LivaNova PLC (Nasdaq: LIVN), a market-leading medical technology
company, today reported results for the quarter ended September 30,
2023 and raised full-year 2023 revenue and adjusted diluted
earnings per share guidance.
Financial Summary and
Highlights1
- Third-quarter revenue of $286.1 million increased 13.3% on a
reported basis and increased 12.1% on a constant-currency basis, as
compared to the prior-year period
- Third-quarter U.S. GAAP diluted loss per share was $0.14 and
adjusted diluted earnings per share was $0.73
- Received U.S. FDA 510(k) clearance and CE Mark for its EssenzTM
In-Line Blood Monitor
“LivaNova delivered double-digit revenue growth across all
regions, improved profitability and achieved important clearances
for the Essenz In-Line Blood Monitor in the third quarter,” said
Bill Kozy, Interim Chief Executive Officer and Board Chair of
LivaNova. "Our performance reflects strong execution throughout the
organization as demonstrated in all three Business Units. We look
forward to building on these results with a firm focus on patients
and performance in the fourth quarter and in 2024."
Third-Quarter 2023
Results
The following table summarizes revenue for the third quarter of
2023 by segment (in millions):
Three Months Ended
September 30,
% Change
Constant-Currency
% Change2
2023
2022
Cardiopulmonary
$144.8
$121.0
19.7
%
18.1
%
Neuromodulation
128.9
121.8
5.8
%
5.2
%
Advanced Circulatory Support
11.0
8.6
26.8
%
26.6
%
Other
1.5
1.2
23.7
%
14.4
%
Total Net Revenue
$286.1
$252.6
13.3
%
12.1
%
- Numbers may not add precisely due to rounding.
Cardiopulmonary revenue increased 19.7% on a reported
basis and increased 18.1%2 on a constant-currency basis versus the
third quarter of 2022 with growth across all regions, driven by
increased heart-lung machine placements, including EssenzTM
Perfusion System installations in the U.S. and Europe, and strong
oxygenator demand.
Neuromodulation revenue increased 5.8% on a reported
basis and increased 5.2%2 on a constant-currency basis versus the
third quarter of 2022 with growth in the U.S. and Europe
regions.
Advanced Circulatory Support (ACS) revenue increased
26.8% on a reported basis and increased 26.6%2 on a
constant-currency basis versus the third quarter of 2022, driven by
an increase in case volumes.
Earnings Analysis
On a U.S. GAAP basis, third-quarter 2023 operating income was
$4.5 million, as compared to an operating loss of $132.0 million
for the third quarter of 2022. Adjusted operating income for the
third quarter of 2023 was $45.0 million, as compared to adjusted
operating income of $36.6 million for the third quarter of
2022.
On a U.S. GAAP basis, third-quarter 2023 diluted loss per share
was $0.14, as compared to diluted loss per share of $2.01 in the
third quarter of 2022. Third-quarter 2023 adjusted diluted earnings
per share was $0.73, as compared to adjusted diluted earnings per
share of $0.58 in the third quarter of 2022.
Full-Year 2023 Guidance
LivaNova now expects revenue for full-year 2023 to grow between
9% and 11% on a constant-currency basis. Foreign currency is
expected to be a 1% tailwind based on current rates.
Adjusted diluted earnings per share for 2023 is now expected to
be in the range of $2.60 to $2.80, assuming a fully diluted share
count of 54 million for full-year 2023. The Company now estimates
that adjusted free cash flow will be in the range of $85 to $95
million.
As discussed further below, the Company is unable to predict
with a reasonable degree of certainty the type and extent of
certain items that would be expected to impact GAAP measures but
would not impact the non-GAAP measures. Accordingly, the Company is
unable to reconcile the forward-looking non-GAAP financial measures
included in this section to their most directly comparable
forward-looking GAAP financial measures without unreasonable
efforts.
Webcast and Conference Call
Instructions
The Company will host a live audiocast at 12 p.m. London time (8
a.m. Eastern Time) on Wednesday, November 1, 2023 that will be
accessible at www.livanova.com/events. Listeners should register in
advance and log on approximately 10 minutes early to ensure proper
setup. To listen to the conference call by telephone, dial +1 833
470 1428 (if dialing from within the U.S.) or +1 929 526 1599 (if
dialing from outside the U.S.). The conference call access code is
951660. Within 24 hours of the audiocast, a replay will be
available at www.livanova.com/events, where it will be archived and
accessible for approximately 90 days.
_____________________________________________
1
Constant-currency percent change, adjusted
operating income, adjusted diluted earnings per share and adjusted
free cash flow are non-GAAP measures. For an explanation of these
and other non-GAAP measures used in this release, see the section
entitled "Use of Non-GAAP Financial Measures." For reconciliations
of certain non-GAAP measures, see the tables that accompany this
press release.
2
Constant-currency percent change excludes
the impact from fluctuations in the various currencies in which the
Company operates as compared to reported percent change.
Constant-currency percent change is a non-GAAP metric. For an
explanation of this and other non-GAAP metrics used in this
release, see the section entitled "Use of Non-GAAP Financial
Measures."
About LivaNova
LivaNova PLC is a global medical technology company built on
nearly five decades of experience and a relentless commitment to
provide hope for patients and their families through medical
technologies, delivering life-changing improvements for both the
Head and Heart. Headquartered in London, LivaNova employs
approximately 2,900 employees and has a presence in more than 100
countries for the benefit of patients, healthcare professionals and
healthcare systems worldwide. For more information, please visit
www.livanova.com.
Use of Non-GAAP Financial Measures
In this press release, management has disclosed financial
measurements that present financial information not in accordance
with GAAP. Company management uses these measurements as aids in
monitoring the Company’s ongoing financial performance from quarter
to quarter and year to year on a regular basis and for benchmarking
against other medical technology companies. Non-GAAP financial
measures used by the Company may be calculated differently from,
and therefore may not be comparable to, similarly titled measures
used by other companies. These non-GAAP financial measures should
be considered along with, but not as alternatives to, operating
performance measures as prescribed by GAAP.
Unless otherwise noted, all revenue growth rates in this release
reflect comparable, constant-currency percent change. Management
believes that referring to comparable, constant-currency percent
change is the most useful way to evaluate the revenue performance
of LivaNova and to compare the revenue performance of current
periods to prior periods on a consistent basis. Constant-currency
percent change, a non-GAAP financial measure, measures the change
in revenue between current and prior-year periods using average
exchange rates in effect during the applicable prior-year
period.
LivaNova calculates forward-looking non-GAAP financial measures
based on internal forecasts that omit certain amounts that would be
included in GAAP financial measures. For example, forward-looking
net revenue growth projections are estimated on a constant-currency
basis and exclude the impact of foreign currency fluctuations.
Forward-looking non-GAAP adjusted diluted earnings per share
guidance exclude other items such as, but not limited to, changes
in fair value of derivatives and contingent consideration
arrangements and asset impairment charges that would be included in
comparable GAAP financial measures. The most directly comparable
GAAP measure for constant-currency net revenue, non-GAAP adjusted
tax rate and adjusted diluted earnings per share are net revenue,
the effective tax rate and earnings per share, respectively. The
most directly comparable GAAP measure for adjusted free cash flow
is net cash provided by operating activities. However, non-GAAP
financial adjustments on a forward-looking basis are subject to
uncertainty and variability as they are dependent on many factors,
including but not limited to, the effect of foreign currency
exchange fluctuations, impacts from potential acquisitions or
divestitures, the ultimate outcome of legal proceedings, gains or
losses on the potential sale of businesses or other assets,
restructuring costs, merger and integration activities, changes in
fair value of derivatives and contingent consideration
arrangements, asset impairment charges and the tax impact of the
aforementioned items, tax law changes or other tax matters.
Accordingly, forward-looking GAAP financial measures and
reconciliations to the most directly comparable forward-looking
GAAP financial measures are not available without unreasonable
effort.
The Company also believes adjusted financial measures such as
adjusted gross profit percentage, adjusted selling, general and
administrative expense, adjusted research and development expense,
adjusted other operating expense, adjusted operating income,
adjusted income tax expense, adjusted net income and adjusted
diluted earnings per share, are measures by which LivaNova
generally uses to facilitate management review of the operational
performance of the company, to serve as a basis for strategic
planning and to assist in the design of compensation incentive
plans. Additionally, the Company also uses the non-GAAP liquidity
measure adjusted free cash flow. Furthermore, adjusted financial
measures allow investors to evaluate the Company’s core performance
for different periods on a more comparable and consistent basis,
and with other entities in the medical technology industry by
adjusting for items that are not related to the ongoing operations
of the Company or incurred in the ordinary course of business.
Safe Harbor Statement
Certain statements in this press release, other than statements
of historical or current fact, are “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995, Section 27A of the Securities Act and Section 21E of the
Exchange Act. These statements include, but are not limited to,
LivaNova’s plans, objectives, strategies, financial performance and
outlook, trends, the amount and timing of future cash
distributions, prospects or future events and involve known and
unknown risks that are difficult to predict. As a result, the
Company’s actual financial results, performance, achievements or
prospects may differ materially from those expressed or implied by
these forward-looking statements. Generally, you can identify
forward-looking statements by the use of words such as “may,”
“could,” “seek,” “guidance,” “predict,” “potential,” “likely,”
“believe,” “will,” “should,” “expect,” “anticipate,” “estimate,”
“plan,” “intend,” “forecast,” “foresee” or variations of these
terms and similar expressions, or the negative of these terms or
similar expressions. Such forward-looking statements are
necessarily based on estimates and assumptions that, while
considered reasonable by LivaNova and its management based on their
knowledge and understanding of the business and industry, are
inherently uncertain. These statements are not guarantees of future
performance, and stockholders should not place undue reliance on
forward-looking statements. There are a number of risks,
uncertainties and other important factors, many of which are beyond
the Company’s control, that could cause the Company’s actual
results to differ materially from the forward-looking statements
contained in this Quarterly Report on Form 10-Q, and include, but
are not limited to, the following risks and uncertainties:
volatility in the global market and worldwide economic conditions,
including as caused by the invasion of Ukraine, the evolving
instability in the Middle East, inflation, foreign exchange
fluctuations, changes to existing trade agreements and
relationships between the U.S. and other countries including the
implementation of sanctions; cyber-attacks or other disruptions to
the Company’s information technology systems or those of third
parties with which the Company interacts; costs of complying with
privacy and security of personal information requirements and laws;
losses or costs from pending or future lawsuits and governmental
investigations, including in the case of the Company’s 3T
Heater-Cooler and SNIA litigations; risks related to reductions,
interruptions or increasing costs related to the supply of raw
materials and components and the distribution of finished products,
including as a result of inflation, war and extreme weather;
changes in technology, including the development of superior or
alternative technology or devices by competitors and/or competition
from providers of alternative medical therapies; failure to obtain
approvals or reimbursement in relation to the Company’s products;
failure to establish, expand or maintain market acceptance of the
Company’s products for the treatment of the Company’s approved
indications; failure to develop and commercialize new products and
the rate and degree of market acceptance of such products;
unfavorable results from clinical studies or failure to meet
milestones; failure to comply with, or changes in, laws,
regulations or administrative practices affecting government
regulation of the Company’s products; risks relating to recalls,
enforcement actions or product liability claims; changes or
reduction in reimbursement for the Company’s products or failure to
comply with rules relating to reimbursement of healthcare goods and
services; failure to comply with anti-bribery laws; risks relating
to recalls, enforcement actions or product liability claims; risks
associated with environmental laws and regulations as well as
environmental liabilities, violations, protest voting and
litigation; product liability, intellectual property,
shareholder-related, environmental-related, income tax and other
litigation, disputes, losses and costs; failure to retain key
personnel, prevent labor shortages, or manage labor costs; the
failure of the Company’s R&D efforts to keep up with the rapid
pace of technological development in the medical device industry;
the impact of climate change and the risk of environmental, social
and governance pressures from internal and external stakeholders;
the risk of quality concerns and the impacts thereof; failure to
protect the Company’s proprietary intellectual property; the
potential loss of funds resulting from recent and potential future
bank failures; failure of new acquisitions to further the Company’s
strategic objectives or strengthen the Company’s existing
businesses; the potential for impairments of intangible assets and
goodwill; risks relating to the Company’s indebtedness including
under the exchangeable senior notes, the Company’s revolving credit
facility and the Company’s 2022 Term Facilities, as defined herein;
effectiveness of the Company’s internal controls over financial
reporting; changes in the Company’s profitability and/or failure to
manage costs and expenses; fluctuations in future quarterly
operating results and/or variations in revenue and operating
expenses relative to estimates; changes in tax laws and
regulations, including exposure to additional income tax
liabilities; and other unknown or unpredictable factors that could
harm the Company’s financial performance.
The foregoing list of factors is not exhaustive. You should
carefully consider the foregoing factors and the other risks and
uncertainties that affect the Company’s business, including those
described in the “Risk Factors” section of Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K
and other documents filed from time to time with the United States
Securities and Exchange Commission by LivaNova.
We caution you not to place undue reliance on any
forward-looking statements, which are made only as of the date of
this press release. The Company does not undertake or assume any
obligation to update publicly any of the forward-looking statements
in this press release to reflect actual results, new information or
future events, changes in assumptions or changes in other factors
affecting forward-looking statements, except to the extent required
by applicable law. If we update one or more forward-looking
statements, no inference should be drawn that we will make
additional updates with respect to those or other forward-looking
statements.
Essenz is a trademark of LivaNova USA, Inc.
LIVANOVA PLC
NET REVENUE
(U.S. dollars in millions)
Three Months Ended September
30,
2023
2022
% Change
Constant-Currency
% Change (1)
Cardiopulmonary
US
$48.5
$38.5
26.2
%
26.2
%
Europe (2)
35.2
28.8
22.4
%
13.2
%
Rest of World
61.1
53.7
13.7
%
14.9
%
Total
144.8
121.0
19.7
%
18.1
%
Neuromodulation
US
102.5
96.5
6.2
%
6.2
%
Europe (2)
12.7
11.1
13.8
%
6.7
%
Rest of World
13.7
14.2
(3.2
)%
(2.7
)%
Total
128.9
121.8
5.8
%
5.2
%
Advanced Circulatory Support
US
10.6
8.4
25.3
%
25.3
%
Europe (2)
0.3
0.1
NM
NM
Rest of World
0.1
0.1
NM
NM
Total
11.0
8.6
26.8
%
26.6
%
Other Revenue (3)
1.5
1.2
23.7
%
14.4
%
Totals
US
161.6
143.4
12.7
%
12.7
%
Europe (2)
48.1
40.0
20.3
%
11.7
%
Rest of World
76.4
69.2
10.4
%
11.3
%
Total
$286.1
$252.6
13.3
%
12.1
%
(1)
Constant-currency growth, a non-GAAP
financial measure, measures the change in revenue between current
and prior-year periods using average exchange rates in effect
during the applicable prior-year period.
(2)
Includes countries in Europe where the
Company has a direct sales presence. Countries where sales are made
through distributors are included in “Rest of World.”
(3)
Other revenue primarily includes rental
income not allocated to segments.
NM
Indicates that variance as a percentage is
not meaningful.
- The revenue results presented are unaudited. Numbers may not
add precisely due to rounding.
LIVANOVA PLC
NET REVENUE
(U.S. dollars in millions)
Nine Months Ended September
30,
2023
2022
% Change
Constant-Currency
% Change (1)
Cardiopulmonary
US
$131.4
$114.4
14.8
%
14.8
%
Europe (2)
110.6
94.0
17.7
%
16.1
%
Rest of World
185.5
155.4
19.3
%
23.5
%
Total
427.5
363.9
17.5
%
18.9
%
Neuromodulation
US
301.0
275.1
9.4
%
9.4
%
Europe (2)
41.1
37.3
10.1
%
10.5
%
Rest of World
40.7
37.4
8.7
%
12.3
%
Total
382.8
349.9
9.4
%
9.8
%
Advanced Circulatory Support
US
29.4
28.2
4.4
%
4.4
%
Europe (2)
0.5
1.2
NM
NM
Rest of World
0.3
0.3
NM
NM
Total
30.2
29.7
1.8
%
1.8
%
Other Revenue (3)
2.9
3.5
(17.8
)%
(20.3
)%
Totals
US
461.8
417.8
10.5
%
10.5
%
Europe (2)
152.2
132.5
14.9
%
13.8
%
Rest of World
229.4
196.7
16.6
%
20.6
%
Total
$843.4
$746.9
12.9
%
13.8
%
(1)
Constant-currency growth, a non-GAAP
financial measure, measures the change in revenue between current
and prior-year periods using average exchange rates in effect
during the applicable prior-year period.
(2)
Includes countries in Europe where the
Company has a direct sales presence. Countries where sales are made
through distributors are included in “Rest of World.”
(3)
Other revenue primarily includes rental
income not allocated to segments.
NM
Indicates that variance as a percentage is
not meaningful.
- The revenue results presented are unaudited. Numbers may not
add precisely due to rounding.
LIVANOVA PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME - UNAUDITED
(U.S. dollars in millions, except per
share amounts)
Three Months Ended September
30,
2023
2022
% Change
Net revenue
$286.1
$252.6
Cost of sales
84.3
81.7
Gross profit
201.8
170.9
18.1
%
Operating expenses:
Selling, general and administrative
134.8
114.6
Research and development
46.5
35.7
Impairment of goodwill
—
129.4
Other operating expense
16.0
23.1
Operating income (loss)
4.5
(132.0
)
(103.4
)%
Interest expense
(15.0
)
(12.7
)
Foreign exchange and other
income/(expense)
8.6
38.5
Loss before tax
(2.0
)
(106.1
)
(98.1
)%
Income tax expense
5.3
1.3
Net loss
($7.3
)
($107.3
)
(93.2
)%
Basic loss per share
($0.14
)
($2.01
)
Diluted loss per share
($0.14
)
($2.01
)
Weighted average common shares
outstanding:
Basic
54.0
53.5
Diluted
54.0
53.5
- Numbers may not add precisely due to rounding.
Adjusted Financial Measures (U.S.
dollars in millions, except per share amounts)
Adjusted (1) Three Months
Ended September 30,
2023
2022
% Change
Adjusted SG&A
$114.7
$98.5
16.5
%
Adjusted R&D
42.0
41.5
1.2
%
Adjusted operating income
45.0
36.6
22.7
%
Adjusted net income
39.5
31.0
27.2
%
Adjusted diluted earnings per share
$0.73
$0.58
26.1
%
(1)
Adjusted financial measures are non-GAAP
measures and exclude specified items as described and reconciled in
the “Reconciliation of GAAP to non-GAAP Financial Measures”
contained in the press release.
Statistics (as a % of net revenue,
except for income tax rate)
GAAP Three Months Ended
September 30,
Adjusted (1) Three Months
Ended September 30,
2023
2022
2023
2022
Gross profit
70.5
%
67.7
%
70.5
%
69.9
%
SG&A
47.1
%
45.4
%
40.1
%
39.0
%
R&D
16.3
%
14.1
%
14.7
%
16.4
%
Operating income (loss)
1.6
%
(52.2
)%
15.7
%
14.5
%
Net (loss) income
(2.6
)%
(42.5
)%
13.8
%
12.3
%
Income tax rate
(268.4
)%
(1.2
)%
10.4
%
8.3
%
(1)
Adjusted financial measures are non-GAAP
measures and exclude specified items as described and reconciled in
the “Reconciliation of GAAP to non-GAAP Financial Measures”
contained in the press release.
LIVANOVA PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME - UNAUDITED
(U.S. dollars in millions, except per
share amounts)
Nine Months Ended September
30,
2023
2022
% Change
Net revenue
$843.4
$746.9
Cost of sales
262.3
223.2
Gross profit
581.1
523.7
11.0
%
Operating expenses:
Selling, general and administrative
384.8
349.6
Research and development
147.7
110.9
Impairment of goodwill
—
129.4
Other operating expenses
29.1
24.5
Operating income (loss)
19.5
(90.7
)
(121.5
)%
Interest expense
(43.2
)
(34.9
)
Foreign exchange and other
income/(expense)
36.8
44.1
Income (loss) before tax
13.1
(81.5
)
(116.0
)%
Income tax expense
11.8
6.3
Losses from equity method investments
(0.1
)
—
Net income (loss)
$1.2
($87.9
)
(101.4
)%
Basic income (loss) per share
$0.02
($1.64
)
Diluted income (loss) per share
$0.02
($1.64
)
Weighted average common shares
outstanding:
Basic
53.8
53.5
Diluted
54.1
53.5
- Numbers may not add precisely due to rounding.
Adjusted Financial Measures (U.S.
dollars in millions, except per share amounts)
Adjusted (1) Nine Months Ended
September 30,
2023
2022
% Change
Adjusted SG&A
$336.1
$301.5
11.5
%
Adjusted R&D
136.1
123.3
10.3
%
Adjusted operating income
121.3
98.4
23.3
%
Adjusted net income
104.7
85.6
22.4
%
Adjusted diluted earnings per share
$1.94
$1.58
22.3
%
(1)
Adjusted financial measures are non-GAAP
measures and exclude specified items as described and reconciled in
the “Reconciliation of GAAP to non-GAAP Financial Measures”
contained in the press release.
Statistics (as a % of net revenue,
except for income tax rate)
GAAP Nine Months Ended
September 30,
Adjusted (1) Nine Months Ended
September 30,
2023
2022
2023
2022
Gross profit
68.9
%
70.1
%
70.4
%
70.0
%
SG&A
45.6
%
46.8
%
39.8
%
40.4
%
R&D
17.5
%
14.8
%
16.1
%
16.5
%
Operating income (loss)
2.3
%
(12.1
)%
14.4
%
13.2
%
Net income (loss)
0.1
%
(11.8
)%
12.4
%
11.5
%
Income tax rate
90.1
%
(7.8
)%
9.1
%
6.8
%
(1)
Adjusted financial measures are non-GAAP
measures and exclude specified items as described and reconciled in
the “Reconciliation of GAAP to non-GAAP Financial Measures”
contained in the press release.
RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL MEASURES - UNAUDITED
(U.S. dollars in millions, except per
share amounts)
Specified Items
Three Months Ended
September 30, 2023
GAAP Financial
Measures
Restructuring Expenses
(A)
Depreciation and Amortization
Expenses
(B)
Financing Transactions
(C)
Contingent
Consideration
(D)
Certain Legal & Regulatory
Costs
(E)
Stock-based Compensation
Costs
(F)
Certain Tax
Adjustments
(G)
Certain Interest
Adjustments
(H)
Adjusted Financial
Measures
Cost of sales
$84.3
$—
($3.7
)
$—
$4.2
$—
($0.3
)
$—
$—
$84.4
Gross profit percent
70.5
%
—
%
1.3
%
—
%
(1.5
)%
—
%
0.1
%
—
%
—
%
70.5
%
Selling, general and administrative
134.8
—
(2.9
)
—
—
(7.9
)
(9.3
)
—
—
114.7
Selling, general and administrative as a
percent of net revenue
47.1
%
—
%
(1.0
)%
—
%
—
%
(2.8
)%
(3.2
)%
—
%
—
%
40.1
%
Research and development
46.5
—
—
—
(1.4
)
(1.0
)
(2.2
)
—
—
42.0
Research and development as a percent of
net revenue
16.3
%
—
%
—
%
—
%
(0.5
)%
(0.4
)%
(0.8
)%
—
%
—
%
14.7
%
Other operating expense
16.0
(0.1
)
—
—
—
(15.9
)
—
—
—
—
Operating income
4.5
0.1
6.6
—
(2.8
)
24.8
11.8
—
—
45.0
Operating margin percent
1.6
%
—
%
2.3
%
—
%
(1.0
)%
8.7
%
4.1
%
—
%
—
%
15.7
%
Income tax expense
5.3
0.1
0.4
—
—
0.9
0.1
(0.9
)
(1.4
)
4.6
Income tax rate
(268.4
)%
88.7
%
6.5
%
—
%
—
%
3.6
%
0.9
%
N/A
(18.1
)%
10.4
%
Net (loss) income
(7.3
)
—
6.1
(2.0
)
(2.8
)
23.9
11.7
0.9
8.9
39.5
Net (loss) income as a percent of net
revenue
(2.6
)%
—
%
2.1
%
(0.7
)%
(1.0
)%
8.4
%
4.1
%
0.3
%
3.1
%
13.8
%
Diluted EPS
($0.14
)
$—
$0.11
($0.04
)
($0.05
)
$0.44
$0.21
$0.02
$0.16
$0.73
GAAP results for the three months ended
September 30, 2023 include:
(A)
Restructuring expenses related to
organizational changes
(B)
Includes depreciation and amortization
associated with purchase price accounting
(C)
Mark-to-market adjustments for the
exchangeable option feature and capped call derivatives
(D)
Remeasurement of contingent consideration
related to acquisitions
(E)
3T Heater-Cooler litigation provision,
legal expenses primarily related to 3T Heater-Cooler defense, the
Saluggia site provision, Medical Device Regulation ("MDR") costs
and costs related to the SNIA matter
(F)
Non-cash expenses associated with
stock-based compensation costs
(G)
Discrete tax items, R&D tax credits
and the tax impact of intercompany transactions
(H)
Non-cash interest expense on the Cash
Exchangeable Senior Notes and 2021 Revolving Credit Facility,
interest expense on the Term Facilities and interest income on the
collateral for the SNIA litigation guarantee and delayed draw on
Term Facilities
- Numbers may not add precisely due to rounding.
RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL MEASURES - UNAUDITED
(U.S. dollars in millions, except per
share amounts)
Specified Items
Three Months Ended
September 30, 2022
GAAP Financial
Measures
Merger and Integration
Expenses
(A)
Restructuring Expenses
(B)
Depreciation and Amortization
Expenses
(C)
Impairment
(D)
Financing Transactions
(E)
Contingent
Consideration
(F)
Certain Legal & Regulatory
Costs
(G)
Stock-based Compensation
Costs
(H)
Certain Tax
Adjustments
(I)
Certain Interest
Adjustments
(J)
Adjusted Financial
Measures
Cost of sales
$81.7
$—
$—
($3.5
)
$—
$—
($1.9
)
$—
($0.3
)
$—
$—
$76.0
Gross profit percent
67.7
%
—
%
—
%
1.4
%
—
%
—
%
0.7
%
—
%
0.1
%
—
%
—
%
69.9
%
Selling, general and administrative
114.6
—
—
(2.7
)
—
—
—
(4.9
)
(8.6
)
—
—
98.5
Selling, general and administrative as a
percent of net revenue
45.4
%
—
%
—
%
(1.1
)%
—
%
—
%
—
%
(1.9
)%
(3.4
)%
—
%
—
%
39.0
%
Research and development
35.7
—
—
—
—
—
7.9
(0.3
)
(1.8
)
—
—
41.5
Research and development as a percent of
net revenue
14.1
%
—
%
—
%
—
%
—
%
—
%
3.1
%
(0.1
)%
(0.7
)%
—
%
—
%
16.4
%
Other operating expense
23.1
(0.2
)
(4.1
)
—
—
—
—
(18.8
)
—
—
—
—
Operating (loss) income
(132.0
)
0.2
4.1
6.2
129.4
—
(6.0
)
23.9
10.8
—
—
36.6
Operating margin percent
(52.2
)%
0.1
%
1.6
%
2.5
%
51.2
%
—
%
(2.4
)%
9.5
%
4.3
%
—
%
—
%
14.5
%
Income tax expense
1.3
—
—
0.4
—
—
—
0.2
0.2
0.7
—
2.8
Income tax rate
(1.2
)%
—
%
1.2
%
6.7
%
—
%
—
%
—
%
0.8
%
1.4
%
N/A
—
%
8.3
%
Net (loss) income
(107.3
)
0.2
4.1
5.8
129.4
(37.9
)
(6.0
)
23.8
10.6
(0.7
)
9.1
31.0
Net (loss) income as a percent of net
revenue
(42.5
)%
0.1
%
1.6
%
2.3
%
51.2
%
(15.0
)%
(2.4
)%
9.4
%
4.2
%
(0.3
)%
3.6
%
12.3
%
Diluted EPS
($2.01
)
$—
$0.08
$0.11
$2.40
($0.70
)
($0.11
)
$0.44
$0.20
($0.01
)
$0.17
$0.58
GAAP results for the three months ended
September 30, 2022 include:
(A)
Merger and integration expenses related to
the acquisition of ALung Technologies, Inc.
(B)
Restructuring expenses related to
organizational changes
(C)
Includes depreciation and amortization
associated with purchase price accounting
(D)
Goodwill impairment associated with the
Company's ACS business
(E)
Mark-to-market adjustment for the
exchangeable option feature and capped call derivatives
(F)
Remeasurement of contingent consideration
related to acquisitions
(G)
3T Heater-Cooler litigation provision,
legal expenses primarily related to 3T Heater-Cooler defense, costs
related to the SNIA matter and MDR costs
(H)
Non-cash expenses associated with
stock-based compensation costs
(I)
Discrete tax items, R&D tax credits
and the tax impact of intercompany transactions
(J)
Non-cash interest expense on the Cash
Exchangeable Senior Notes and 2021 Revolving Credit Facility, and
interest expense on the 2022 Bridge Loan and Term Facilities
- Numbers may not add precisely due to rounding.
RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL MEASURES - UNAUDITED
(U.S. dollars in millions, except per
share amounts)
Specified Items
Nine Months Ended
September 30, 2023
GAAP Financial
Measures
Merger and Integration
Expenses
(A)
Restructuring Expenses
(B)
Depreciation and Amortization
Expenses
(C)
Financing Transactions
(D)
Contingent
Consideration
(E)
Certain Legal & Regulatory
Costs
(F)
Stock-based Compensation
Costs
(G)
Certain Tax
Adjustments
(H)
Certain Interest
Adjustments
(I)
Adjusted Financial
Measures
Cost of sales
$262.3
$—
$—
($11.1
)
$—
($0.4
)
$—
($0.8
)
$—
$—
$250.0
Gross profit percent
68.9
%
—
%
—
%
1.3
%
—
%
0.1
%
—
%
0.1
%
—
%
—
%
70.4
%
Selling, general and administrative
384.8
—
—
(8.6
)
—
—
(17.7
)
(22.4
)
—
—
336.1
Selling, general and administrative as a
percent of net revenue
45.6
%
—
%
—
%
(1.0
)%
—
%
—
%
(2.1
)%
(2.7
)%
—
%
—
%
39.8
%
Research and development
147.7
—
—
0.1
—
(4.1
)
(2.7
)
(4.9
)
—
—
136.1
Research and development as a percent of
net revenue
17.5
%
—
%
—
%
—
%
—
%
(0.5
)%
(0.3
)%
(0.6
)%
—
%
—
%
16.1
%
Other operating expense
29.1
(0.1
)
(1.1
)
—
—
—
(28.0
)
—
—
—
—
Operating income
19.5
0.1
1.1
19.6
—
4.5
48.5
28.1
—
—
121.3
Operating margin percent
2.3
%
—
%
0.1
%
2.3
%
—
%
0.5
%
5.7
%
3.3
%
—
%
—
%
14.4
%
Income tax expense
11.8
—
0.1
1.3
—
—
1.4
0.3
(3.0
)
(1.4
)
10.5
Income tax rate
90.1
%
17.1
%
10.4
%
6.6
%
—
%
—
%
2.9
%
1.0
%
N/A
(6.2
)%
9.1
%
Net income
1.2
0.1
0.9
18.3
(21.7
)
4.5
47.0
27.8
3.0
23.5
104.7
Net income as a percent of net revenue
0.1
%
—
%
0.1
%
2.2
%
(2.6
)%
0.5
%
5.6
%
3.3
%
0.4
%
2.8
%
12.4
%
Diluted EPS
$0.02
$—
$0.02
$0.34
($0.40
)
$0.08
$0.87
$0.51
$0.06
$0.43
$1.94
GAAP results for the nine months ended
September 30, 2023 include:
(A)
Merger and integration expenses related to
the acquisition of ALung Technologies, Inc.
(B)
Restructuring expenses related to
organizational changes
(C)
Includes depreciation and amortization
associated with purchase price accounting
(D)
Mark-to-market adjustments for the
exchangeable option feature and capped call derivatives
(E)
Remeasurement of contingent consideration
related to acquisitions
(F)
3T Heater-Cooler litigation provision,
legal expenses primarily related to 3T Heater-Cooler defense, the
Saluggia site provision, MDR costs and costs related to the SNIA
matter
(G)
Non-cash expenses associated with
stock-based compensation costs
(H)
Discrete tax items, R&D tax credits
and the tax impact of intercompany transactions
(I)
Non-cash interest expense on the Cash
Exchangeable Senior Notes and 2021 Revolving Credit Facility,
interest expense on the Term Facilities and interest income on the
collateral for the SNIA litigation guarantee and delayed draw on
Term Facilities
- Numbers may not add precisely due to rounding.
RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL MEASURES - UNAUDITED
(U.S. dollars in millions, except per
share amounts)
Specified Items
Nine Months Ended
September 30, 2022
GAAP Financial
Measures
Merger and Integration
Expenses (A)
Restructuring Expenses
(B)
Depreciation and Amortization
Expenses
(C)
Impairment
(D)
Financing Transactions
(E)
Contingent
Consideration
(F)
Certain Legal & Regulatory
Costs
(G)
Stock-based Compensation
Costs
(H)
Certain Tax
Adjustments
(I)
Certain Interest
Adjustments
(J)
Adjusted Financial
Measures
Cost of sales
$223.2
$—
$—
($10.9
)
$—
$—
$12.6
$—
($1.2
)
$—
$—
$223.7
Gross profit percent
70.1
%
—
%
—
%
1.5
%
—
%
—
%
(1.7
)%
—
%
0.2
%
—
%
—
%
70.0
%
Selling, general and administrative
349.6
—
—
(8.6
)
—
—
—
(15.4
)
(24.2
)
—
—
301.5
Selling, general and administrative as a
percent of net revenue
46.8
%
—
%
—
%
(1.1
)%
—
%
—
%
—
%
(2.1
)%
(3.2
)%
—
%
—
%
40.4
%
Research and development
110.9
—
—
0.2
—
—
20.8
(1.4
)
(7.1
)
—
—
123.3
Research and development as a percent of
net revenue
14.8
%
—
%
—
%
—
%
—
%
—
%
2.8
%
(0.2
)%
(1.0
)%
—
%
—
%
16.5
%
Other operating expense
24.5
(0.5
)
(4.6
)
—
—
—
—
(19.5
)
—
—
—
—
Operating (loss) income
(90.7
)
0.5
4.6
19.3
129.4
—
(33.4
)
36.2
32.5
—
—
98.4
Operating margin percent
(12.1
)%
0.1
%
0.6
%
2.6
%
17.3
%
—
%
(4.5
)%
4.8
%
4.4
%
—
%
—
%
13.2
%
Income tax expense
6.3
—
0.1
1.3
—
—
—
1.0
0.4
(2.7
)
—
6.3
Income tax rate
(7.8
)%
—
%
1.5
%
6.7
%
—
%
—
%
—
%
2.6
%
1.1
%
N/A
—
%
6.8
%
Net (loss) income
(87.9
)
0.5
4.5
18.0
129.4
(40.5
)
(33.4
)
35.3
32.1
2.7
24.8
85.6
Net (loss) income as a percent of net
revenue
(11.8
)%
0.1
%
0.6
%
2.4
%
17.3
%
(5.4
)%
(4.5
)%
4.7
%
4.3
%
0.4
%
3.3
%
11.5
%
Diluted EPS
($1.64
)
$0.01
$0.08
$0.33
$2.39
($0.75
)
($0.62
)
$0.65
$0.59
$0.05
$0.46
$1.58
GAAP results for the nine months ended
September 30, 2022 include:
(A)
Merger and integration expenses related to
the acquisition of ALung Technologies, Inc.
(B)
Restructuring expenses related to
organizational changes
(C)
Includes depreciation and amortization
associated with purchase price accounting
(D)
Goodwill impairment associated with the
Company's ACS business
(E)
Mark-to-market adjustment for the
exchangeable option feature and capped call derivatives
(F)
Remeasurement of contingent consideration
related to acquisitions
(G)
3T Heater-Cooler litigation provision,
legal expenses primarily related to 3T Heater-Cooler defense, costs
related to the SNIA matter and MDR costs
(H)
Non-cash expenses associated with
stock-based compensation costs
(I)
Discrete tax items, R&D tax credits
and the tax impact of intercompany transactions
(J)
Non-cash interest expense on the Cash
Exchangeable Senior Notes and 2021 Revolving Credit Facility, and
interest expense on the 2022 Bridge Loan
- Numbers may not add precisely due to rounding.
LIVANOVA PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS -
UNAUDITED
(U.S. dollars in millions)
September 30, 2023
December 31, 2022
ASSETS
Current Assets:
Cash and cash equivalents
$233.9
$214.2
Restricted cash
298.8
301.4
Accounts receivable, net of allowance
189.9
183.1
Inventories
161.5
129.4
Prepaid and refundable taxes
25.5
31.7
Prepaid expenses and other current
assets
44.2
26.3
Total Current Assets
953.9
886.1
Property, plant and equipment, net
149.3
147.2
Goodwill
767.1
768.8
Intangible assets, net
347.7
368.6
Operating lease assets
31.5
35.8
Investments
22.7
16.3
Deferred tax assets
1.5
1.4
Long-term derivative assets
43.7
54.4
Other assets
12.1
16.2
Total Assets
$2,329.4
$2,294.8
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Current debt obligations
$19.0
$23.4
Accounts payable
62.8
74.3
Accrued liabilities and other
89.7
81.5
Current litigation provision liability
26.7
29.5
Taxes payable
22.3
16.5
Accrued employee compensation and related
benefits
74.9
72.2
Total Current Liabilities
295.4
297.4
Long-term debt obligations
568.2
518.1
Contingent consideration
89.8
85.3
Deferred tax liabilities
9.9
8.5
Long-term operating lease liabilities
25.2
29.5
Long-term employee compensation and
related benefits
15.9
16.8
Long-term derivative liabilities
53.3
85.7
Other long-term liabilities
46.3
45.8
Total Liabilities
1,103.9
1,087.1
Total Stockholders’ Equity
1,225.5
1,207.6
Total Liabilities and Stockholders’
Equity
$2,329.4
$2,294.8
- Numbers may not add precisely due to rounding.
LIVANOVA PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS - UNAUDITED
(U.S. dollars in millions)
Nine Months Ended September
30,
2023
2022
Operating Activities:
Net income (loss)
$1.2
($87.9
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Stock-based compensation
28.1
32.5
Remeasurement of derivative
instruments
(25.7
)
(38.8
)
Amortization
19.1
19.0
Depreciation
18.6
16.6
Amortization of debt issuance costs
14.2
16.4
Amortization of operating lease assets
7.3
7.1
Remeasurement of contingent consideration
to fair value
4.5
(33.3
)
Impairment of goodwill
—
129.4
Other
2.5
1.4
Changes in operating assets and
liabilities:
Accounts receivable, net
(8.2
)
(1.7
)
Inventories
(33.0
)
(22.6
)
Other current and non-current assets
(3.0
)
12.2
Accounts payable and accrued current and
non-current liabilities
(8.1
)
(5.4
)
Taxes payable
6.3
(1.8
)
Litigation provision liability
(2.9
)
8.2
Net cash provided by operating
activities
21.0
51.2
Investing Activities:
Purchases of property, plant and
equipment
(22.1
)
(17.4
)
Purchase of investments
(6.6
)
(0.9
)
Acquisition, net of cash acquired
—
(8.9
)
Other
0.4
(0.3
)
Net cash used in investing
activities
(28.2
)
(27.5
)
Financing Activities:
Proceeds from long-term debt
obligations
50.0
507.5
Repayment of long-term debt
obligations
(16.1
)
(220.8
)
Shares repurchased from employees for
minimum tax withholding
(7.0
)
(8.6
)
Repayments of short-term borrowings
(maturities greater than 90 days)
(1.9
)
—
Proceeds from share issuances under
ESPP
1.6
1.8
Proceeds from deferred consideration from
sale of Heart Valves, net of working capital adjustments
—
4.6
Payment of debt issuance costs
—
(3.3
)
Other
(0.2
)
0.5
Net cash provided by financing
activities
26.5
281.8
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(2.2
)
(7.3
)
Net increase in cash, cash equivalents
and restricted cash
17.1
298.3
Cash, cash equivalents and restricted cash
at beginning of period
515.6
208.0
Cash, cash equivalents and restricted cash
at end of period
$532.7
$506.3
- Numbers may not add precisely due to rounding.
The following table presents the reconciliation of GAAP diluted
weighted average shares outstanding, used in the computation of
GAAP diluted net loss per common share, to adjusted diluted
weighted average shares outstanding, used in the computation of
adjusted diluted earnings per common share (in millions of
shares):
RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL MEASURES - UNAUDITED
(shares in millions)
Three Months Ended
September 30,
Nine Months Ended
September 30, 2022
2023
2022
GAAP diluted weighted average shares
outstanding
54.0
53.5
53.5
Add effects of stock-based compensation
instruments
0.3
0.4
0.6
Adjusted diluted weighted average shares
outstanding (1)
54.3
53.9
54.1
(1)
Adjusted diluted weighted average shares
outstanding is a non-GAAP measure and includes the effects of
stock-based compensation instruments, as reconciled in the above
table.
- Numbers may not add precisely due to rounding.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231101862587/en/
Briana Gotlin Director, Investor Relations Phone: +1 281 895
2382 e-mail: InvestorRelations@livanova.com
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