LivaNova(US:LIVN)2022-11-07 06:46Financial Data and Key Metrics Changes - The company achieved a revenue growth of 5% in Q3 2022, with total revenue reaching $253 million compared to the previous year [9][28] - Adjusted gross margin was 70%, consistent with Q3 2021, but impacted by supply chain challenges and inflationary pressures [29] - Adjusted operating income decreased to $37 million from $46 million year-over-year, with an operating income margin of 15% down from 18% [31] - Adjusted diluted earnings per share were $0.58, down from $0.66 in Q3 2021 [33] - The company recorded a $129 million non-cash goodwill impairment charge for the ACS reporting unit [33] Segment Performance Changes - Cardiopulmonary segment revenue was $121 million, a 7% increase year-over-year, driven by high-single digit growth in oxygenator revenue [10][11] - Epilepsy revenue increased by 11%, with growth across all regions, primarily from replacement implants [12][13] - ACS revenue was $9 million, a significant decrease of 44% year-over-year, primarily due to a decline in severe COVID cases [17][21] Market Performance Changes - US epilepsy revenue grew 9% year-over-year, with total implants up mid-single digits [13] - The rest of the world region for epilepsy saw a 28% growth, led by Brazil [15] - The company expects global epilepsy revenue to grow 6% to 8% for the full year [16] Company Strategy and Industry Competition - The company is navigating macro headwinds including supply chain issues, inflation, and foreign exchange volatility [9] - Strategic portfolio initiatives include ongoing studies like the RECOVER study and ANTHEM-HFrEF trial, with expectations for continued progress [23][25] - The company plans to add two additional dedicated teams for epilepsy in Q4 to enhance market penetration [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about improving procedure trends globally, particularly in the US [47] - The company maintains its guidance for 2022, expecting constant currency revenue growth of 4% to 6% and adjusted EPS of $2.25 to $2.45 [36] - Management highlighted the potential impact of foreign exchange rates on future earnings, estimating a $0.35 EPS headwind [36][50] Other Important Information - The company’s cash balance at September 30 was $506 million, significantly up from $208 million at year-end 2021 [34] - Total debt increased to $540 million, primarily due to a $300 million term loan facility executed in July [34] - The FDA classified a field action related to the LifeSPARC controller as a Class I recall, but the device remains safe for use [20] Q&A Session Summary Question: Epilepsy performance drivers and backlog - Management noted improved market conditions and a backlog of approximately 300 patients remaining for EOS [42][44] Question: 2023 growth outlook - Management expects improving procedure trends but acknowledges ongoing macro challenges [47] Question: Essenz launch updates - The Essenz program is progressing well, with clinical cases expected before year-end in Europe [53] Question: ACS business confidence - Management indicated a modest improvement expected in Q4, with a focus on non-COVID cases [57] Question: RECOVER study interim analysis - Management remains confident in achieving statistical significance, even if the full 500 patients are required [60][81] Question: Retaining sales force amid ACS headwinds - Management has taken steps to retain the sales team and is optimistic about non-COVID business growth [65] Question: SG&A and R&D expense increases - The increase in expenses is attributed to the timing of spending, with lower expenses in the prior year due to pandemic impacts [67][68]