• Organic Revenue Growth (2024): 11% for the full year.
• Revenue Growth (Q4 2024): 5% overall, 7% organic growth compared to Q4 2023.
• Adjusted Operating Income Growth (2024): 41% increase.
• Adjusted Diluted Earnings Per Share Growth (2024): 21% increase.
• Adjusted Free Cash Flow (2024): $163 million, up 70% from the prior year.
• Cardiopulmonary Segment Revenue (Q4 2024): $182 million, 11% increase from Q4 2023.
• Cardiopulmonary Segment Revenue (2024): $684 million, 14% growth for the full year.
• Epilepsy Revenue Growth (2024): 7% for the full year.
• Adjusted Gross Margin (Q4 2024): 69%, up from 68% in Q4 2023.
• Adjusted R&D Expense (Q4 2024): $40 million, down from $42 million in Q4 2023.
• Adjusted SG&A Expense (Q4 2024): $127 million, up from $120 million in Q4 2023.
• Adjusted Operating Income (Q4 2024): $56 million, up from $48 million in Q4 2023.
• Adjusted Diluted Earnings Per Share (Q4 2024): $0.81, down from $0.87 in Q4 2023.
• Cash Balance (End of 2024): $429 million, up from $267 million at the end of 2023.
• Total Debt (End of 2024): $628 million, up from $587 million at the end of 2023.
• 2025 Revenue Growth Guidance: 5% to 6% constant currency, 6% to 7% organic.
• 2025 Adjusted Diluted EPS Guidance: $3.65 to $3.75.
• 2025 Adjusted Free Cash Flow Guidance: $135 million to $155 million.

• Warning! GuruFocus has detected 3 Warning Signs with LIVN.

Release Date: February 25, 2025

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

Positive Points

• LivaNova PLC (NASDAQ:LIVN) achieved 11% organic revenue growth in 2024, marking the second consecutive year of double-digit organic growth.
• The company expanded operating margins and increased free cash flow, delivering $163 million in adjusted free cash flow for the full year 2024.
• Significant clinical milestones were achieved in obstructive sleep apnea (OSA) and difficult-to-treat depression (DTD), with the OSPREY clinical study meeting its primary efficacy and safety endpoints.
• LivaNova PLC (NASDAQ:LIVN) successfully launched the ProtekDuo Plus in the US and Canada, strengthening its cardiopulmonary solutions.
• The company enhanced its executive leadership team and focused on talent development, with 30% of director-level positions filled by new hires or promotions.

Negative Points

• Epilepsy revenue in Europe and the rest of the world declined by a combined 9% in the fourth quarter of 2024, indicating challenges in international markets.
• The adjusted diluted earnings per share decreased to $0.81 from $0.87 in the fourth quarter of 2023, primarily due to a higher effective tax rate.
• The company faces ongoing litigation with the SNIA case, with potential financial implications not included in the 2025 guidance.
• Foreign exchange had an unfavorable impact on revenue, with a $3 million or 1% negative effect in the fourth quarter.
• The adjusted effective tax rate increased to 20% in the fourth quarter of 2024, compared to negative 3% in the same period of 2023, impacting net earnings.

Q & A Highlights

Q: Can you elaborate on the cardiopulmonary performance in the US and EU during the quarter and the outlook for 2025? A: Alex Shvartsburg, CFO, explained that despite challenging comparisons due to a 40% growth in HLM placements in Q4 2023, they saw sequential growth in HLM placements versus Q3 2024. The demand for consumables remains strong, and they are operating in a backorder situation. The team has increased capacity by 10% and expects further growth opportunities in 2025.

Q: Could you provide more details on the innovation pipeline, particularly the impact of the new ECMO-related product and other expected developments in 2025? A: CEO Vladimir Makatsaria emphasized innovation as a strategic pillar, focusing on delivering milestones in epilepsy and cardiopulmonary. Ahmet Tezel, Chief Innovation Officer, highlighted the submission for FDA approval for cloud-connected VNS therapy and the development of a next-gen oxygenator. The launch of ProtekDuo Plus is expected to drive growth, with the specialty cannula business projected to grow by approximately 10%.

Q: What are the financial and strategic plans for the obstructive sleep apnea (OSA) program, and how does it fit into the 2025 guidance? A: CEO Vladimir Makatsaria stated that OSA is a strategic growth area due to significant unmet needs and a growing market. CFO Alex Shvartsburg noted a $27 million investment in 2024, with an additional $8 million in 2025, shifting from clinical to product development. The PMA submission is expected in the first half of 2025, with a limited commercial launch planned post-approval.

Q: Can you discuss the issues faced in the OUS epilepsy segment and the confidence in returning to growth in 2025? A: CFO Alex Shvartsburg acknowledged personnel issues in various markets, which have been addressed. The company is confident in returning to historical growth levels, expecting high single to low double-digit growth in the OUS epilepsy business in 2025.

Q: How does the company plan to balance capital allocation between core business investments and new growth initiatives like DTD and OSA? A: CEO Vladimir Makatsaria emphasized sustaining growth in core businesses while pursuing faster growth markets like OSA and DTD. The R&D spend as a percentage of sales is declining, with more focus on core businesses. CFO Alex Shvartsburg highlighted the large, underserved markets and the compelling clinical evidence supporting these initiatives, which are expected to drive future growth.

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