LivaNova PLC 10-Q for FY2024 Q1

LivaNova PLC (LIVN)

10-Q 2024-05-03 For: 2024-03-31

Added on April 10, 2026

About this 10-Q

LivaNova PLC filed this 10-Q on May 3, 2024, covering the quarter ended March 31, 2024 (FY2024 Q1).

Headline figures

Quarter ended March 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $294.91M; up 12.0% from $263.42M a year earlier
Net loss: $41.94M; compared with net income of $7.37M a year earlier
Diluted EPS: -$0.78; compared with $0.14 a year earlier

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Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐


Class			Outstanding at April 26, 2024
Ordinary Shares - £1.00 par value per share			54,151,745


Abbreviation						Definition
2021 First Lien Credit Agreement						First Lien Credit Agreement for $125 million between LivaNova PLC and its wholly-owned subsidiary, Borrower, and Goldman Sachs Bank USA, as First Lien Administrative Agent and First Lien Collateral Agent, entered into on August 13, 2021
2023 Form 10-K						LivaNova PLC’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 29, 2024
2024 Restructuring Plan						A plan, initiated during the first quarter of 2024, to enhance LivaNova’s focus on its core Cardiopulmonary and Neuromodulation segments
2025 Capped Calls						Privately negotiated capped call transactions entered into with certain financial institutions
2025 Notes						$287.5 million aggregate principal amount 3.00% unsecured cash exchangeable senior notes due 2025 by private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act, issued by LivaNova USA on June 17, 2020
2025 Notes Repurchase Transaction						Repurchase of $230.0 million aggregate principal amount of the 2025 Notes in privately-negotiated transactions from proceeds from the issuance of the 2029 Notes
2029 Capped Calls						Privately negotiated capped call transactions entered into with certain financial institutions
2029 Notes						$345.0 million aggregate principal amount 2.5% unsecured convertible senior notes due 2029 by private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act, issued by LivaNova PLC on March 8, 2024
ACS						Advanced Circulatory Support
ALung						ALung Technologies, Inc.
AOCI						Accumulated other comprehensive income
Barclays						Barclays Bank Ireland PLC
BEPS						Base Erosion and Profit Shifting
Borrower						LivaNova USA, Inc.
Capped Call Transactions						The 2025 Capped Calls and the 2029 Capped Calls
CEO						Chief Executive Officer
CFO						Chief Financial Officer
CODM						Chief Operating Decision Maker
Convertible Notes Measurement Period						Any specified ten consecutive trading day measurement period
Court of Appeal						Court of Appeal in Milan
CPB						Cardiopulmonary bypass
Delayed Draw Term Facility						$50 million delayed draw term facility under the 2021 First Lien Credit Agreement resulting from the Incremental Facility Amendment No. 2
DRE						Drug-resistant epilepsy
DTD						Difficult-to-treat depression
ECJ						European Court of Justice
EU						European Union
Exchange Act						U.S. Securities Exchange Act of 1934, as amended
FX						Foreign currency exchange rate
GAAP						Generally Accepted Accounting Principles
HLM						Heart-lung machine
ImThera						ImThera Medical, Inc., acquired by LivaNova in 2018, a company developing an implantable neurostimulation device system for the treatment of obstructive sleep apnea
Incremental Facility Amendment No. 2						An incremental facility amendment to the 2021 First Lien Credit Agreement, dated July 6, 2022
Incremental Facility Amendment No. 3						An incremental facility amendment to the 2021 First Lien Credit Agreement, dated March 8, 2024


Abbreviation						Definition
Initial Term Facility						$300 million term facility under the 2021 First Lien Credit Agreement resulting from the Incremental Facility Amendment No. 2
ISIN						National Inspectorate for Nuclear Safety and Radiation Protection, a sub-body of the Italian Ministry of Economic Development
LivaNova PLC						A public limited company organized under the laws of England and Wales on February 20, 2015
LivaNova USA						LivaNova USA, Inc.
LSM						LivaNova Site Management S.r.l.
MDL						Federal multi-district litigation in the U.S. District Court for the Middle District of Pennsylvania
Nasdaq						Nasdaq Global Market
OCI						Other comprehensive income (loss)
OECD						Organization for Economic Co-operation and Development
Option Counterparties						Certain financial institutions with whom LivaNova USA or LivaNova PLC, as applicable, has entered into the 2025 Capped Calls and 2029 Capped Calls
Order						Administrative order from the Italian Ministry of the Environment received by LivaNova in 2021
OSA						Obstructive sleep apnea
OSPREY clinical trial						LivaNova’s clinical trial, “Treating Obstructive Sleep Apnea using Targeted Hypoglossal Neurostimulation”
Pillar Two						OECD BEPS Pillar Two
Public Administrations						The Italian Ministry of the Environment and other Italian government agencies
R&D						Research and Development
Report						This Quarterly Report on Form 10-Q
RSUs						Service-based restricted stock units
SARs						Service-based stock appreciation rights
SEC						U.S. Securities and Exchange Commission
Securities Act						U.S. Securities Act of 1933, as amended
SG&A						Selling, general and administrative expenses
SNIA						SNIA S.p.A.
SNIA Litigation Guarantee						A first demand bank guarantee of €270.0 million in connection with the SNIA litigation
Sorin spin-off						The spin-off of Sorin from SNIA in 2004
Term Facilities						The Initial Term Facility, together with the Delayed Draw Term Facility
UK						United Kingdom
UK Act						Finance (No.2) Act 2023
U.S.						United States of America
U.S. GAAP						Generally Accepted Accounting Principles in the U.S.
USD						U.S. dollar
UTPR						Undertaxed profits rule
VNS Therapy						LivaNova Vagus Nerve Stimulation Therapy


	Three Months Ended March 31,
		2024		2023
Net revenue		$	294,912	$	263,418
Cost of sales		87,522		89,335
Gross profit		207,390		174,083
Operating expenses:
Selling, general and administrative		129,863		124,129
Research and development		45,664		49,986
Other operating expenses		15,617		2,310
Operating income (loss)		16,246		(2,342)
Interest expense		(15,893)		(13,437)
Loss on debt extinguishment		(25,482)		—
Foreign exchange and other income/(expense)		(9,071)		25,547
(Loss) income before tax		(34,200)		9,768
Income tax expense		7,717		2,371
Loss from equity method investments		(26)		(27)
Net (loss) income		$	(41,943)	$	7,370

Basic (loss) income per share		$	(0.78)	$	0.14
Diluted (loss) income per share		$	(0.78)	$	0.14

Shares used in computing basic (loss) income per share		54,008		53,617
Shares used in computing diluted (loss) income per share		54,008		53,900


	March 31, 2024		December 31, 2023
ASSETS
Current Assets:
Cash and cash equivalents	$	309,191	$	266,504
Restricted cash	306,492		311,368
Accounts receivable, net of allowance of $11,026 at March 31, 2024 and $12,019 at December 31, 2023	209,431		215,072
Inventories	153,176		147,887
Prepaid and refundable taxes	22,543		20,145


Prepaid expenses and other current assets	39,184		27,182
Total Current Assets	1,040,017		988,158
Property, plant and equipment, net	152,237		154,181
Goodwill	771,817		782,941
Intangible assets, net	253,927		261,178
Operating lease assets	50,260		50,845
Investments	22,675		22,843
Deferred tax assets	113,687		118,858
Long-term derivative assets	41,617		38,496
Other assets	13,365		12,063
Total Assets	$	2,459,602	$	2,429,563
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current debt obligations	$	19,704	$	18,111
Accounts payable	75,944		80,845
Accrued liabilities and other	94,029		107,301

Current litigation provision liability	16,980		10,756
Taxes payable	29,761		23,340
Accrued employee compensation and related benefits	91,353		94,630

Total Current Liabilities	327,771		334,983
Long-term debt obligations	604,753		568,543
Contingent consideration	80,769		80,902

Deferred tax liabilities	10,974		11,567
Long-term operating lease liabilities	43,724		45,388
Long-term employee compensation and related benefits	17,062		17,254
Long-term derivative liabilities	104,920		45,569
Other long-term liabilities	48,092		47,729
Total Liabilities	1,238,065		1,151,935
Commitments and contingencies (Note 6)
Stockholders’ Equity:
Ordinary Shares, £1.00 par value: unlimited shares authorized; 54,295,837 shares issued and 54,148,808 shares outstanding at March 31, 2024; 53,942,151 shares issued and 53,918,222 shares outstanding at December 31, 2023	82,975		82,533
Additional paid-in capital	2,192,676		2,189,517
Accumulated other comprehensive loss	(45,206)		(27,883)
Accumulated deficit	(1,008,427)		(966,484)
Treasury stock at cost, 147,029 ordinary shares at March 31, 2024; 23,929 ordinary shares at December 31, 2023	(481)		(55)
Total Stockholders’ Equity	1,221,537		1,277,628
Total Liabilities and Stockholders’ Equity	$	2,459,602	$	2,429,563


	Employee Severance and Other Termination Costs		Other		Total
Balance at December 31, 2023 (1)	$	911	$	—	$	911
Charges	7,251		1,974		9,225
Cash payments	(2,092)		(1,218)		(3,310)
Balance at March 31, 2024	$	6,070	$	756	$	6,826


	Fair Value as of March 31, 2024		Fair Value Measurements Using Inputs Considered as:
			Level 1		Level 2		Level 3
Assets:

Derivative assets - freestanding instruments (FX)	$	1,295	$	—	$	1,295	$	—
Derivative assets - capped call derivatives (2025 Notes)	8,010		—		—		8,010
Derivative assets - capped call derivatives (2029 Notes)	33,607		—		—		33,607
Convertible notes receivable	269		—		—		269
	$	43,181	$	—	$	1,295	$	41,886

Liabilities:


Derivative liabilities - embedded exchange feature (2025 Notes)	$	10,632	$	—	$	—	$	10,632
Derivative liabilities - embedded conversion feature (2029 Notes)	94,288		—		—		94,288
Contingent consideration arrangement	80,769		—		—		80,769
	$	185,689	$	—	$	—	$	185,689


	Fair Value as of December 31, 2023		Fair Value Measurements Using Inputs Considered as:
			Level 1		Level 2		Level 3
Assets:
Derivative assets - capped call derivatives (2025 Notes)	$	38,496	$	—	$	—	$	38,496
Convertible notes receivable	275		—		—		275
	$	38,771	$	—	$	—	$	38,771

Liabilities:
Derivative liabilities - freestanding instruments (FX)	$	3,883	$	—	$	3,883	$	—

Derivative liabilities - embedded exchange feature (2025 Notes)	45,569		—		—		45,569
Contingent consideration arrangements	94,652		—		—		94,652
	$	144,104	$	—	$	3,883	$	140,221


	Capped Call Derivative Assets (2025 Notes)		Capped Call Derivative Assets (2029 Notes)		Convertible Notes Receivable		Embedded Exchange Feature Derivative Liability (2025 Notes)		Embedded Conversion Feature Derivative Liability (2029 Notes)		Contingent Consideration Liability Arrangements
As of December 31, 2023	$	38,496	$	—	$	275	$	45,569	$	—	$	94,652
Additions	—		31,637		—		—		87,457		—
Cash receipt	(22,524)		—		—		—		—		—
Payment	—		—		—		(36,915)		—		(13,750)
Changes in fair value	(7,962)		1,970		(6)		1,978		6,831		(133)
Total at March 31, 2024 - long-term	$	8,010	$	33,607	$	269	$	10,632	$	94,288	$	80,769


March 31, 2024	Capped Call Derivative Assets (2025 Notes)		Capped Call Derivative Assets (2029 Notes)		Embedded Exchange Feature Derivative Liability (2025 Notes)		Embedded Conversion Feature Derivative Liability (2029 Notes)
Stock price volatility	38	%	36	%	38	%	36	%


	March 31, 2024		December 31, 2023		Maturity	Interest Rate
Term Facilities	$	324,571	$	328,459	July 2027	8.93%
2029 Notes	246,256		—		March 2029	2.50%
2025 Notes	51,015		255,500		December 2025	3.00%
Bank of America, U.S.	1,500		1,500		January 2025	8.09%
Other	478		568
Total long-term facilities	623,820		586,027
Less current portion of long-term debt	19,067		17,484
Total long-term debt obligations	$	604,753	$	568,543


			Three Months Ended March 31,
		2023
Description of Derivative Contract	Location in Earnings of Reclassified Gain or Loss		Loss Recognized in OCI		Gain Reclassified from AOCI to Earnings
Interest rate swap contracts	Interest expense		$	(433)	$	533


	Asset Derivatives			Liability Derivatives
December 31, 2023	Balance Sheet Location	Fair Value (1)		Balance Sheet Location	Fair Value (1)
Derivatives Not Designated as Hedging Instruments:

Capped call derivatives (2025 Notes)	Long-term derivative assets	$	38,496
FX derivative contracts				Accrued liabilities and other	$	3,883
Embedded exchange feature (2025 Notes)				Long-term derivative liabilities	45,569


Total derivatives not designated as hedging instruments		38,496			49,452
Total derivatives		$	38,496		$	49,452


Total litigation provision liability at December 31, 2023	$	13,860
Payments	(157)
Adjustments (1)	6,392
FX and other	(80)
Total litigation provision liability at March 31, 2024	20,015
Less current portion of litigation provision liability at March 31, 2024	16,980
Long-term portion of litigation provision liability at March 31, 2024 (2)	$	3,035


	Three Months Ended March 31,
		2024		2023
Cardiopulmonary
United States		$	50,577	$	39,609
Europe (1)		40,926		36,385
Rest of World		64,388		59,750
		155,891		135,744
Neuromodulation
United States		105,929		94,489
Europe (1)		13,407		13,280
Rest of World		14,536		12,954
		133,872		120,723
Other Revenue (2)		5,149		6,951
Totals
United States		160,620		140,267
Europe (1)		54,341		49,643
Rest of World		79,951		73,508
Total (3)		$	294,912	$	263,418


	March 31, 2024		December 31, 2023
Raw materials	$	76,782	$	81,878
Work-in-process	15,964		12,901
Finished goods	60,430		53,108
	$	153,176	$	147,887


	Ordinary Shares	Ordinary Shares - Amount		Additional Paid-In Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity (1)






December 31, 2023	53,942	$	82,533	$	2,189,517	$	(55)	$	(27,883)	$	(966,484)	$	1,277,628
Issuance of shares	—	440		—		(440)		—		—		—
Stock-based compensation plans	354	2		3,159		14		—		—		3,175
Net loss	—	—		—		—		—		(41,943)		(41,943)
Other comprehensive loss	—	—		—		—		(17,323)		—		(17,323)
March 31, 2024	54,296	$	82,975	$	2,192,676	$	(481)	$	(45,206)	$	(1,008,427)	$	1,221,537


	Change in Unrealized Loss on Derivatives		Foreign Currency Translation Adjustments (Loss) Gain (1)		Total
December 31, 2023	$	—	$	(27,883)	$	(27,883)
Other comprehensive loss before reclassifications, before tax	—		(17,323)		(17,323)
Tax benefit	—		—		—
Other comprehensive loss before reclassifications, net of tax	—		(17,323)		(17,323)



Net current-period other comprehensive loss, net of tax	—		(17,323)		(17,323)
March 31, 2024	$	—	$	(45,206)	$	(45,206)

December 31, 2022	$	966	$	(49,085)	$	(48,119)
Other comprehensive (loss) income before reclassifications, before tax	(433)		8,053		7,620
Tax benefit	—		—		—
Other comprehensive (loss) income before reclassifications, net of tax	(433)		8,053		7,620
Reclassification of gain from accumulated other comprehensive loss, before tax	(533)		—		(533)
Reclassification of tax benefit	—		—		—
Reclassification of gain from accumulated other comprehensive loss, after tax	(533)		—		(533)
Net current-period other comprehensive (loss) income, net of tax	(966)		8,053		7,087
March 31, 2023	$	—	$	(41,032)	$	(41,032)


	Three Months Ended March 31, 2024
	Shares	Weighted Average Grant Date Fair Value
Service-based SARs	697,124	$	26.38
Service-based RSUs	336,423	$	55.94
Market performance-based RSUs	60,104	$	75.13
Operating performance-based RSUs	60,098	$	55.94


	March 31, 2024		December 31, 2023
Legal and professional costs	$	19,961	$	17,794
Operating lease liabilities	8,578		8,362
Italian medical device payback law	8,447		8,223
Contract liabilities	8,113		10,725
Interest payable	7,985		7,840
Provisions for agents, returns and other	6,705		4,464
Restructuring liability	4,601		911
Royalty accrual	4,146		4,441
Research and development costs	3,099		2,462
Contingent consideration	—		13,750
Current derivative liabilities	—		3,883
Other accrued expenses	22,394		24,446
	$	94,029	$	107,301


	March 31, 2024		December 31, 2023
Available Short-term Liquidity
Cash and cash equivalents	$	309,191	$	266,504
Availability under the 2021 First Lien Credit Agreement (1)	225,000		125,000
	$	534,191	$	391,504
Working Capital
Current assets	$	1,040,017	$	988,158
Current liabilities	327,771		334,983
	$	712,246	$	653,175
Debt Obligations
Current portion of long-term debt	$	19,067	$	17,484
Short-term unsecured borrowing arrangements	637		627
Current debt obligations	19,704		18,111
Long-term debt obligations	604,753		568,543
Total debt obligations	$	624,457	$	586,654


Exhibit Number			Document Description
4.1			Indenture, dated as of March 8, 2024 between LivaNova PLC and Citibank, N.A., as trustee, incorporated by reference to Exhibit 4.1 of the Company’s current Report on Form 8-K, filed on March 8, 2024
4.2			Form of Global Note, representing LivaNova’s 2.50% convertible senior notes due 2029 (included in Exhibit 4.1 of the Company’s current Report on Form 8-K, filed on March 8, 2024)
10.1*†			Vladimir Makatsaria Employment Agreement, dated February 1, 2024
10.2			Form of Confirmation for Capped Call Transactions, incorporated by reference to Exhibit 10.1 of the Company’s current Report on Form 8-K, filed on March 8, 2024.
10.3			Incremental Facility Amendment No. 3 to Credit Agreement, dated as of March 8, 2024, by and among LivaNova Plc, LivaNova USA, Inc., the Third Incremental Amendment Revolving Lenders, Goldman Sachs Bank USA, the Term Lenders parties hereto, the Issuing Banks, the Swingline Lenders and, for purposes of Sections 7 and 9 only, the other Loan Parties as of the date hereof., incorporated by reference to Exhibit 10.2 of the Company’s current Report on Form 8-K filed on March 8, 2024.
31.1*			Certification of the Chief Executive Officer of LivaNova PLC pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*			Certification of the Chief Financial Officer of LivaNova PLC pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*			Certification of the Chief Executive Officer and Chief Financial Officer of LivaNova PLC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101*			Interactive Data Files Pursuant to Rule 405 of Regulation S-T formatted in Inline XBRL: (i) the Condensed Consolidated Statements of (Loss) Income for the three months ended March 31, 2024 and 2023, (ii) the Condensed Consolidated Statements of Comprehensive (Loss) Income for the three months ended March 31, 2024 and 2023, (iii) the Condensed Consolidated Balance Sheet as of March 31, 2024 and December 31, 2023, (iv) the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023, and (vi) the Notes to the Condensed Consolidated Financial Statements
104*			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


	LIVANOVA PLC


Date: May 3, 2024	By:	/s/ VLADIMIR MAKATSARIA
		Vladimir Makatsaria
		Chief Executive Officer
		(Principal Executive Officer)


	LIVANOVA PLC


Date: May 3, 2024	By:	/s/ ALEX SHVARTSBURG
		Alex Shvartsburg
		Chief Financial Officer
		(Principal Accounting and Financial Officer)