• Revenue: $318 million, an increase of 11% versus 2023.
• Organic Revenue Growth: 12% year-to-date.
• Cardiopulmonary Revenue: $172 million, an increase of 15% versus Q3 2023.
• Epilepsy Revenue: Increased 9% versus Q3 2023.
• Adjusted Gross Margin: 71%, in line with Q3 2023.
• Adjusted R&D Expense: $47 million, up from $42 million in Q3 2023.
• Adjusted SG&A Expense: $116 million, compared to $115 million in Q3 2023.
• Adjusted Operating Income: $64 million, up from $45 million in Q3 2023.
• Adjusted Operating Income Margin: 20%, compared to 16% in Q3 2023.
• Adjusted Effective Tax Rate: 23%, up from 10% in Q3 2023.
• Adjusted Diluted EPS: $0.90, compared to $0.73 in Q3 2023.
• Cash Balance: $346 million as of September 30, 2024.
• Total Debt: $626 million as of September 30, 2024.
• Adjusted Free Cash Flow: $47 million, up from $26 million in the prior year period.
• 2024 Revenue Growth Guidance: 8.5% to 9.5% on a constant currency basis.
• 2024 Adjusted Diluted EPS Guidance: $3.30 to $3.40.
• 2024 Adjusted Free Cash Flow Guidance: $110 million to $130 million.

• Warning! GuruFocus has detected 4 Warning Signs with LIVN.

Release Date: October 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• LivaNova PLC (NASDAQ:LIVN) reported an 11% revenue increase, marking the seventh consecutive quarter of double-digit growth.
• The company achieved 12% organic revenue growth year-to-date, with strong performances in both the US (15%) and Europe/rest of the world (9%).
• Cardiopulmonary segment revenue increased by 15% in the third quarter, driven by strong demand and pricing strategies.
• The company successfully launched the Essence platform, contributing approximately 400 basis points of growth this year.
• LivaNova PLC (NASDAQ:LIVN) increased its 2024 full-year guidance based on strong third-quarter results and expanded operating margins.

Negative Points

• The company faces capacity constraints in the oxygenator market, with demand outpacing global supply.
• Epilepsy revenue in Europe declined, offsetting double-digit growth in the rest of the world.
• The adjusted effective tax rate increased to 23% from 10% in the third quarter of 2023, with further increases expected in 2025.
• The ACS segment wind-down impacted revenue growth, although the company is exiting this business.
• Higher operating expenses are anticipated in the fourth quarter, driven by increased R&D investments and commercial activities.

Q & A Highlights

Q: Can you reflect on your approach to portfolio management, specifically regarding R&D deployment and balancing investment in high-risk programs like DTD and OSA versus core business innovation? A: Vladimir Makatsaria, CEO: We are focusing on maximizing our core businesses, Epilepsy and Cardiopulmonary, by reinvesting in R&D and human capital. We are setting directions for DTD and OSA, awaiting reimbursement and clinical data to make further decisions. We aim to enter faster growth markets with significant unmet clinical needs, leveraging our commercial and R&D capabilities. We plan to communicate our strategy in 2025.

Q: What are the assumptions for the fourth quarter, and are there any specific drivers for the implied slowdown in revenue growth and earnings? A: Alex Shvartsburg, CFO: The slowdown is due to strong performance in Q4 2023, particularly with essence placements. We are investing incrementally in Q4 to drive above-market growth, focusing on innovation programs and core portfolio acceleration in Cardiopulmonary and Epilepsy, while continuing investments in DTD and OSA.

Q: Can you provide an update on the oxygenator outlook and competitor dynamics? A: Vladimir Makatsaria, CEO: The market is experiencing supply constraints due to above-average procedure growth, especially in emerging markets. We have improved productivity and expect a 10% volume growth in manufacturing output. Competitor capacity remains constrained, offering us continued market share gain opportunities in 2025.

Q: What are the timelines for innovation initiatives, particularly for DTD and OSA? A: Ahmet Tezel, Chief Innovation Officer: We expect to initiate the CMS coverage process for DTD after final publications in early 2025, with a general timeline of about a year. Our innovation programs are in mid to late development stages, focusing on engineering execution rather than high-risk discovery research. For OSA, we anticipate a PMA submission in the first half of 2025.

Q: How do you view the potential impact of a level six payment coding for US Epilepsy, and what is the current Medicare patient proportion? A: Unidentified Company Representative: About 40% of our Epilepsy patients are on Medicare. A level six payment could significantly improve implanting centers' economics and drive greater VNS therapy utilization. We plan to continue our annual inflationary price increase strategy, with potential flexibility for future innovative products.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.