LivaNova PLC 10-Q for FY2024 Q2

LivaNova PLC (LIVN)

10-Q 2024-08-01 For: 2024-06-30

Added on April 10, 2026

About this 10-Q

LivaNova PLC filed this 10-Q on August 1, 2024, covering the quarter ended June 30, 2024 (FY2024 Q2).

Headline figures

Quarter ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $318.58M; up 8.4% from $293.88M a year earlier
Net income: $16.33M; up 1314.1% from net income of $1.16M a year earlier
Diluted EPS: $0.30; up 1400.0% from $0.02 a year earlier

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


Class			Outstanding at July 26, 2024
Ordinary Shares - £1.00 par value per share			54,297,960


Item	Description	Page
	Definitions	1
	Intellectual Property, Trademarks, and Trade Names	3
	Cautionary Note About Forward-Looking Statements	4
	PART I. FINANCIAL INFORMATION
1.	Financial Statements (unaudited)	5
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	30
3.	Quantitative and Qualitative Disclosures About Market Risk	37
4.	Controls and Procedures	37
	PART II. OTHER INFORMATION
1.	Legal Proceedings	37
1A.	Risk Factors	37
2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
3.	Defaults Upon Senior Securities	37
4.	Mine Safety Disclosures	37
5.	Other Information	38
6.	Exhibits	38
	Signatures	39


Abbreviation						Definition
2015 Plan						LivaNova PLC 2015 Incentive Award Plan
2015 Plan Amendment						Amendment No. 2 to the LivaNova PLC 2015 Incentive Award Plan
2021 First Lien Credit Agreement						First Lien Credit Agreement between LivaNova PLC and its wholly-owned subsidiary, LivaNova USA, Inc., 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 2.50% 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
A&R 2022 Plan						Amended and Restated LivaNova PLC 2022 Incentive Award Plan
A&R 2022 Plan Amendment						Amendment No. 1 to the Amended and Restated LivaNova PLC 2022 Incentive Award Plan
ACS						Advanced Circulatory Support
ALung						ALung Technologies, Inc.
AOCI						Accumulated other comprehensive income (loss)
Barclays						Barclays Bank Ireland PLC
Capped Call Transactions						The 2025 Capped Calls and the 2029 Capped Calls
CEO						Chief Executive Officer
CFO						Chief Financial Officer
CMS						The U.S. Centers for Medicare & Medicaid Services
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
Delayed Draw Term Facility						$50.0 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


Exchange Act						U.S. Securities Exchange Act of 1934, as amended
FX						Foreign currency exchange rate
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


Abbreviation						Definition
Incremental Facility Amendment No. 3						An incremental facility amendment to the 2021 First Lien Credit Agreement, dated March 8, 2024
Initial Term Facility						$300.0 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 Select Market
OCI						Other comprehensive income (loss)
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

OSA						Obstructive sleep apnea
OSPREY clinical trial						LivaNova’s clinical trial, “Treating Obstructive Sleep Apnea using Targeted Hypoglossal Neurostimulation”
Pillar Two						Organisation for Economic Co-operation and Development Global Anti-Base Erosion Model Rules (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						Restricted stock units
SARs						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 environmental litigation
Sorin						Sorin S.p.A.
Term Facilities						The Initial Term Facility, together with the Delayed Draw Term Facility
U.S.						United States of America
U.S. GAAP						Generally Accepted Accounting Principles in the U.S.
UK						United Kingdom
UK Act						Finance (No. 2) Act 2023
USD						U.S. dollar

VNS Therapy						LivaNova Vagus Nerve Stimulation Therapy


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net revenue	$	318,575	$	293,882	$	613,487	$	557,300
Cost of sales	99,710		88,685		187,232		178,020
Gross profit	218,865		205,197		426,255		379,280
Operating expenses:
Selling, general, and administrative	129,118		125,872		258,981		250,001
Research and development	44,737		51,124		90,401		101,110
Other operating expenses	4,844		10,825		20,461		13,135
Operating income	40,166		17,376		56,412		15,034

Interest expense	(15,532)		(14,809)		(31,425)		(28,246)
Loss on debt extinguishment	—		—		(25,482)		—
Foreign exchange and other income/(expense)	(3,045)		2,713		(12,116)		28,260
Income (loss) before tax	21,589		5,280		(12,611)		15,048
Income tax expense	5,227		4,097		12,944		6,468
Loss from equity method investments	(29)		(28)		(55)		(55)
Net income (loss)	$	16,333	$	1,155	$	(25,610)	$	8,525


Basic income (loss) per share	$	0.30	$	0.02	$	(0.47)	$	0.16
Diluted income (loss) per share	$	0.30	$	0.02	$	(0.47)	$	0.16

Shares used in computing basic income (loss) per share	54,238		53,803		54,202		53,713
Shares used in computing diluted income (loss) per share	54,591		53,977		54,202		53,942


	June 30, 2024		December 31, 2023
ASSETS
Current Assets:
Cash and cash equivalents	$	329,237	$	266,504
Restricted cash	303,884		311,368
Accounts receivable, net of allowance of $10,903 at June 30, 2024 and $12,019 at December 31, 2023	200,889		215,072
Inventories	154,722		147,887
Prepaid and refundable taxes	21,931		20,145


Prepaid expenses and other current assets	36,026		27,182
Total Current Assets	1,046,689		988,158
Property, plant, and equipment, net	158,055		154,181
Goodwill	766,368		782,941
Intangible assets, net	248,195		261,178
Operating lease assets	49,737		50,845
Investments	17,217		22,843
Deferred tax assets	113,011		118,858
Long-term derivative assets	39,553		38,496
Other assets	14,363		12,063
Total Assets	$	2,453,188	$	2,429,563
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current debt obligations	$	19,742	$	18,111
Accounts payable	81,323		80,845
Accrued liabilities and other	97,971		107,301

Current litigation provision liability	15,968		10,756
Taxes payable	23,317		23,340
Accrued employee compensation and related benefits	64,665		94,630

Total Current Liabilities	302,986		334,983
Long-term debt obligations	605,432		568,543
Contingent consideration	81,174		80,902

Deferred tax liabilities	10,842		11,567
Long-term operating lease liabilities	43,512		45,388
Long-term employee compensation and related benefits	16,392		17,254
Long-term derivative liabilities	105,409		45,569
Other long-term liabilities	44,899		47,729
Total Liabilities	1,210,646		1,151,935
Commitments and contingencies (Note 6)
Stockholders’ Equity:
Ordinary Shares, £1.00 par value: unlimited shares authorized; 54,403,904 shares issued and 54,296,008 shares outstanding at June 30, 2024; 53,942,151 shares issued and 53,918,222 shares outstanding at December 31, 2023	83,070		82,533
Additional paid-in capital	2,204,580		2,189,517
Accumulated other comprehensive loss	(52,819)		(27,883)
Accumulated deficit	(992,094)		(966,484)
Treasury stock at cost, 107,896 ordinary shares at June 30, 2024; 23,929 ordinary shares at December 31, 2023	(195)		(55)
Total Stockholders’ Equity	1,242,542		1,277,628
Total Liabilities and Stockholders’ Equity	$	2,453,188	$	2,429,563


	Employee Severance and Other Termination Costs		Other		Total
Balance at December 31, 2023 (1)	$	911	$	—	$	911
Charges	9,084		2,280		11,364
Cash payments	(6,627)		(1,780)		(8,407)
Balance at June 30, 2024	$	3,368	$	500	$	3,868


	Balance Sheet Location	June 30, 2024		Fair Value Measurements Using Inputs Considered as:
				Level 1		Level 2		Level 3
Assets:
Derivative assets - freestanding instruments (FX)	Prepaid expenses and other current assets	$	914	$	—	$	914	$	—
Derivative assets - capped call derivatives (2025 Notes)	Long-term derivative assets	7,439		—		—		7,439
Derivative assets - capped call derivatives (2029 Notes)	Long-term derivative assets	32,114		—		—		32,114
Convertible notes receivable	Other assets	275		—		—		275
		$	40,742	$	—	$	914	$	39,828
Liabilities:
Derivative liabilities - freestanding instruments (FX)	Accrued liabilities and other	$	39	$	—	$	39	$	—
Derivative liabilities - embedded derivative (2025 Notes)	Long-term derivative liabilities	10,017		—		—		10,017
Derivative liabilities - embedded derivative (2029 Notes)	Long-term derivative liabilities	95,392		—		—		95,392
Contingent consideration arrangement	Contingent consideration	81,174		—		—		81,174
		$	186,622	$	—	$	39	$	186,583


	Three Months Ended June 30, 2024
	Capped Call Derivative Assets (2025 Notes)		Capped Call Derivative Assets (2029 Notes)		Convertible Notes Receivable		Embedded Derivative Liability (2025 Notes)		Embedded Derivative Liability (2029 Notes)		Contingent Consideration Liability Arrangement
March 31, 2024	$	8,010	$	33,607	$	269	$	10,632	$	94,288	$	80,769



Changes in fair value	(571)		(1,493)		6		(615)		1,104		405
June 30, 2024	$	7,439	$	32,114	$	275	$	10,017	$	95,392	$	81,174


	Three Months Ended June 30, 2023
	Capped Call Derivative Assets (2025 Notes)		Convertible Notes Receivable		Embedded Derivative Liability (2025 Notes)		Contingent Consideration Liability Arrangements
March 31, 2023	$	31,014	$	275	$	41,285	$	90,119



Changes in fair value	11,020		—		12,420		2,507
June 30, 2023	$	42,034	$	275	$	53,705	$	92,626


	Six Months Ended June 30, 2024
	Capped Call Derivative Assets (2025 Notes)		Capped Call Derivative Assets (2029 Notes)		Convertible Notes Receivable		Embedded Derivative Liability (2025 Notes)		Embedded Derivative Liability (2029 Notes)		Contingent Consideration Liability Arrangements
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	(8,533)		477		—		1,363		7,935		272
June 30, 2024	$	7,439	$	32,114	$	275	$	10,017	$	95,392	$	81,174


	Six Months Ended June 30, 2023
	Capped Call Derivative Assets (2025 Notes)		Convertible Notes Receivable		Embedded Derivative Liability (2025 Notes)		Contingent Consideration Liability Arrangements
December 31, 2022	$	54,393	$	285	$	85,675	$	85,292



Changes in fair value	(12,359)		(10)		(31,970)		7,334
June 30, 2023	$	42,034	$	275	$	53,705	$	92,626


	June 30, 2024		December 31, 2023		Maturity	Interest Rate
Term Facilities	$	320,684	$	328,459	July 2027	8.65%
2029 Notes	249,838		—		March 2029	2.50%
2025 Notes	52,052		255,500		December 2025	3.00%
Bank of America, U.S.	1,500		1,500		January 2025	8.19%
Other	463		568
Total long-term facilities	624,537		586,027
Less: Current portion of long-term debt	19,105		17,484
Total long-term debt obligations	$	605,432	$	568,543


Total litigation provision liability at December 31, 2023	$	13,860
Payments	(3,966)
Adjustments (1)	9,097
FX and other	(14)
Total litigation provision liability at June 30, 2024	18,977
Less: Current portion of litigation provision liability at June 30, 2024	15,968
Long-term portion of litigation provision liability at June 30, 2024 (2)	$	3,009


	Six Months Ended June 30,
	2024		2023
Operating Activities:
Net (loss) income	$	(25,610)	$	8,525
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Loss on debt extinguishment	25,482		—
Stock-based compensation	18,425		16,290
Remeasurement of derivative instruments	12,465		(25,332)
Depreciation	12,441		12,040
Amortization of debt issuance costs	10,195		9,535
Amortization of intangible assets	8,615		12,747
Impairment of investment in ShiraTronics, Inc.	5,750		—
Deferred income tax expense	5,556		85
Amortization of operating lease assets	4,377		5,107
Remeasurement of contingent consideration to fair value	272		7,334
Other	704		113
Changes in operating assets and liabilities:
Accounts receivable, net	8,398		(707)
Inventories	(10,938)		(25,439)
Other current and non-current assets	(3,366)		(8,321)
Accounts payable and accrued current and non-current liabilities	(25,380)		(4,638)
Taxes payable	820		2,738

Litigation provision liability	5,131		(7,257)
Net cash provided by operating activities	53,337		2,820
Investing Activities:
Purchases of property, plant, and equipment	(18,554)		(13,344)
Purchase of investments	(374)		(5,409)
Other	(4)		614
Net cash used in investing activities	(18,932)		(18,139)
Financing Activities:
Proceeds from long-term debt obligations	335,513		50,000
Repayment of long-term debt obligations	(238,750)		(11,808)
Payment of debt extinguishment costs	(38,953)		—
Purchase of capped calls	(31,637)		—
Proceeds from unwind of capped calls	22,523		—
Payment of contingent consideration	(13,750)		—
Shares repurchased from employees for minimum tax withholding	(8,125)		(5,841)
Proceeds from exercise of stock options	3,682		17


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Service-based RSUs	$	4,300	$	4,696	$	9,374	$	10,413
Service-based SARs	3,240		3,706		6,523		6,827
Market performance-based RSUs	(13)		(1,560)		1,046		(679)
Operating performance-based RSUs	416		(1,429)		864		(859)
Employee share purchase plan	256		298		618		588
	$	8,199	$	5,711	$	18,425	$	16,290


	Six Months Ended June 30, 2024
	Shares	Weighted Average Grant Date Fair Value
Service-based SARs	723,597	$	26.32
Service-based RSUs	392,638	$	55.48
Market performance-based RSUs	67,222	$	74.67
Operating performance-based RSUs	67,216	$	55.59


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Cardiopulmonary
United States	$	64,873	$	50,001	$	115,450	$	89,610
Europe (1)	38,567		39,339		79,493		75,724
Rest of World	70,274		64,773		134,662		124,523
	173,714		154,113		329,605		289,857
Neuromodulation
United States	111,683		104,065		217,612		198,554
Europe (1)	15,590		15,125		28,997		28,405
Rest of World	15,603		13,991		30,139		26,945
	142,876		133,181		276,748		253,904




Other Revenue (2)	1,985		6,588		7,134		13,539
Totals (3)
United States	179,537		159,973		340,157		300,240
Europe (1)	51,258		54,459		105,599		104,102
Rest of World	87,780		79,450		167,731		152,958
	$	318,575	$	293,882	$	613,487	$	557,300


	Ordinary Shares	Ordinary Shares - Amount		Additional Paid-In Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
March 31, 2024	54,296	$	82,975	$	2,192,676	$	(481)	$	(45,206)	$	(1,008,427)	$	1,221,537
Stock-based compensation plans	108	95		11,904		286		—		—		12,285
Net income	—	—		—		—		—		16,333		16,333
Other comprehensive loss	—	—		—		—		(7,613)		—		(7,613)
June 30, 2024	54,404	$	83,070	$	2,204,580	$	(195)	$	(52,819)	$	(992,094)	$	1,242,542

March 31, 2023	53,854	$	82,424	$	2,162,928	$	(319)	$	(41,032)	$	(976,660)	$	1,227,341

Stock-based compensation plans	50	17		6,418		224		—		—		6,659
Net income	—	—		—		—		—		1,155		1,155
Other comprehensive income	—	—		—		—		5,453		—		5,453
June 30, 2023	53,904	$	82,441	$	2,169,346	$	(95)	$	(35,579)	$	(975,505)	$	1,240,608


	Foreign Currency Translation Adjustments (1)		Total
December 31, 2023	$	(27,883)	$	(27,883)
Other comprehensive loss before reclassifications, before tax	(24,936)		(24,936)
Tax expense	—		—
Other comprehensive loss before reclassifications, net of tax	(24,936)		(24,936)



Net current-period other comprehensive loss, net of tax	(24,936)		(24,936)
June 30, 2024	$	(52,819)	$	(52,819)


	Change in Unrealized Gain on Cash Flow Hedges		Foreign Currency Translation Adjustments (1)		Total
December 31, 2022	$	966	$	(49,085)	$	(48,119)
Other comprehensive (loss) income before reclassifications, before tax	(433)		13,506		13,073
Tax expense	—		—		—
Other comprehensive (loss) income before reclassifications, net of tax	(433)		13,506		13,073
Reclassification of gain from accumulated other comprehensive loss, before tax	(533)		—		(533)
Reclassification of tax expense	—		—		—
Reclassification of gain from accumulated other comprehensive loss, after tax	(533)		—		(533)
Net current-period other comprehensive (loss) income, net of tax	(966)		13,506		12,540
June 30, 2023	$	—	$	(35,579)	$	(35,579)


	June 30, 2024		December 31, 2023
Raw materials	$	72,467	$	81,878
Work-in-process	16,230		12,901
Finished goods	66,025		53,108
	$	154,722	$	147,887


	June 30, 2024		December 31, 2023
Italian medtech payback measure	$	14,968	$	8,223
Legal and professional costs	14,021		17,794
Contract liabilities	10,225		10,725
Operating lease liabilities	8,843		8,362
Interest payable	7,223		7,840
Provisions for agents, returns, and other	6,406		4,464
Royalty accrual	4,531		4,441
Restructuring liability	3,331		911
Research and development costs	2,489		2,462
Current derivative liabilities	39		3,883
Contingent consideration	—		13,750
Other accrued expenses	25,895		24,446
	$	97,971	$	107,301


	June 30, 2024		December 31, 2023
Available Short-term Liquidity
Cash and cash equivalents	$	329,237	$	266,504
Availability under the 2021 First Lien Credit Agreement	225,000		125,000
	$	554,237	$	391,504
Working Capital
Current assets	$	1,046,689	$	988,158
Current liabilities	302,986		334,983
	$	743,703	$	653,175
Debt Obligations
Current portion of long-term debt	$	19,105	$	17,484
Short-term unsecured borrowing arrangements	637		627
Current debt obligations	19,742		18,111
Long-term debt obligations	605,432		568,543
	$	625,174	$	586,654


Exhibit Number						Description
10.1†						Amendment No. 1 to the Amended and Restated LivaNova PLC 2022 Incentive Award Plan, incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed on June 12, 2024
10.2†						Amendment No. 2 to the LivaNova PLC 2015 Incentive Award Plan, incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K, filed on June 12, 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 Income (Loss) for the three and six months ended June 30, 2024 and 2023, (ii) the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2024 and 2023, (iii) the Condensed Consolidated Balance Sheet as of June 30, 2024 and December 31, 2023, (iv) the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 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: August 1, 2024	By:	/s/ VLADIMIR MAKATSARIA
		Vladimir Makatsaria
		Chief Executive Officer
		(Principal Executive Officer)


	LIVANOVA PLC


Date: August 1, 2024	By:	/s/ ALEX SHVARTSBURG
		Alex Shvartsburg
		Chief Financial Officer
		(Principal Accounting and Financial Officer)