strengthening talent and customer segmentation [64][66] Question: What is the impact of tariffs on the company's guidance? - Management confirmed that the $5 million tariff impact is included in the guidance, with some pricing actions assumed to offset costs [70][75] Question: How does the company view its leverage ratio and capital allocation? - Management expressed confidence in a healthy leverage ratio and indicated a focus on investing in core businesses while remaining open to inorganic growth opportunities [88][89]

Financial Data and Key Metrics Changes - The company achieved 11% organic revenue growth in 2024, marking the second consecutive year of double-digit organic growth [5][10] - Adjusted operating income grew by 41%, and adjusted diluted earnings per share increased by 21% [11] - Free cash flow for the full year 2024 was $163 million, representing a 70% increase from the prior year [34] Business Line Data and Key Metrics Changes - Cardiopulmonary segment revenue for Q4 was $182 million, an 11% increase year-over-year, with full-year revenue of $684 million, growing 14% [11][13] - Epilepsy revenue increased by 1% in Q4, with U.S. epilepsy revenue growing by 4% year-over-year [15][16] - The company expects cardiopulmonary revenue to grow by 7% to 8% in 2025 and global epilepsy revenue to grow by 4% to 5% [13][17] Market Data and Key Metrics Changes - The hypoglossal nerve stimulation market for obstructive sleep apnea is expected to approach $2 billion by the end of the decade [7] - The company noted a growing worldwide prevalence of obstructive sleep apnea, with significant unmet needs in the market [60] Company Strategy and Development Direction - The company is focusing on innovation and growth, with a clear strategy to enhance its talent and culture [8][40] - Investment will be increased to accelerate product development in obstructive sleep apnea and difficult-to-treat depression [7][26] - The company aims to leverage its clinical and scientific expertise to expand into new therapeutic areas [6][8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to continue delivering strong financial results and achieving significant milestones in innovation [5][40] - The company is optimistic about the future growth potential in both core and new markets, driven by strong clinical data and market demand [60][100] Other Important Information - The company plans to submit a PMA for obstructive sleep apnea in the first half of 2025, with a limited commercial launch expected thereafter [63] - Adjusted free cash flow is projected to be between $135 million and $155 million for 2025, reflecting increased capital spending [36] Q&A Session Summary Question: Can you help us understand the U.S. and EU cardiopulmonary performance in the quarter? - Management acknowledged a challenging comparison due to previous high growth but noted sequential growth in HLM placements and strong demand for consumables [46] Question: What is the impact of the launch of the new ECMO related product? - Management highlighted that innovation is a key focus and expects the new product to drive growth in 2025 [50][57] Question: How much are you spending to prepare for the sleep apnea launch? - The company invested $27 million in 2024 and plans to invest an additional $8 million in 2025, shifting focus from clinical spend to product development [61] Question: What are the execution issues in the OUS epilepsy business? - Management identified personnel issues as isolated across different markets and expressed confidence in returning to growth [66] Question: Can you provide insight into revenue phasing for 2025? - Management indicated that Q1 is typically the lowest quarter, with growth expected to ramp up throughout the year [69] Question: What is the expected impact of the Siena ruling? - Management stated that they do not anticipate a decision at the upcoming hearing but expect a ruling in the first half of 2025 [78] Question: How does the company view capital allocation between core business and new initiatives? - Management emphasized the importance of sustaining growth in core businesses while also investing in new growth opportunities [100]