• Revenue: $319 million, an increase of 10% versus 2023.
• Cardiopulmonary Segment Revenue: $174 million, an increase of 14% versus Q2 2023.
• Heart-Lung Machine Revenue: Increased over 25% driven by Essenz.
• Oxygenator Revenue: Grew more than 15% driven by customer demand and price.
• Epilepsy Revenue: Increased 7% versus Q2 2023.
• US Epilepsy Revenue: Increased 6% year over year.
• Adjusted Gross Margin: 69% compared to 72% in Q2 2023.
• Adjusted R&D Expense: $41 million, down from $48 million in Q2 2023.
• Adjusted SG&A Expense: $113 million, consistent with Q2 2023.
• Adjusted Operating Income: $67 million, up from $49 million in Q2 2023.
• Adjusted Operating Income Margin: 21% compared to 17% in Q2 2023.
• Adjusted Effective Tax Rate: 21% compared to 10% in Q2 2023.
• Adjusted Diluted Earnings Per Share: $0.93 compared to $0.78 in Q2 2023.
• Cash Balance: $329 million as of June 30, 2024.
• Total Debt: $625 million as of June 30, 2024.
• Adjusted Free Cash Flow: $42 million, up from negative $10 million in the prior year period.
• 2024 Revenue Growth Guidance: 7% to 8% on a constant currency basis.
• 2024 Adjusted Diluted EPS Guidance: $3.10 to $3.20.

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

Release Date: July 31, 2024

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

Positive Points

• LivaNova PLC (NASDAQ:LIVN) achieved its sixth consecutive quarter of double-digit revenue growth, with a 10% increase in revenue compared to the previous year.
• The cardiopulmonary segment saw a 14% revenue increase, driven by strong demand for heart-lung machines and oxygenators.
• The company is increasing its 2024 full-year revenue and adjusted earnings per share guidance.
• LivaNova PLC (NASDAQ:LIVN) is optimizing its difficult-to-treat depression program, which is expected to result in at least $0.3 of incremental adjusted EPS in 2025.
• The epilepsy segment experienced a 7% revenue increase, with growth in both new and replacement implants.

Negative Points

• The European Court of Justice ruling on de-merger law could potentially hold LivaNova PLC (NASDAQ:LIVN) responsible for liabilities prior to a spin-off, creating legal uncertainties.
• The adjusted gross margin decreased to 69% from 72% in the second quarter of 2023, primarily due to a provision for the Italian payback measure.
• The company anticipates slower sales growth in the second half of 2024 compared to the first half.
• Foreign exchange had an unfavorable year-over-year impact of approximately $3 million, or about 1% of revenue.
• The adjusted effective tax rate increased to 21% from 10% in the second quarter of 2023, impacting net earnings.

Q & A Highlights

Q: Can you explain the rationale behind the guidance for the second half of 2024, given the strong first half performance? A: Alex Shvartsburg, CFO, explained that the first half of 2024 benefited from favorable comparisons, particularly due to the ramp-up of Essenz revenues in the latter half of 2023. The second half of 2024 is expected to see slower sales growth. Investments will focus on critical capabilities to support innovation, growth, and infrastructure, aiming for sustainable above-market growth while expanding margins.

Q: What led to the decision to continue pursuing CMS coverage for difficult-to-treat depression (DTD)? A: Ahmet Tezel, Chief Innovation Officer, stated that both internal and external assessments showed a strong positive benefit for DTD patients using VNS therapy. Despite not meeting the primary endpoint, the data demonstrated statistically significant and clinically meaningful benefits in certain endpoints, prompting the decision to pursue CMS coverage.

Q: Could you elaborate on the cost savings related to the DTD program and how they will be reallocated? A: Alex Shvartsburg, CFO, mentioned that the company expects at least $20 million in pre-tax savings in 2025 from optimizing the DTD program. These savings will be reallocated to high-value initiatives in the cardiopulmonary and epilepsy businesses, including new product development and manufacturing capacity.

Q: What are the strategic considerations for the obstructive sleep apnea (OSA) program, and what investments might be needed for commercialization? A: Matthew Dodds, SVP of Corporate Development & IT, noted that the OSA program's direction will be determined by the 12-month data expected in early 2025. The decision will depend on the competitive profile of the data compared to existing market players, which will influence the level of investment required for commercialization.

Q: How is LivaNova addressing the competitive landscape in the cardiopulmonary (CP) business for the second half of 2024? A: Vladimir Makatsaria, CEO, stated that the company assumes competitors will return to full supply, which is factored into their guidance. LivaNova is focused on improving manufacturing capacity and productivity to meet market demand and maintain growth, even if competitors face supply disruptions.

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