LivaNova PLC 10-Q for FY2023 Q3

LivaNova PLC (LIVN)

10-Q 2023-11-01 For: 2023-09-30

Added on April 10, 2026

About this 10-Q

LivaNova PLC filed this 10-Q on November 1, 2023, covering the quarter ended September 30, 2023 (FY2023 Q3).

Headline figures

Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $286.11M; up 13.3% from $252.61M a year earlier
Net loss: $7.32M; compared with a net loss of $107.34M a year earlier
Diluted EPS: -$0.14; compared with -$2.01 a year earlier

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Emerging growth company	☐


Class			Outstanding at October 26, 2023
Ordinary Shares - £1.00 par value per share			53,870,826


Abbreviation						Definition
2015 Plan						LivaNova PLC 2015 Incentive Award Plan
2022 Form 10-K						LivaNova PLC’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 27, 2023
2022 Plan						LivaNova PLC 2022 Incentive Award Plan
ACS						Advanced Circulatory Support
ALung						ALung Technologies, Inc.
AOCI						Accumulated other comprehensive income
A&R 2022 Plan						Amended and Restated LivaNova PLC 2022 Incentive Award Plan
BEPS						Base Erosion and Profit Shifting
Bridge Loan Facility						Incremental Facility Amendment No. 1 to the 2021 First Lien Credit Agreement, relating to a €200 million bridge loan facility, dated February 24, 2022, and repaid on July 6, 2022
CEO						Chief Executive Officer
CFO						Chief Financial Officer
CMS						U.S. Centers for Medicare & Medicaid Services
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
Exchange Act						U.S. Securities Exchange Act of 1934, as amended
FDA						U.S. Food and Drug Administration

FX						Foreign currency exchange rate
Hemolung RAS						Hemolung Respiratory Assist System
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
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 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
Mitral						Mitral Holdco S.à r.l.
Notes						$287.5 million aggregate principal amount of 3.00% senior notes due December 2025, issued June 17, 2020

OCI						Other comprehensive income (loss)
OECD						Organisation for Economic Co-operation and Development
Order						Administrative order
OSA						Obstructive sleep apnea


Abbreviation						Definition
OSPREY clinical trial						LivaNova’s clinical trial, “Treating Obstructive Sleep Apnea using Targeted Hypoglossal Neurostimulation”
Public Administrations						The Italian Ministry of the Environment and other Italian government agencies
R&D						Research and Development
RECOVER clinical study						LivaNova’s clinical study “A Prospective, Multi-center, Randomized Controlled Blinded Trial Demonstrating the Safety and Effectiveness of VNS Therapy System as Adjunctive Therapy Versus a No Stimulation Control in Subjects With Treatment-Resistant Depression”
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 expense
SNIA						SNIA S.p.A.
SNIA Litigation Guarantee						A first demand bank guarantee of €270.0 million in connection with the SNIA litigation
SOFR						Secured Overnight Financing Rate
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
VNS						Vagus nerve stimulation


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net revenue	$	286,113	$	252,605	$	843,413	$	746,931
Cost of sales	84,310		81,687		262,330		223,220
Gross profit	201,803		170,918		581,083		523,711
Operating expenses:
Selling, general and administrative	134,794		114,630		384,795		349,637
Research and development	46,541		35,725		147,651		110,872
Impairment of goodwill	—		129,396		—		129,396
Other operating expense	16,010		23,140		29,145		24,518
Operating income (loss)	4,458		(131,973)		19,492		(90,712)
Interest expense	(14,986)		(12,661)		(43,232)		(34,889)
Foreign exchange and other income/(expense)	8,550		38,528		36,810		44,065
(Loss) income before tax	(1,978)		(106,106)		13,070		(81,536)
Income tax expense	5,308		1,295		11,776		6,347
(Loss) income from equity method investments	(32)		57		(87)		(24)
Net (loss) income	$	(7,318)	$	(107,344)	$	1,207	$	(87,907)

Basic (loss) income per share	$	(0.14)	$	(2.01)	$	0.02	$	(1.64)
Diluted (loss) income per share	$	(0.14)	$	(2.01)	$	0.02	$	(1.64)

Shares used in computing basic (loss) income per share	53,989		53,534		53,837		53,474
Shares used in computing diluted (loss) income per share	53,989		53,534		54,107		53,474


	September 30, 2023		December 31, 2022
ASSETS
Current Assets:
Cash and cash equivalents	$	233,941	$	214,172
Restricted cash	298,781		301,446
Accounts receivable, net of allowance of $11,628 at September 30, 2023 and $11,862 at December 31, 2022	189,871		183,110
Inventories	161,539		129,379
Prepaid and refundable taxes	25,505		31,708


Prepaid expenses and other current assets	44,230		26,321
Total Current Assets	953,867		886,136
Property, plant and equipment, net	149,302		147,187
Goodwill	767,055		768,787
Intangible assets, net	347,672		368,559
Operating lease assets	31,533		35,830
Investments	22,698		16,266
Deferred tax assets	1,506		1,384
Long-term derivative assets	43,669		54,393
Other assets	12,115		16,231
Total Assets	$	2,329,417	$	2,294,773
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current debt obligations	$	19,027	$	23,434
Accounts payable	62,780		74,310
Accrued liabilities and other	89,680		81,481

Current litigation provision liability	26,704		29,481
Taxes payable	22,300		16,505
Accrued employee compensation and related benefits	74,905		72,187

Total Current Liabilities	295,396		297,398
Long-term debt obligations	568,163		518,067
Contingent consideration	89,808		85,292

Deferred tax liabilities	9,929		8,516
Long-term operating lease liabilities	25,192		29,548
Long-term employee compensation and related benefits	15,894		16,804
Long-term derivative liabilities	53,303		85,675
Other long-term liabilities	46,260		45,849
Total Liabilities	1,103,945		1,087,149
Commitments and contingencies (Note 8)
Stockholders’ Equity:
Ordinary Shares, £1.00 par value: unlimited shares authorized; 53,903,564 shares issued and 53,860,644 shares outstanding at September 30, 2023; 53,851,979 shares issued and 53,564,664 shares outstanding at December 31, 2022	82,491		82,424
Additional paid-in capital	2,180,661		2,157,724
Accumulated other comprehensive loss	(54,801)		(48,119)
Accumulated deficit	(982,823)		(984,030)
Treasury stock at cost, 42,920 ordinary shares at September 30, 2023; 287,315 ordinary shares at December 31, 2022	(56)		(375)
Total Stockholders’ Equity	1,225,472		1,207,624
Total Liabilities and Stockholders’ Equity	$	2,329,417	$	2,294,773


	Initial Fair Value of Consideration		Measurement Period Adjustments (1)		Adjusted Fair Value of Consideration
Cash and other considerations	$	15,586	$	—	$	15,586
Contingent consideration	26,369		(9,578)		16,791
Fair value of consideration transferred	$	41,955	$	(9,578)	$	32,377


	Initial Purchase Price Allocation		Measurement Period Adjustments (1)		Adjusted Purchase Price Allocation
Developed technology - 15-year life	$	13,950	$	(11,050)	$	2,900
Goodwill	25,893		977		26,870
Other assets and liabilities, net	2,112		495		2,607
Net assets acquired	$	41,955	$	(9,578)	$	32,377


ALung Acquisition	Fair value at May 2, 2022		Valuation Technique	Unobservable Input	Ranges
Sales-based earnout	$	16,791	Monte Carlo simulation	Risk-adjusted discount rate	7.0%	-	8.4%
				Credit risk discount rate	6.4%	-	8.0%
				Revenue volatility	25.7%
				Projected years of earnout	2023	-	2027


	Fair Value as of September 30, 2023		Fair Value Measurements Using Inputs Considered as:
			Level 1		Level 2		Level 3
Assets:

Derivative assets - freestanding instruments (FX)	$	2,625	$	—	$	2,625	$	—
Derivative assets - capped call derivatives	43,669		—		—		43,669
Convertible notes receivable	275		—		—		275
	$	46,569	$	—	$	2,625	$	43,944

Liabilities:

Derivative liabilities - freestanding instruments (FX)	$	207	$	—	$	207	$	—
Derivative liabilities - embedded exchange feature	53,303		—		—		53,303
Contingent consideration arrangements	89,808		—		—		89,808
	$	143,318	$	—	$	207	$	143,111


	Fair Value as of December 31, 2022		Fair Value Measurements Using Inputs Considered as:
			Level 1		Level 2		Level 3
Assets:
Derivative assets - designated as cash flow hedges (interest rate swap)	$	1,333	$	—	$	1,333	$	—
Derivative assets - capped call derivatives	54,393		—		—		54,393
Convertible notes receivable	285		—		—		285
	$	56,011	$	—	$	1,333	$	54,678

Liabilities:
Derivative liabilities - freestanding instruments (FX)	$	5,886	$	—	$	5,886	$	—

Derivative liabilities - embedded exchange feature	85,675		—		—		85,675
Contingent consideration arrangements	85,292		—		—		85,292
	$	176,853	$	—	$	5,886	$	170,967


	Capped Call Derivative Asset		Convertible Notes Receivable		Embedded Exchange Feature Derivative Liability		Contingent Consideration Liability Arrangements
As of December 31, 2022 - long-term	$	54,393	$	285	$	85,675	$	85,292



Changes in fair value	(10,724)		(10)		(32,372)		4,516
Total at September 30, 2023 - long-term	$	43,669	$	275	$	53,303	$	89,808


	September 30, 2023		December 31, 2022		Maturity	Interest Rate
Term Facilities	$	332,433	$	289,294	July 2027	8.87%
2020 Cash Exchangeable Senior Notes	251,315		239,568		December 2025	3.00%
Bank of America Merrill Lynch Banco Múltiplo S.A.	—		6,462		N/A	N/A
Mediocredito Italiano	799		1,601		December 2023	0.50% - 7.15%
Bank of America, U.S.	1,500		1,500		January 2025	8.31%
Other	533		534
Total long-term facilities	586,580		538,959
Less current portion of long-term debt	18,417		20,892
Total long-term debt obligations	$	568,163	$	518,067


Description of Derivative Contract	September 30, 2023		December 31, 2022
Interest rate swap contracts	$	—	$	210,000


	Asset Derivatives			Liability Derivatives
September 30, 2023	Balance Sheet Location	Fair Value (1)		Balance Sheet Location	Fair Value (1)



Derivatives Not Designated as Hedging Instruments:
Capped call derivatives	Long-term derivative assets	$	43,669
Embedded exchange feature				Long-term derivative liabilities	$	53,303
FX derivative contracts	Prepaid expenses and other current assets	2,625		Accrued liabilities and other	207
Total derivatives not designated as hedging instruments		46,294			53,510
Total derivatives		$	46,294		$	53,510


	Nine Months Ended September 30,
	2023		2022
Operating Activities:
Net income (loss)	$	1,207	$	(87,907)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Stock-based compensation	28,069		32,492
Remeasurement of derivative instruments	(25,730)		(38,825)
Amortization	19,129		18,970
Depreciation	18,582		16,593
Amortization of debt issuance costs	14,246		16,394
Amortization of operating lease assets	7,270		7,100
Remeasurement of contingent consideration to fair value	4,516		(33,323)
Impairment of goodwill	—		129,396
Other	2,513		1,369
Changes in operating assets and liabilities:
Accounts receivable, net	(8,239)		(1,665)
Inventories	(33,024)		(22,571)
Other current and non-current assets	(2,981)		12,191
Accounts payable and accrued current and non-current liabilities	(8,084)		(5,395)
Taxes payable	6,347		(1,772)
Litigation provision liability	(2,865)		8,171
Net cash provided by operating activities	20,956		51,218
Investing Activities:
Purchases of property, plant and equipment	(22,062)		(17,383)
Purchase of investments	(6,570)		(928)
Acquisition, net of cash acquired	—		(8,857)
Other	439		(293)
Net cash used in investing activities	(28,193)		(27,461)
Financing Activities:
Proceeds from long-term debt obligations	50,000		507,547
Repayment of long-term debt obligations	(16,061)		(220,784)
Shares repurchased from employees for minimum tax withholding	(6,995)		(8,550)
Repayments of short-term borrowings (maturities greater than 90 days)	(1,901)		—
Proceeds from share issuances under ESPP	1,625		1,788
Proceeds from deferred consideration from sale of Heart Valves, net of working capital adjustments	—		4,597
Payment of debt issuance costs	—		(3,292)
Other	(166)		481
Net cash provided by financing activities	26,502		281,787
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(2,161)		(7,257)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
RSUs	$	5,690	$	5,484	$	16,103	$	16,710
SARs	3,886		3,069		10,713		9,727
Market performance-based restricted stock units	1,071		1,049		392		2,903
Operating performance-based restricted stock units	866		875		7		2,271
Employee share purchase plan	266		250		854		881
Total stock-based compensation expense	$	11,779	$	10,727	$	28,069	$	32,492


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Cardiopulmonary
United States	$	48,547	$	38,476	$	131,372	$	114,437
Europe (1)	35,190		28,754		110,642		93,980
Rest of World	61,090		53,729		185,488		155,437
	144,827		120,959		427,502		363,854
Neuromodulation
United States	102,475		96,504		301,029		275,145
Europe (1)	12,661		11,130		41,066		37,296
Rest of World	13,744		14,201		40,689		37,416
	128,880		121,835		382,784		349,857
Advanced Circulatory Support
United States	10,562		8,430		29,423		28,183
Europe (1)	277		114		522		1,220
Rest of World	113		92		266		268
	10,952		8,636		30,211		29,671
Other Revenue (2)	1,454		1,175		2,916		3,549
Totals
United States	161,583		143,410		461,823		417,765
Europe (1)	48,129		39,998		152,231		132,496
Rest of World	76,401		69,197		229,359		196,670
Total (3)	$	286,113	$	252,605	$	843,413	$	746,931


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Cardiopulmonary	$	4,103	$	2,295	$	11,444	$	7,337
Neuromodulation	597		192		1,089		322
Advanced Circulatory Support	221		589		1,066		1,273
Other capital expenditures (1)	3,261		2,852		8,489		8,439
Total	$	8,182	$	5,928	$	22,088	$	17,371


Total litigation provision liability at December 31, 2022	$	32,487
Payments	(28,604)
Adjustments (1)	25,739
FX and other	60
Total litigation provision liability at September 30, 2023	29,682
Less current portion of litigation provision liability at September 30, 2023	26,704
Long-term portion of litigation provision liability at September 30, 2023 (2)	$	2,978


	Ordinary Shares	Ordinary Shares - Amount		Additional Paid-In Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity (1)
June 30, 2023	53,904	$	82,441	$	2,169,346	$	(95)	$	(35,579)	$	(975,505)	$	1,240,608
Stock-based compensation plans	—	50		11,315		39		—		—		11,404
Net income	—	—		—		—		—		(7,318)		(7,318)
Other comprehensive loss	—	—		—		—		(19,222)		—		(19,222)
September 30, 2023	53,904	$	82,491	$	2,180,661	$	(56)	$	(54,801)	$	(982,823)	$	1,225,472

June 30, 2022	53,810	$	82,359	$	2,133,258	$	(397)	$	(54,870)	$	(878,347)	$	1,282,003

Stock-based compensation plans	4	17		10,504		17		—		—		10,538
Net loss	—	—		—		—		—		(107,344)		(107,344)
Other comprehensive loss	—	—		—		—		(38,234)		—		(38,234)
September 30, 2022	53,814	$	82,376	$	2,143,762	$	(380)	$	(93,104)	$	(985,691)	$	1,146,963


	Change in Unrealized Gain (Loss) on Derivatives		Foreign Currency Translation Adjustments Gain (Loss) (1)		Total
December 31, 2022	$	966	$	(49,085)	$	(48,119)
Other comprehensive loss before reclassifications, before tax	(433)		(5,716)		(6,149)
Tax benefit	—		—		—
Other comprehensive loss before reclassifications, net of tax	(433)		(5,716)		(6,149)
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, net of tax	(966)		(5,716)		(6,682)
September 30, 2023	$	—	$	(54,801)	$	(54,801)

December 31, 2021	$	(945)	$	(6,232)	$	(7,177)
Other comprehensive loss before reclassifications, before tax	(194)		(85,653)		(85,847)
Tax benefit	—		—		—
Other comprehensive loss before reclassifications, net of tax	(194)		(85,653)		(85,847)
Reclassification of gain from accumulated other comprehensive loss, before tax	(80)		—		(80)
Reclassification of tax benefit	—		—		—
Reclassification of gain from accumulated other comprehensive loss, after tax	(80)		—		(80)
Net current-period other comprehensive loss, net of tax	(274)		(85,653)		(85,927)
September 30, 2022	$	(1,219)	$	(91,885)	$	(93,104)


	Nine Months Ended September 30, 2023
	Shares	Weighted Average Grant Date Fair Value
Service-based SARs	974,204	$	19.44
Service-based RSUs	502,821	$	42.89
Market performance-based RSUs	94,561	$	38.95
Operating performance-based RSUs	94,556	$	42.30


	September 30, 2023		December 31, 2022
Raw materials	$	90,953	$	70,027
Work-in-process	17,919		15,508
Finished goods	52,667		43,844
	$	161,539	$	129,379


	September 30, 2023		December 31, 2022
Legal and professional costs	$	15,299	$	8,653
Contract liabilities	10,969		10,226
Interest payable	9,961		—
Operating lease liabilities	8,560		9,379
Italian medical device payback law	7,586		6,414
Research and development costs	5,860		7,020
Royalty accrual	4,172		3,950
Provisions for agents, returns and other	3,607		1,678
Restructuring liabilities	1,285		2,045
Current derivative liabilities	207		5,886
Other accrued expenses	22,174		26,230
	$	89,680	$	81,481


	September 30, 2023		December 31, 2022
Available Short-term Liquidity
Cash and cash equivalents	$	233,941	$	214,172
Availability under the 2021 First Lien Credit Agreement	125,000		125,000
Availability under the Delayed Draw Term Facility (1)	—		50,000
	$	358,941	$	389,172

Working Capital
Current assets	$	953,867	$	886,136
Current liabilities	295,396		297,398
	$	658,471	$	588,738

Debt Obligations
Current portion of long-term debt	$	18,417	$	20,892
Short-term unsecured borrowing arrangements	610		2,542
Current debt obligations	19,027		23,434
Long-term debt obligations	568,163		518,067
Total debt obligations	$	587,190	$	541,501


Exhibit Number			Document Description
10.1*†			Marco Dolci Retirement Agreement dated September 18, 2023
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 nine months ended September 30, 2023 and 2022, (ii) the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2023 and 2022, (iii) the Condensed Consolidated Balance Sheet as of September 30, 2023 and December 31, 2022, (iv) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022, 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: November 1, 2023	By:	/s/ WILLIAM A. KOZY
		William A. Kozy
		Interim Chief Executive Officer and Chair of the Board
		(Principal Executive Officer)


	LIVANOVA PLC


Date: November 1, 2023	By:	/s/ ALEX SHVARTSBURG
		Alex Shvartsburg
		Chief Financial Officer
		(Principal Accounting and Financial Officer)