false12/312024Q300016396910.0163980.0144085
Note 14. Subsequent Event
[OPEN FOR SUBSEQUENT EVENT REVIEW THROUGH FILING DATE]
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美国
证券交易委员会
华盛顿特区20549
_________________________
表 10-Q

（标记一）
☑ 根据1934年证券交易法第13或15(d)节的季度报告
截止季度结束日期：2024年9月30日
或者
☐ 根据1934年证券交易法第13或15(d)节的转型报告书
从________到________的过渡期报告

委托文件号码：001-37599
lnlogomain280x78.jpg
LivaNova PLC
(根据其章程规定的注册人准确名称)
英格兰和威尔士 ................... 98-1268150
（注册或组织的）州或其他司法辖区.......... （IRS雇主
(成立或组织地)........ 唯一识别号码）
20 Eastbourne Terrace, 伦敦, 英国, W2 6LG
（主要执行办事处地址） ....................... (邮政编码)
公司电话，包括区号：(44) (0) 203 325-0660
在法案第12(b)条的规定下注册的证券：
每一类的名称交易标志在其上注册的交易所的名称
普通股 - 每股面值£1.00LIVN纳斯达克证券交易所 LLC
请打勾表示注册人已在过去12个月内或更短期间内（注册人要求提交此类报告的）按照1934年证券交易法第13条或15（d）条的规定提交了所有要求提交的报告，并且过去90天内一直受到此类报告要求的约束。是 ☑没有☐
根据规则405及第232.405章的有关规定，在过去12个月内（或注册人需要提交该等文件的较短时期内），注册人是否已经递交了每个交互式数据文件。是 ☑没有 ☐
请在标记上打√，以表明注册人是大型加速备案人、加速备案人、非加速备案人、小型报表公司还是新兴增长公司。有关“大型加速备案人”、“加速备案人”、“小型报表公司”和“新兴增长公司”的定义，请参见1934年证券交易法的规则12亿.2。
大型加速报告人☑加速文件提交人☐
非加速文件提交人☐较小的报告公司☐
新兴成长公司☐
如果是新兴增长企业，请勾选是否选择不使用扩展过渡期，在符合交易所法第13(a)条规定的任何新的或修订的财务会计准则的合规方面遵循。☐
请用复选标记表示注册人是否为空壳公司（如法令第120亿.2条规定）。 是☐没有☑
班级2024年10月25日的业绩卓越
普通股 - 每股面值£1.0054,300,835


livanova
目录
项目Description
第一部分 财务信息
 第二部分。其他信息





定义
在截至2024年9月30日的第10-Q季度报告中，以下术语和缩写所指的含义如下。"利华诺瓦"和"公司"指的是利华诺瓦PLC及其合并子公司。
缩略语定义
2015计划LivaNova PLC 2015激励奖计划
2015计划修正修正案2：关于LivaNova PLC 2015激励奖计划
2021年头等留置信贷协议LivaNova PLC及其全资子公司LivaNova USA，Inc.与高盛银行(美国)签署的头等留置信贷协议，由高盛银行(美国)作为头等留置行政代理和头等留置抵押代理，于2021年8月13日签署
2023年10-K表格LivaNova PLC于2023年12月31日结束的年度报告在2024年2月29日向美国证券交易委员会提交
2024年重组计划在2024年第一季度启动的计划，以加强LivaNova对其核心心肺和神经调控部门的专注
2025年限制性看涨期权与某些金融机构达成的私下协商的限制性看涨期权交易
2025年票据2020年6月17日由LivaNova美国发行的总额为28750万美元的3.00%无担保现金可转换优先票据到期日为2025年，通过根据《证券法》第144A条规定私募发售给符合条件的机构投资者
2025年债券回购交易使用2029年债券发行收益，以私下协商的方式回购了2.30亿美元的2025年债券的总本金金额
2029年盖帽看涨期权与某些金融机构达成的私下协商的盖帽看涨期权交易
2029年债券livanova于2024年3月8日通过定向增发向符合144A条款下证券法的合格机构买家发行的2.50%无担保可转换优先债券到期于2029年的总本金金额为3.45亿美元
A&R 2022计划修订后的livanova 2022年激励奖计划
2022年A&R计划修订LivaNova PLC 2022年激励奖计划修订案1号
振顺控股高级循环支持
ALungALung Technologies, Inc.
未实现其他综合收益累计其他综合收益(亏损)
巴克莱银行巴克莱银行爱尔兰有限公司
看涨式认购交易2025年和2029年的分层看涨期权
首席执行官首席执行官
首席财务官首席财务官
康哲药业美国医疗保障中心及医疗补助服务
CODM（首席运营决策人）首席运营决策者
上诉法院米兰上诉法院
延迟提款期贷款设施根据增量设施修订协议第二项，2021年一级信贷协议下的5,000万美元延迟提款期贷款设施
DRE耐药性癫痫
DTD难治性抑郁症
ECJ欧洲法院
作为发行优先债券和可转换债券的一部分，公司同意向债券持有人发行总计与2025年债券和2029年债券相关的分离嵌入式衍生工具，合计
使拥有公司注册证券类别10%以上股权的官员、董事或实际股东代表签署人递交表格3、4和5（包括修正版及有关联合递交协议）,符合证券交易法案第16(a)条及其下属规则规定的要求；1934年修订后的《美国证券交易法》
外汇期货外汇汇率
HLM心肺机
ImThera2018年被LivaNova收购的ImThera Medical公司，是一家致力于开发用于治疗阻塞性睡眠呼吸暂停的植入式神经刺激设备系统的公司
增量措施修正案第2号
2021年7月6日签署的第一优先留置信贷协议的增量措施修正案
1

缩略语定义
第三次增量设施修订2024年3月8日签署的2021年头先信贷协议的增量设施修订
初始期限设施根据增量设施修订第2号在2021年头先信贷协议下的3亿美元期限设施
国际证券识别编号
意大利经济发展部下属的国家核安全和辐射防护检验局
LivaNova PLC一家成立于2015年2月20日遵循英格兰和威尔士法律的上市公司
livanova美国livanova美国股份有限公司
LSMLivaNova Site Management S.r.l.
MDL美国宾夕法尼亚州中区地方法院的联邦多区诉讼
基于患者数据实时提供设备调整选项和建议；医疗科技
纳斯达克资本市场纳斯达克全球精选市场
收益其他综合收益（损失）
期权对手方与livanova美国或livanova PLC签订2025年限价认购和2029年限价认购的某些金融机构
OSA阻塞性睡眠呼吸暂停
OSPREY临床试验
LivaNova的临床试验，“利用定向下舌神经刺激治疗阻塞性睡眠呼吸暂停”
支柱二
经济合作与发展组织全球反基地侵蚀模型规则（支柱二）
公共行政意大利环保部和其他意大利政府机构
研发迄今为止，我们的研究和开发费用与AV-101的开发有关。研究和开发费用按照发生的原则确认，并将在收到将用于研究和开发的货物或服务之前支付的款项资本化，直至收到这些货物或服务。
报告本季度10-Q表格的季度报告
RSUs支付限制性股票单位
股票认购权股票增值权
SEC美国证券交易委员会
证券法美国证券法》（已修改）
销售及行政开支销售、一般和管理费用
ShiraTronicsShiraTronics公司是一家开发可植入神经调制治疗慢性偏头痛的设备的公司
SNIASNIA意大利有限公司。
SNIA诉讼担保。与SNIA环境诉讼相关的2.70亿欧元先行付款银行担保。
Sorin Sorin意大利有限公司。
期限设施初始期限设施,以及延迟绘制期限设施
美国交易法案交易所美利坚合众国
美国通用会计准则美国通用会计准则
英国英国
英国法案2023年第二号金融法案
美元指数美元
VNS疗法LivaNova迷走神经刺激疗法
2

INTELLECTUAL PROPERTY, TRADEMARKS, AND TRADE NAMES
This report may contain references to LivaNova’s proprietary intellectual property, including among others:
•Trademarks for LivaNova’s Neuromodulation systems, the VNS Therapy™ System, and LivaNova’s proprietary pulse generator products: Model 102 (Pulse™), Model 102R (Pulse Duo™), Model 103 (Demipulse™), Model 104 (Demipulse Duo™), Model 106 (AspireSR™), Model 1000 (SenTiva™), Model 1000-D (SenTiva™ Duo), and Model 8103 (Symmetry™).
•Trademarks for LivaNova’s Cardiopulmonary products and systems: Essenz™, S5™, S5 Pro™, B-Capta™, Inspire™, Heartlink™, XTRA™, 3T Heater-Cooler™, Connect™, and Revolution™.
•Trademarks for LivaNova’s advanced circulatory support systems: TandemLife™, TandemHeart™, TandemLung™, ProtekDuo™, LifeSPARC™, ALung™, Hemolung™, Respiratory Dialysis™, and ActivMix™.
•Trademarks for LivaNova’s obstructive sleep apnea system: ImThera™ and aura6000™.
These trademarks and trade names are the property of LivaNova or the property of LivaNova’s consolidated subsidiaries and are protected under applicable intellectual property laws. Solely for convenience, LivaNova’s trademarks and trade names referred to in this Report may appear without the ™ symbol, but such references are not intended to indicate in any way that the Company will not assert, to the fullest extent under applicable law, LivaNova’s rights to these trademarks and trade names.
3

CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS
Certain statements in this Report, 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, forward-looking statements can be identified 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 Report, 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, changing interest rates, 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; risks relating to supply chain pressures; 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; the risk of quality issues and the impacts thereof; risks relating to recalls, replacement of inventory, 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; losses or costs from pending or future lawsuits and governmental investigations, including in the case of the Company’s 3T Heater-Cooler and SNIA environmental litigations; 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 risks relating to the impact of climate change and the risk of environmental, social, and governance pressures from internal and external stakeholders; failure to protect the Company’s proprietary intellectual property; 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, goodwill, and other long-lived assets; risks relating to the Company’s indebtedness; 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.
Other factors that could cause LivaNova’s actual results to differ from projected results are described in: (1) “Part II, Item 1A. Risk Factors” and elsewhere in this and the Company’s other Quarterly Reports on Form 10-Q, (2) the Company’s 2023 Form 10-K, (3) the Company’s reports and registration statements filed and furnished from time to time with the SEC, and (4) other announcements LivaNova makes from time to time.
Readers are cautioned not to place undue reliance on the Company’s forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events, or otherwise. The following discussion and analysis should be read in conjunction with the Company’s unaudited condensed consolidated financial statements and related notes included elsewhere in this Report. Operating results for the nine months ended September 30, 2024 are not necessarily indicative of future results, including the full fiscal year. Please also refer to the Company’s “Annual Consolidated Financial Statements,” “Notes” thereto, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Risk Factors” contained in LivaNova’s 2023 Form 10-K and in the Company’s Quarterly Reports on Form 10-Q.
FINANCIAL INFORMATION AND CURRENCY OF FINANCIAL STATEMENTS
All of the financial information included in this Report has been prepared in accordance with U.S. GAAP. The reporting currency of the Company’s condensed consolidated financial statements is USD.
4

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LIVANOVA PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
(In thousands, except per share amounts)
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Net revenue$318,120 $286,113 $931,607 $843,413 
Cost of sales92,856 84,310 280,088 262,330 
Gross profit225,264 201,803 651,519 581,083 
Operating expenses:
Selling, general, and administrative131,661 134,794 390,642 384,795 
Research and development48,805 46,541 139,206 147,651 
Other operating expenses9,180 16,010 29,641 29,145 
Operating income35,618 4,458 92,030 19,492 
Interest expense(15,878)(14,986)(47,303)(43,232)
Loss on debt extinguishment— — (25,482)— 
Foreign exchange and other income/(expense)24,701 8,550 12,585 36,810 
Income (loss) before tax44,441 (1,978)31,830 13,070 
Income tax expense11,525 5,308 24,469 11,776 
Income (loss) from equity method investments37 (32)(18)(87)
Net income (loss)$32,953 $(7,318)$7,343 $1,207 
Basic income (loss) per share$0.61 $(0.14)$0.14 $0.02 
Diluted income (loss) per share$0.60 $(0.14)$0.13 $0.02 
Shares used in computing basic income (loss) per share54,352 53,989 54,194 53,837 
Shares used in computing diluted income (loss) per share54,585 53,989 54,526 54,107 
    

See accompanying notes to the condensed consolidated financial statements.
5

LIVANOVA PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(In thousands)
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Net income (loss)$32,953 $(7,318)$7,343 $1,207 
Other comprehensive income (loss):
Unrealized loss on cash flow hedges— — — (966)
Tax effect— — — — 
Net of tax— — — (966)
Foreign currency translation adjustment26,116 (19,222)1,180 (5,716)
Other comprehensive income (loss), net of tax26,116 (19,222)1,180 (6,682)
Comprehensive income (loss)$59,069 $(26,540)$8,523 $(5,475)

See accompanying notes to the condensed consolidated financial statements.
6

LIVANOVA PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands, except share amounts)
 September 30, 2024December 31, 2023
ASSETS
Current Assets:
Cash and cash equivalents$346,366 $266,504 
Restricted cash320,210 311,368 
Accounts receivable, net of allowance of $12,129 at September 30, 2024 and $12,019 at December 31, 2023
197,162 215,072 
Inventories162,264 147,887 
Prepaid and refundable taxes23,858 20,145 
Prepaid expenses and other current assets43,253 27,182 
Total Current Assets1,093,113 988,158 
Property, plant, and equipment, net169,317 154,181 
Goodwill781,553 782,941 
Intangible assets, net248,545 261,178 
Operating lease assets51,599 50,845 
Investments18,097 22,843 
Deferred tax assets109,992 118,858 
Long-term derivative assets35,368 38,496 
Other assets14,374 12,063 
Total Assets$2,521,958 $2,429,563 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current debt obligations$21,951 $18,111 
Accounts payable77,893 80,845 
Accrued liabilities and other104,523 107,301 
Current litigation provision liability16,098 10,756 
Taxes payable26,507 23,340 
Accrued employee compensation and related benefits77,430 94,630 
Total Current Liabilities324,402 334,983 
Long-term debt obligations604,287 568,543 
Contingent consideration81,240 80,902 
Deferred tax liabilities11,843 11,567 
Long-term operating lease liabilities44,078 45,388 
Long-term employee compensation and related benefits14,867 17,254 
Long-term derivative liabilities84,157 45,569 
Other long-term liabilities47,040 47,729 
Total Liabilities1,211,914 1,151,935 
Commitments and contingencies (Note 6)
Stockholders’ Equity:
Ordinary Shares, £1.00 par value: unlimited shares authorized; 54,405,751 shares issued and 54,300,048 shares outstanding at September 30, 2024; 53,942,151 shares issued and 53,918,222 shares outstanding at December 31, 2023
83,112 82,533 
Additional paid-in capital2,212,932 2,189,517 
Accumulated other comprehensive loss(26,703)(27,883)
Accumulated deficit(959,141)(966,484)
Treasury stock at cost, 105,703 ordinary shares at September 30, 2024; 23,929 ordinary shares at December 31, 2023
(156)(55)
Total Stockholders’ Equity1,310,044 1,277,628 
Total Liabilities and Stockholders’ Equity$2,521,958 $2,429,563 
See accompanying notes to the condensed consolidated financial statements.
7

LIVANOVA PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
Nine Months Ended September 30,
20242023
Operating Activities:
Net income$7,343 $1,207 
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation26,984 28,069 
Loss on debt extinguishment25,482 — 
Depreciation18,683 18,582 
Amortization of debt issuance costs15,692 14,246 
Amortization of intangible assets12,960 19,129 
Deferred income tax expense9,093 1,908 
Amortization of operating lease assets6,918 7,270 
Impairment of investments
5,768 — 
Remeasurement of derivative instruments400 (25,730)
Remeasurement of contingent consideration to fair value338 4,516 
Other1,453 605 
Changes in operating assets and liabilities:
Accounts receivable, net17,425 (8,239)
Inventories(13,895)(33,024)
Other current and non-current assets(14,841)(2,981)
Accounts payable and accrued current and non-current liabilities(23,383)(8,084)
Taxes payable2,628 6,347 
Litigation provision liability5,283 (2,865)
Net cash provided by operating activities104,331 20,956 
Investing Activities:
Purchases of property, plant, and equipment(36,701)(22,062)
Purchase of investments(846)(6,570)
Other95 439 
Net cash used in investing activities(37,452)(28,193)
Financing Activities:
Proceeds from long-term debt obligations335,513 50,000 
Repayment of long-term debt obligations(243,174)(16,061)
Payment of debt extinguishment costs(38,953)— 
Purchase of capped calls(31,637)— 
Proceeds from unwind of capped calls22,523 — 
Payment of contingent consideration(13,750)— 
Shares repurchased from employees for minimum tax withholding(8,071)(6,995)
Payment of debt issuance costs(5,931)— 
Proceeds from exercise of stock options5,028 19 
Repayments of short-term borrowings (maturities greater than 90 days)— (1,901)
Other447 1,440 
Net cash provided by financing activities21,995 26,502 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(170)(2,161)
Net increase in cash, cash equivalents, and restricted cash88,704 17,104 
Cash, cash equivalents, and restricted cash at beginning of period577,872 515,618 
Cash, cash equivalents, and restricted cash at end of period$666,576 $532,722 
See accompanying notes to the condensed consolidated financial statements.
8

LIVANOVA PLC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Unaudited Condensed Consolidated Financial Statements
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of LivaNova and the notes thereto as of and for the three and nine months ended September 30, 2024 and 2023 have been prepared in accordance with U.S. GAAP for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. The accompanying condensed consolidated balance sheet of LivaNova at December 31, 2023 has been derived from audited consolidated financial statements contained in LivaNova’s 2023 Form 10-K, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the condensed consolidated financial statements reflect all adjustments considered necessary for a fair statement of the operating results of LivaNova and its subsidiaries for the three and nine months ended September 30, 2024 and are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The financial information presented herein should be read in conjunction with the audited consolidated financial statements and notes thereto accompanying LivaNova’s 2023 Form 10-K.
Cybersecurity Incident
As previously disclosed, in November 2023, LivaNova detected a cybersecurity incident that resulted in a disruption of portions of the Company’s information technology systems. Promptly after detecting the issue, LivaNova began an investigation with assistance from external cybersecurity experts and coordinated with law enforcement. The Company quickly implemented remediation measures to mitigate the impact of the incident. The Company also assessed the nature and scope of the affected data, analyzed its legal notification obligations, and notified affected individuals and regulators as required by applicable law. The Company believes the incident is contained and mitigation efforts are complete.
Through September 30, 2024, LivaNova incurred direct costs totaling $10.8 million in connection with this cybersecurity incident, including $2.5 million and $8.2 million during the three and nine months ended September 30, 2024, respectively. These costs primarily include external cybersecurity expert and legal fees, system restoration costs, and a $1.2 million provision related to the class action settlement, as discussed in “Note 6. Commitments and Contingencies,” and do not include business interruption losses. The Company expects to incur additional costs related to this incident in the future. LivaNova maintains insurance, including cyber insurance, which is subject to certain retentions and policy limitations that will likely limit the amount that the insurers may pay the Company. LivaNova has filed claims for insurance reimbursement of covered costs and business interruption losses related to this incident and has submitted additional claims and supplemental requests for reimbursement as new costs have been incurred. LivaNova has not yet received reimbursement or recognized a receivable. The Company’s insurance coverage will likely be insufficient to cover all costs and expenses related to this cybersecurity incident or may be unavailable to cover all costs and expenses related to this cybersecurity incident.
Significant Accounting Policies
LivaNova’s significant accounting policies are included within “Note 2. Basis of Presentation, Use of Accounting Estimates and Significant Accounting Policies” and “Note 3. Revenue Recognition” of LivaNova’s 2023 Form 10-K.
Note 2. Restructuring
From time to time, LivaNova initiates restructuring plans to leverage economies of scale, streamline distribution and logistics, and strengthen operational and administrative effectiveness to reduce overall costs.
On January 5, 2024, the Board of Directors of LivaNova approved the 2024 Restructuring Plan to enhance the Company’s focus on its core Cardiopulmonary and Neuromodulation segments. The main component of the 2024 Restructuring Plan was to wind down the ACS segment, which the Company anticipates will be substantially complete by the end of 2024. In connection with the 2024 Restructuring Plan, LivaNova expects to incur pre-tax restructuring charges in the range of $15.0 million to $20.0 million. The anticipated charges are comprised of $10.0 million to $12.0 million in severance expenses and retention bonuses and $5.0 million to $8.0 million in other expenses, including lease termination, facilities remediation, and asset disposal expenses. Retention bonuses will be earned over the period of service, which is expected to be over the full year of 2024. All future cash payments related to these restructuring charges are expected to be substantially paid out during 2024. These estimates are subject to change. LivaNova recognized restructuring expense under the 2024 Restructuring Plan of $1.5 million and $12.8 million in other operating expenses on its condensed consolidated statements of income (loss) for the three and nine months ended September 30, 2024, respectively.
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The following table presents a reconciliation of the beginning and ending balance of the accruals and other reserves recorded in connection with LivaNova’s restructuring plans included in accounts payable and accrued liabilities and other on the condensed consolidated balance sheets (in thousands):
Employee Severance and Other Termination CostsOtherTotal
Balance at December 31, 2023 (1)
$911 $— $911 
Charges10,377 2,466 12,843 
Cash payments(7,868)(2,006)(9,874)
Balance at September 30, 2024
$3,420 $460 $3,880 
(1)Represents restructuring plans initiated prior to 2024.
The following table presents restructuring expense by reportable segment (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Neuromodulation $— $(6)$— $554 
Other (1)
1,479 130 12,843 501 
$1,479 $124 $12,843 $1,055 
(1)Other primarily includes restructuring expense not allocated to segments.
Note 3. Derivatives and Risk Management
Due to the global nature of LivaNova’s operations, the Company is exposed to FX fluctuations. LivaNova enters into FX derivative contracts to reduce the impact of FX fluctuations on earnings and cash flow.
LivaNova is also exposed to equity price risk in connection with its 2025 Notes and 2029 Notes, including exchange/conversion and settlement provisions based on the price of its ordinary shares at exchange/conversion or maturity of the 2025 Notes and 2029 Notes. The Capped Call Transactions associated with the 2025 Notes and 2029 Notes also include settlement provisions that are based on the price of LivaNova’s ordinary shares, subject to a capped price per share. LivaNova does not enter into derivative contracts for speculative purposes.
LivaNova measures all outstanding derivatives each period end at fair value and reports the fair value as either financial assets or liabilities on the condensed consolidated balance sheets. At inception of the contract, the derivative is designated as either a freestanding derivative or a hedge. Derivatives that are not designated as hedging instruments are referred to as freestanding derivatives with changes in fair value included in earnings. These derivatives are intended to serve as economic hedges and follow the cash flows of the economic hedged item. The cash flows from these derivative contracts are reported as operating activities on LivaNova’s condensed consolidated statements of cash flows.
If the derivative qualifies for hedge accounting, changes in the fair value of the derivative will be recorded in AOCI until the hedged item is recognized in earnings upon settlement/termination. Interest rate swap gains and losses in AOCI are reclassified to interest expense on LivaNova’s condensed consolidated statements of income (loss). LivaNova evaluates hedge effectiveness at inception. LivaNova had no designated hedging instruments as of September 30, 2024 and December 31, 2023.
Freestanding FX Derivatives
The gross notional amount of freestanding FX derivative contracts not designated as hedging instruments outstanding as of September 30, 2024 and December 31, 2023 was $158.9 million and $223.4 million, respectively. These derivative contracts are designed to offset the FX effects in earnings of various intercompany loans and trade receivables. LivaNova recorded net losses of $5.0 million and net gains of $5.0 million for these freestanding derivatives for the three months ended September 30, 2024 and 2023, respectively, and net losses of $0.1 million and net gains of $4.1 million for the nine months ended September 30, 2024 and 2023, respectively. These gains and losses are included in foreign exchange and other income/(expense) on LivaNova’s condensed consolidated statements of income (loss).
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Capped Call Derivatives
The Capped Call Transactions are carried on the condensed consolidated balance sheets as a derivative asset at their estimated fair value and are adjusted at the end of each reporting period, with unrealized gain or loss reflected in foreign exchange and other income/(expense) in the condensed consolidated statements of income (loss). The Capped Call Transactions are measured at fair value using the Black-Scholes model utilizing observable and unobservable market data, including stock price, remaining contractual term, expected volatility, risk-free interest rate, and expected dividend yield, as applicable. For additional information, refer to “Note 5. Financing Arrangements.”
2025 Capped Calls
In June 2020, LivaNova issued the 2025 Notes. In connection with the pricing of the 2025 Notes, the Company entered into related privately-negotiated capped call transactions with certain financial institutions. Under the 2025 Capped Calls, the Company purchased a capped call option with an initial strike price of $60.98 and an initial cap price of $100.00 per share. The strike price, which is subject to certain adjustments, corresponds to the initial exchange price of the 2025 Notes. The 2025 Capped Calls are intended to offset any cash payments upon exchange of the 2025 Notes in excess of the principal amount; however, the proceeds are limited to the initial cap price in the event the Company’s share price exceeds the cap price at the time of an exchange. The 2025 Capped Calls expire on December 15, 2025, and must be settled in cash. The 2025 Capped Calls are subject to anti-dilution adjustments substantially similar to those applicable to the 2025 Notes and cover the number of LivaNova’s ordinary shares underlying the 2025 Notes. If the 2025 Capped Calls are terminated early, settlement occurs at their termination value, which is equal to their fair value at the time of the early termination. In connection with the issuance of the 2029 Notes, the Company repurchased an aggregate principal amount of $230.0 million of the 2025 Notes and unwound a corresponding portion of the 2025 Capped Calls at the fair value of such portion of the 2025 Capped Calls. The Company received $22.5 million in cash consideration, the fair value of the terminated portion, upon settlement. The terms of the remaining 2025 Capped Calls remain unchanged and continue to be classified as long-term derivative assets.
2029 Capped Calls
In March 2024, LivaNova issued the 2029 Notes. In connection with the pricing of the 2029 Notes, the Company entered into related privately-negotiated capped call transactions with certain financial institutions. Under the 2029 Capped Calls, the Company purchased a capped call option with an initial strike price of $69.40 and an initial cap price of $94.28 per share. The strike price, which is subject to certain adjustments, corresponds to the initial conversion price of the 2029 Notes. The 2029 Capped Calls are intended to offset any cash payments and/or cash equivalent value of ordinary shares upon conversion of the 2029 Notes if the market value per ordinary share is greater than the strike price, with such offsets being subject to the initial cap price of $94.28 per share. However, the proceeds under the 2029 Capped Calls are limited to the initial cap price in the event the Company’s share price exceeds the cap price at the time of conversion. The 2029 Capped Calls expire on March 15, 2029, and must be settled in cash. The 2029 Capped Calls are subject to anti-dilution adjustments substantially similar to those applicable to the 2029 Notes and cover the number of LivaNova’s ordinary shares underlying the 2029 Notes. If the 2029 Capped Calls are terminated early, settlement occurs at their termination value, which is equal to their fair value at the time of the early termination. For transaction costs associated with entering into the 2029 Capped Calls, refer to “Additions” in the “Reconciliation of Level 3 Assets and Liabilities” table within “Note 4. Fair Value Measurements.”
Embedded Derivatives
The 2025 Notes and 2029 Notes each include terms resulting in a bifurcated embedded derivative. The Embedded Derivatives are measured at fair value using a binomial lattice model and estimated discounted cash flows that utilize observable and unobservable market data and are adjusted at the end of each reporting period, with the unrealized gain or loss reflected in foreign exchange and other income/(expense) in the condensed consolidated statements of income (loss). For additional information, refer to “Note 5. Financing Arrangements.”
Counterparty Credit Risk
LivaNova is exposed to credit risk in the event of non-performance by the counterparties to the Company’s derivatives.
The Option Counterparties are financial institutions. To limit LivaNova’s credit risk, the Company selected financial institutions with a minimum long-term investment grade credit rating. LivaNova’s exposure to the credit risk of the Option Counterparties is not secured by any collateral. If such an Option Counterparty becomes subject to insolvency proceedings, LivaNova will become an unsecured creditor in those proceedings, with a claim equal to the Company’s exposure at that time under the 2025 Capped Calls and/or 2029 Capped Calls, as applicable, with that Option Counterparty.
To manage credit risk with respect to LivaNova’s other derivatives, the Company selects and periodically reviews counterparties based on credit ratings, limits its exposure with respect to each counterparty, and monitors their respective
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market positions. However, if one or more of these counterparties were in a liability position to the Company and were unable to meet their obligations, any transactions with the counterparty could be subject to early termination, which could result in substantial losses for the Company.
Cash Flow Hedges
Historically, LivaNova entered into interest rate swaps associated with the Initial Term Facility, which qualified for and were designated as cash flow hedges. The Company’s outstanding interest rate swaps expired on April 6, 2023. LivaNova elected not to renew the interest rate swaps. Interest expense associated with the Initial Term Facility is principally offset by holding a significant portion of the Term Facilities in a depository account, which earns a floating rate of interest.
The pre-tax gains (losses) for derivative contracts designated as cash flow hedges recognized in OCI and the amount reclassified to earnings from AOCI were as follows (in thousands):
Nine Months Ended September 30, 2023
Description of Derivative ContractLocation in Earnings of Reclassified Gain or LossLoss Recognized in OCIGain Reclassified from AOCI to Earnings
Interest rate swap contractsInterest expense$(433)$533 
Balance Sheet Presentation
LivaNova offsets fair value amounts associated with its derivative instruments that are executed with the same counterparty under master netting arrangements on the Company’s condensed consolidated balance sheets. Master netting arrangements include a right to set off or net together purchases and sales of similar products in the settlement process.
The following tables present the fair value and the location of derivative contracts reported on the condensed consolidated balance sheets (in thousands):
Derivative AssetsDerivative Liabilities
September 30, 2024Balance 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$5,771 
Capped call derivatives (2029 Notes)Long-term derivative assets29,597 
Embedded derivative (2025 Notes)Long-term derivative liabilities$7,188 
Embedded derivative (2029 Notes)Long-term derivative liabilities76,969 
FX derivative contractsPrepaid expenses and other current assets— Accrued liabilities and other2,245 
Total derivatives not designated as hedging instruments$35,368 $86,402 
Derivative AssetsDerivative Liabilities
December 31, 2023Balance 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 
Embedded derivative (2025 Notes)Long-term derivative liabilities$45,569 
FX derivative contractsAccrued liabilities and other3,883 
Total derivatives not designated as hedging instruments$38,496 $49,452 
(1)For the classification of inputs used to evaluate the fair value of LivaNova’s derivatives, refer to “Note 4. Fair Value Measurements.”
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Note 4. Fair Value Measurements
LivaNova reviews its fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain securities in the fair value hierarchy. There were no transfers between Level 1, Level 2, or Level 3 during the nine months ended September 30, 2024 and 2023.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following tables present the level in the fair value hierarchy at which the Company’s assets and liabilities are measured on a recurring basis (in thousands):
Balance Sheet LocationSeptember 30, 2024Fair Value Measurements Using Inputs Considered as:
Level 1Level 2Level 3
Assets:
Derivative assets - capped call derivatives (2025 Notes)Long-term derivative assets$5,771 $— $— $5,771 
Derivative assets - capped call derivatives (2029 Notes)Long-term derivative assets29,597 — — 29,597 
$35,368 $— $— $35,368 
Liabilities:
Derivative liabilities - freestanding instruments (FX) Accrued liabilities and other$2,245 $— $2,245 $— 
Derivative liabilities - embedded derivative (2025 Notes)Long-term derivative liabilities7,188 — — 7,188 
Derivative liabilities - embedded derivative (2029 Notes)Long-term derivative liabilities76,969 — — 76,969 
Contingent consideration arrangementContingent consideration81,240 — — 81,240 
$167,642 $— $2,245 $165,397 
Balance Sheet LocationDecember 31, 2023
Fair Value Measurements Using Inputs Considered as:
Level 1Level 2Level 3
Assets:
Derivative assets - capped call derivatives (2025 Notes)Long-term derivative assets$38,496 $— $— $38,496 
Convertible notes receivableOther assets275 — — 275 
$38,771 $— $— $38,771 
Liabilities:
Derivative liabilities - freestanding instruments (FX)Accrued liabilities and other$3,883 $— $3,883 $— 
Derivative liabilities - embedded derivative (2025 Notes)Long-term derivative liabilities45,569 — — 45,569 
Contingent consideration arrangementContingent consideration80,902 — — 80,902 
Contingent consideration arrangementAccrued liabilities and other13,750 — — 13,750 
$144,104 $— $3,883 $140,221 
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Reconciliation of Level 3 Assets and Liabilities
The following tables present reconciliations of recurring fair value measurements that use significant unobservable inputs (Level 3) (in thousands):
Three Months Ended September 30, 2024
Capped Call Derivative Assets
(2025 Notes)		Capped Call Derivative Assets
(2029 Notes)		Convertible Notes ReceivableEmbedded Derivative Liability
(2025 Notes)		Embedded Derivative Liability
(2029 Notes)		Contingent Consideration Liability Arrangement
June 30, 2024$7,439 $32,114 $275 $10,017 $95,392 $81,174 
Changes in fair value(1,668)(2,517)(275)(2,829)(18,423)66 
September 30, 2024$5,771 $29,597 $— $7,188 $76,969 $81,240 
Three Months Ended September 30, 2023
Capped Call Derivative Assets
(2025 Notes)		Convertible Notes ReceivableEmbedded Derivative Liability
(2025 Notes)		Contingent Consideration Liability Arrangements
June 30, 2023$42,034 $275 $53,705 $92,626 
Changes in fair value1,635 — (402)(2,818)
September 30, 2023$43,669 $275 $53,303 $89,808 
Nine Months Ended September 30, 2024
Capped Call Derivative Assets
(2025 Notes)		Capped Call Derivative Assets
(2029 Notes)		Convertible Notes ReceivableEmbedded 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(10,201)(2,040)(275)(1,466)(10,488)338 
September 30, 2024$5,771 $29,597 $— $7,188 $76,969 $81,240 
Nine Months Ended September 30, 2023
Capped Call Derivative Assets
(2025 Notes)		Convertible Notes ReceivableEmbedded Derivative Liability
(2025 Notes)		Contingent Consideration Liability Arrangements
December 31, 2022$54,393 $285 $85,675 $85,292 
Changes in fair value(10,724)(10)(32,372)4,516 
September 30, 2023$43,669 $275 $53,303 $89,808 
Stock Price Volatility
The following table presents the stock price volatility utilized in determining the fair value of LivaNova’s capped call derivative assets and embedded derivative liabilities:
September 30, 2024Capped Call Derivative Assets
(2025 Notes)		Capped Call Derivative Assets
(2029 Notes)		Embedded Derivative Liability
(2025 Notes)		Embedded Derivative Liability
(2029 Notes)
Stock price volatility (1)
40 %37 %40 %37 %
(1)    The Embedded Derivatives and Capped Call Transactions are classified as Level 3 because the Company uses historical volatility and implied volatility from actual options traded to determine expected stock price volatility, an unobservable input that is significant to the valuation. In general, an increase in LivaNova’s stock price or stock price volatility would increase the fair value of the Embedded Derivatives and Capped Call Transactions which would result in an increase in net expense. As the remaining time
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to the expiration of the derivatives decreases, the fair value of the derivatives decreases. The future impact of the derivatives on net income depends on how significant inputs such as stock price, stock price volatility, and time to the expiration of the derivatives change in relation to other inputs.
Contingent Consideration Arrangements
The following table presents the fair value of LivaNova’s Level 3 contingent consideration arrangements by acquisition (in thousands):
September 30, 2024December 31, 2023
ImThera$81,240 $80,902 
ALung— 13,750 
$81,240 $94,652 
The ImThera business combination involved contingent consideration arrangements comprised of potential cash payments upon the achievement of a certain regulatory milestone and a sales-based earnout associated with sales of products. The sales-based earnouts are valued using projected sales from LivaNova’s internal strategic plan. These arrangements are Level 3 fair value measurements and included the following significant unobservable inputs as of September 30, 2024:
ImThera AcquisitionValuation TechniqueUnobservable InputInputs
Regulatory milestone-based paymentDiscounted cash flowDiscount rate7.7%
Probability of payment85%
Projected payment year2026
Sales-based earnoutMonte-Carlo simulationRisk-adjusted discount rate
14.6% - 14.7%
Credit risk discount rate
7.8% - 8.2%
Revenue volatility27.1%
Probability of payment85%
Projected years of earnout
2027 - 2030
Note 5. Financing Arrangements
The following table presents a summary of LivaNova’s long-term debt obligations (in thousands, except interest rates):
September 30, 2024December 31, 2023MaturityInterest Rate
Term Facilities$316,803 $328,459 July 20278.66%
2029 Notes253,863 — March 20292.50%
2025 Notes52,919 255,500 December 20253.00%
Bank of America, U.S.1,500 1,500 January 20258.19%
Other455 568 
Total long-term facilities625,540 586,027 
Less: Current portion of long-term debt21,253 17,484 
Total long-term debt obligations$604,287 $568,543 
Revolving Credit and Term Facilities
The outstanding principal amount of LivaNova’s short-term unsecured revolving credit agreements and other agreements with various banks was $0.7 million at September 30, 2024 and $0.6 million at December 31, 2023, with an average interest rate of 4.94% and loan terms ranging from overnight to 364 days as of September 30, 2024.
On March 8, 2024, LivaNova and LivaNova USA entered into Incremental Facility Amendment No. 3, which provides for LivaNova USA to obtain revolving commitments in an aggregate principal amount of $225.0 million. The $225.0 million revolving facility is subject to the terms and conditions of the 2021 First Lien Credit Agreement, as amended thereof, and replaced the previously existing $125.0 million revolving facility under the 2021 First Lien Credit Agreement. The $225.0 million revolving facility is available for working capital and other general corporate purposes and, if drawn, can be repaid at any time without premium or penalty. The $225.0 million revolving facility matures on March 8, 2029. There were no
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outstanding borrowings under the revolving facilities under the 2021 First Lien Credit Agreement as of September 30, 2024 and December 31, 2023.
The 2021 First Lien Credit Agreement, as amended, also requires the payment of certain commitment fees on the unused portion of the commitments, at a variable percentage based on LivaNova’s Total Net Leverage Ratio. As of September 30, 2024 and December 31, 2023, the applicable commitment fee percentage was 0.5% per annum.
The 2021 First Lien Credit Agreement, as amended, contains customary representations, warranties, and covenants, including the requirement to maintain a Senior Secured First Lien Net Leverage Ratio of not more than 3.50 to 1.00, calculated as the ratio of Consolidated Senior Secured First Lien Net Indebtedness to Consolidated EBITDA, as defined in the credit agreement, for the period of four consecutive fiscal quarters ended on the calculation date and an Interest Coverage Ratio of not less than 2.00 to 1.00, calculated as the ratio of Consolidated EBITDA to Consolidated Interest Expense, both as defined in the credit agreement, for the period of four consecutive fiscal quarters ended on the calculation date. As of September 30, 2024, the Company was in compliance with the financial covenants contained in the 2021 First Lien Credit Agreement.
Debt discount and issuance costs related to the Initial Term Facility were $9.6 million. The unamortized debt discount and issuance costs related to the Initial Term Facility were $5.4 million and $6.8 million as of September 30, 2024 and December 31, 2023, respectively.
2029 Notes Issuance and 2025 Notes Repurchase Transactions
On March 8, 2024, LivaNova issued $345.0 million aggregate principal amount of 2.50% notes due 2029 by private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act, which included exercise in full of the initial purchasers’ option to purchase up to an additional $45.0 million principal amount of the 2029 Notes. The 2029 Notes are senior unsecured obligations of the Company. The Company used part of the proceeds from the issuance of the 2029 Notes to repurchase $230.0 million aggregate principal amount of the 2025 Notes in privately-negotiated transactions for an aggregate cash repurchase consideration of $270.5 million.
The 2025 Notes Repurchase Transaction was treated as a debt extinguishment. The carrying value of the related 2025 Notes, which included the unamortized debt discount and issuance costs and the fair value of the embedded derivative, was derecognized, and the 2029 Notes issued were recognized at fair value. The difference between the consideration used to extinguish the 2025 Notes, the carrying value of the 2025 Notes, and the fair value of the embedded derivative was recognized as a loss on debt extinguishment of $25.5 million on LivaNova’s condensed consolidated statements of income (loss) during the nine months ended September 30, 2024. Third-party costs incurred directly related to the 2025 Notes Repurchase Transaction were deferred and capitalized as additional debt issuance costs to be amortized on the 2029 Notes.
Contemporaneously with the 2025 Notes Repurchase Transaction, the Company and the financial institutions party to the 2025 Capped Calls agreed to terminate a portion of the 2025 Capped Calls in a notional amount corresponding to the amount of 2025 Notes repurchased. The Company received $22.5 million in cash consideration, the fair value of the terminated portion, upon settlement. The terms of the remaining 2025 Capped Calls remain unchanged and continue to be classified as long-term derivative assets. For additional information on LivaNova’s capped call and embedded derivatives, refer to “Note 3. Derivatives and Risk Management.”
2029 Notes
The sale of the 2029 Notes resulted in $332.1 million in net proceeds to the Company after deducting issuance costs. Interest is payable semiannually in arrears on March 15 and September 15 of each year. The effective interest rate of the 2029 Notes was 9.79% as of September 30, 2024. The 2029 Notes mature on March 15, 2029, unless earlier repurchased, redeemed or converted.
Debt discount and issuance costs related to the 2029 Notes were $99.6 million, including $87.5 million of discount attributable to the embedded derivative and $12.1 million of new debt issuance costs related to the 2029 Notes. The debt discount and issuance costs are amortized as interest expense using the effective interest method over the term of the 2029 Notes. The unamortized debt discount and issuance costs related to the 2029 Notes as of September 30, 2024 were $91.1 million.
Holders are entitled to convert the 2029 Notes at any time during specified periods, at their option, subject to certain conditions. This includes the right to convert the 2029 Notes during any calendar quarter if the last reported sale price of LivaNova’s ordinary shares is greater than or equal to 130% of the conversion price, or $90.22 per share, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter. The initial conversion rate for the 2029 Notes is 14.4085 ordinary shares per $1,000 principal amount of 2029 Notes (equivalent to an initial conversion price of $69.40 per share). The conversion rate is subject to adjustment in certain circumstances, as set forth in the indenture governing the 2029 Notes.
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As of September 30, 2024, the conditions for conversion were not met. As a result, the Company included its obligations from the 2029 Notes and the associated embedded derivative as long-term liabilities on the condensed consolidated balance sheet as of September 30, 2024, and the 2029 Notes are not convertible during the three months ending December 31, 2024.
Upon any conversion of the 2029 Notes, LivaNova will be required to pay cash up to the aggregate principal amount of the 2029 Notes to be converted and may elect to settle the conversion obligation in excess of the aggregate principal amount of the 2029 Notes being converted in cash, shares, or a combination of the two.
On or after December 15, 2028, holders may convert their 2029 Notes at their option at any time until the close of business on the second Scheduled Trading Day (as defined in the indenture governing the 2029 Notes) immediately preceding the maturity date.
The Company may redeem the 2029 Notes, in whole or in part, at its option on or after March 22, 2027 for cash if the last reported sale price of LivaNova’s ordinary share has been at least 130% of the conversion price, or $90.22 per share, then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption. Additionally, the Company may redeem the 2029 Notes at its option, prior to the stated maturity, in whole but not in part, in connection with certain tax-related events.
Holders may require the Company to repurchase their 2029 Notes upon the occurrence of a Fundamental Change (as defined in the indenture governing the 2029 Notes) at a repurchase price equal to the principal amount thereof plus accrued and unpaid interest to, but excluding, the repurchase date. In addition, in connection with certain corporate events or if the Company issues a notice of redemption, the Company will, under certain circumstances, increase the conversion rate for holders who elect to convert their 2029 Notes in connection with such corporate event or during the relevant redemption period.
The indenture governing the 2029 Notes contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee (as defined in the indenture governing the 2029 Notes) or holders of at least 25% in aggregate principal amount of the 2029 Notes then outstanding may declare the entire principal amount of all the 2029 Notes, and accrued and unpaid interest on such 2029 Notes, to be immediately due and payable. Upon events of default in connection with specified bankruptcy events involving the Company, the 2029 Notes will become due and payable immediately.
2025 Notes
On June 17, 2020, LivaNova USA issued $287.5 million aggregate principal amount of 3.00% notes due 2025 by private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The 2025 Notes are senior unsecured obligations of the Company. The sale of the 2025 Notes resulted in $278.0 million in net proceeds to the Company after deducting issuance costs. Interest is payable semiannually in arrears on June 15 and December 15 of each year. On March 8, 2024, in connection with the issuance of the 2029 Notes, the Company used part of the net proceeds to repurchase $230.0 million aggregate principal amount of the 2025 Notes in privately-negotiated transactions. For additional information, refer to “2029 Notes Issuance and 2025 Notes Repurchase Transactions” above. The effective interest rate of the 2025 Notes was 9.16% as of September 30, 2024. The 2025 Notes mature on December 15, 2025, unless earlier exchanged, repurchased, or redeemed.
Debt discount and issuance costs related to the 2025 Notes were $82.0 million, including $75.0 million of discount attributable to the embedded derivative and $7.0 million of allocated issuance costs to the 2025 Notes related to legal, bank, and accounting fees. The debt discount and issuance costs are amortized as interest expense using the effective interest method over the term of the 2025 Notes. Upon the closing of the 2025 Notes Repurchase Transaction in March 2024, the remaining unamortized debt discount and issuance costs related to the 2025 Notes were $5.8 million. The unamortized debt discount and issuance costs related to the 2025 Notes as of September 30, 2024 and December 31, 2023 were $4.6 million and $32.0 million, respectively.
Holders are entitled to exchange the 2025 Notes at any time during specified periods, at their option, subject to certain conditions. This includes the right to exchange the 2025 Notes during any calendar quarter if the last reported sale price of LivaNova’s ordinary shares is greater than or equal to 130% of the exchange price, or $79.27 per share, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter. The 2025 Notes are exchangeable solely into cash and are not exchangeable into ordinary shares of LivaNova or any other security under any circumstances. The initial exchange rate for the 2025 Notes is 16.3980 ordinary shares per $1,000 principal amount of 2025 Notes (equivalent to an initial exchange price of $60.98 per share). The exchange rate is subject to adjustment in certain circumstances, as set forth in the indenture governing the 2025 Notes.
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As of September 30, 2024, the conditions for exchange were not met. As a result, the Company included its obligations from the 2025 Notes and the associated embedded derivative as long-term liabilities on the condensed consolidated balance sheet as of September 30, 2024, and the 2025 Notes are not exchangeable during the three months ending December 31, 2024.
On or after September 15, 2025, holders may exchange their 2025 Notes at their option at any time until the close of business on the second Scheduled Trading Day (as defined in the indenture governing the 2025 Notes) immediately preceding the maturity date.
The Company may redeem the 2025 Notes, in whole or in part, at its option prior to the 51st scheduled trading day immediately preceding the maturity date if the last reported sale price per ordinary share has been at least 130% of the exchange price, or $79.27 per share, then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption, at a redemption price equal to 100% of the principal amount of the 2025 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. Additionally, the Company may redeem the 2025 Notes at its option, prior to the stated maturity, in whole but not in part, in connection with certain tax-related events.
Note 6. Commitments and Contingencies
Saluggia Site Hazardous Substances
LSM, formerly a subsidiary of Sorin, one of the companies that merged into LivaNova PLC in 2015, manages site services for the campus in Saluggia, Italy. In addition to being a former LivaNova manufacturing facility, the Saluggia campus is also the location of manufacturing facilities of third parties, a cafeteria for workers, and storage facilities for hazardous substances and equipment previously used in a nuclear research center, later turned nuclear medicine business, between the 1960s and the late 1990s. Pursuant to authorization from the Italian government, LSM performs ordinary maintenance, secures the facilities, monitors air and water quality, and files applicable reports with the competent environmental authorities.
In 2020, LSM received correspondence from ISIN requesting that, within five years, LSM demonstrate the financial capacity to meet its obligations under Italian law to clean and dismantle any contaminated buildings and equipment, as well as to deliver hazardous substances to a national repository. This repository will be built by the Italian government at a location and time yet to be determined. ISIN subsequently published Technical Guide n. 30, which identifies the technical criteria, and general safety and protection requirements for the design, construction, operation, and dismantling of temporary storage facilities for the hazardous substances. In January 2021, a list of 67 potential sites for the national repository was published.
Although there is no legal obligation to begin any work or deliver the hazardous substances, as the performance of these obligations is contingent on the construction of the as-yet unbuilt national repository, based on the aforementioned factors, the Company concluded its obligation to clean, dismantle, and deliver any hazardous substances to a national repository is probable and reasonably estimable. The estimated liability as of September 30, 2024 was €35.5 million ($39.6 million), which represented the low end of the estimated range of loss of €35.5 million ($39.6 million) to €45.3 million ($50.6 million). The estimated liability as of December 31, 2023 was €35.8 million ($39.7 million).
SNIA Environmental Litigation
Sorin was created as a result of a spin-off from SNIA in 2004 and in 2015, Sorin was merged into LivaNova. SNIA subsequently became insolvent, and the Public Administrations sought compensation from SNIA in an aggregate amount of approximately $3.8 billion for remediation costs relating to the environmental damage at chemical sites previously operated by SNIA’s other subsidiaries.
There are proceedings relating to the SNIA bankruptcy to which LivaNova is not a party in the Bankruptcy Court of Udine and the Bankruptcy Court of Milan. In 2011, the Bankruptcy Court of Udine held that the Public Administrations were not creditors of either SNIA or its subsidiaries in connection with their claims in the Italian insolvency proceedings. The Public Administrations appealed. In 2016, the Court of Udine rejected the appeal, and the Public Administrations appealed to the Italian Supreme Court. Similarly, in 2014, the Bankruptcy Court of Milan held that the Public Administrations were not creditors of either SNIA or its subsidiaries. The Public Administrations appealed. In April 2022, the Bankruptcy Court of Milan declared the Public Administrations to be a non-privileged creditor of SNIA for up to €454.0 million, and the Public Administrations appealed to the Italian Supreme Court.
In 2012, SNIA filed a civil action against Sorin in the Civil Court of Milan asserting joint liability of a parent and a spun-off company; the Public Administrations entered voluntarily into the proceeding, asking Sorin, as jointly liable with SNIA, to pay compensation for SNIA’s environmental damages. In 2016, the Court of Milan dismissed all legal actions of SNIA and of the Public Administrations further requiring the Public Administrations to pay Sorin €292,000 ($326,191 as of September 30,
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2024) for legal fees. The Public Administrations appealed the 2016 Decision to the Court of Appeal. On March 5, 2019, the Court of Appeal issued a partial decision on the merits declaring Sorin/LivaNova jointly liable with SNIA for SNIA’s environmental liabilities in an amount up to the fair value of the net worth received by Sorin because of the spin-off of Sorin from SNIA in 2004, an estimated €572.1 million ($639.1 million as of September 30, 2024). LivaNova appealed the partial decision on liability to the Italian Supreme Court in August 2019.
In 2021, the Court of Appeal delivered the remainder of its decision, ordering LivaNova to pay damages of €453.6 million ($506.7 million as of September 30, 2024). LivaNova appealed the decision on damages in December 2021. On February 21, 2022, the Court of Appeal notified the Company that it granted the Company a suspension with respect to the payment of damages until a decision has been reached on the appeal to the Italian Supreme Court. This suspension was subject to LivaNova providing a first demand bank guarantee of €270.0 million ($301.6 million as of September 30, 2024) within 30 calendar days, and on March 21, 2022, LivaNova delivered the guarantee, thereby satisfying the condition. For additional information on the financing of the guarantee, refer to “Note 12. Supplemental Financial Information.”
In 2022, in response to one of a number of appeals asserted by LivaNova, the Italian Supreme Court issued an ordinance, a procedural document, whereby the Italian Supreme Court referred a question on interpretation of a European directive on demergers to the ECJ. Specifically, the ordinance asked the ECJ to provide a binding decision as to whether a company resulting from a demerger can be held jointly and severally liable not only for the established liabilities of the demerged company that were articulated at the time of demerger, but also for the environmental liabilities of the demerged company that materialized after the demerger which are derived from actions performed prior to the demerger. On July 29, 2024, the ECJ issued a judgment in response to the ordinance. The ECJ judgment states that a demerged company can be held responsible for liabilities not established prior to a demerger as long as the liabilities derive from the conduct of a demerged company prior to the demerger. The ECJ judgment also states that national law should determine whether liability for damages stemming from conduct after a demerger can be assigned to a demerged company. The Italian Supreme Court is expected to issue a decision in response to all of the appeals of LivaNova, and counter-appeals submitted by the Public Administrations. While the timing of the decision by the Italian Supreme Court is uncertain, the Company does not expect that a decision will be issued until at least 2025. LivaNova has not recognized a liability in connection with this matter because any potential loss is not currently probable.
Product Liability Litigation
The Company continues to be involved in litigation involving LivaNova’s 3T device. The litigation includes the cases remaining in the MDL, various U.S. state court cases, and claims in jurisdictions outside the U.S. As of October 30, 2024, the Company was aware of approximately 65 filed and unfiled claims worldwide. The complaints generally seek damages and other relief based on theories of strict liability, negligence, breach of express and implied warranties, failure to warn, design and manufacturing defect, fraudulent and negligent misrepresentation or concealment, unjust enrichment, and violations of various state consumer protection statutes.
During the three and nine months ended September 30, 2024, LivaNova recorded an additional liability of $7.7 million and $16.8 million, respectively, due to new information received about the nature of certain claims. As of September 30, 2024 and December 31, 2023, the provision for these matters was $19.2 million and $13.9 million, respectively. While the amount accrued represents LivaNova’s best estimate for those filed and unfiled claims worldwide of which LivaNova is aware and believes are both probable and estimable at this time, the actual liability for resolution of these matters may vary from the Company’s provision. A provision for the remaining claims has not been recorded, because a potential loss is not determined to be probable, or a potential loss or range of potential loss is not reasonably estimable at this time.
The following table presents the changes in the litigation provision liability for the nine months ended September 30, 2024 (in thousands):
Total litigation provision liability at December 31, 2023
$13,860 
Payments(11,515)
Adjustments (1)
16,798 
FX and other86 
Total litigation provision liability at September 30, 202419,229 
Less: Current portion of litigation provision liability at September 30, 202416,098 
Long-term portion of litigation provision liability at September 30, 2024 (2)
$3,131 
(1)Adjustments to the litigation provision are included in other operating expenses on the condensed consolidated statements of income (loss).
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(2)Included in other long-term liabilities on the condensed consolidated balance sheets.
Italian MedTech Payback Measure
As previously disclosed, in 2015, the Italian Parliament introduced rules regarding public contracts with the National Healthcare System for the supply of goods and services. In particular, the law introduced a payback measure requiring companies selling medical devices in Italy to repay a percentage of the healthcare expenditures exceeding the regional maximum caps for medical devices. In the intervening years since the rules were first issued, there has been considerable uncertainty about how the law will operate and what the exact timeline is for finalization. In August 2022, a decree was published which provided guidance and timetables for the rule. In response, LivaNova filed an appeal at the Administrative Court against the Decree of the Ministry of Health, assessing the amount payable and against the payback law. LivaNova also filed appeals against the regions requesting payments. In August 2023, the Administrative Court upheld LivaNova’s request to suspend the effect of the requests for payment by the regions, pending the decision by the Administrative Court on the merits of the case. In November 2023, the Administrative Court, in a separate matter, asked the Constitutional Court whether the payback law was compliant with the Italian Constitution and pending the decision by the Constitutional Court, all cases brought by medical device companies in this matter were suspended. On July 22, 2024, the Constitutional Court determined that the payback law is compliant with the Italian Constitution and that companies may reduce their payment obligations between 2015-2018 to 48% of the amount originally charged to companies. Based on market and product information, as previously disclosed, and the recent ruling by the Constitutional Court, the amount reserved for this matter was $16.8 million and $8.2 million as of September 30, 2024 and December 31, 2023, respectively, and is included in accrued liabilities and other in the condensed consolidated balance sheets. However, the actual liability could vary. Amounts recognized associated with the Italian MedTech payback measure are recorded as a reduction to net revenue in the condensed consolidated statements of income (loss).
Cyber Litigation
In connection with the cybersecurity incident initially reported on November 20, 2023, LivaNova USA was named as a defendant in six putative class action lawsuits filed in the United States District Court for the Southern District of Texas in June and July 2024. Those cases were consolidated in a single action, and the plaintiffs filed against LivaNova USA a consolidated class action complaint, which asserted claims of negligence, breach of contract, and violation of various state consumer protection laws. The plaintiffs sought damages, equitable/injunctive relief, and attorney’s fees, costs, and expenses, among other relief. The parties entered into mediation and have agreed to a settlement, for which the Company recorded an accrual of $1.2 million during the quarter ended September 30, 2024. The settlement is currently being memorialized and will be subject to court approval.
Other Matters
Additionally, LivaNova is the subject of various pending or threatened legal actions and proceedings that arise in the ordinary course of LivaNova’s business. These matters are subject to many uncertainties and outcomes that are not predictable and that may not be known for extended periods of time. Since the outcome of these matters cannot be predicted with certainty, the costs associated with them could have a material adverse effect on LivaNova’s consolidated results of operations, financial position, or liquidity.
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Note 7. Stockholders' Equity
The tables below present the condensed consolidated statements of stockholders’ equity as of and for the three and nine months ended September 30, 2024 and 2023 (in thousands):
Ordinary SharesOrdinary Shares - AmountAdditional Paid-In CapitalTreasury StockAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders' Equity
June 30, 202454,404 $83,070 $2,204,580 $(195)$(52,819)$(992,094)$1,242,542 
Stock-based compensation plans2 42 8,352 39 — — 8,433 
Net income— — — — — 32,953 32,953 
Other comprehensive income— — — — 26,116 — 26,116 
September 30, 202454,406 $83,112 $2,212,932 $(156)$(26,703)$(959,141)$1,310,044 
June 30, 202353,904 $82,441 $2,169,346 $(95)$(35,579)$(975,505)$1,240,608 
Stock-based compensation plans— 50 11,315 39 — — 11,404 
Net loss— — — — — (7,318)(7,318)
Other comprehensive loss— — — — (19,222)— (19,222)
September 30, 202353,904 $82,491 $2,180,661 $(56)$(54,801)$(982,823)$1,225,472 
Ordinary SharesOrdinary Shares - AmountAdditional Paid-In CapitalTreasury StockAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders' Equity
December 31, 202353,942 $82,533 $2,189,517 $(55)$(27,883)$(966,484)$1,277,628 
Issuance of shares— 440 — (440)— — — 
Stock-based compensation plans464 139 23,415 339 — — 23,893 
Net income— — — — — 7,343 7,343 
Other comprehensive income— — — — 1,180 — 1,180 
September 30, 202454,406 $83,112 $2,212,932 $(156)$(26,703)$(959,141)$1,310,044 
December 31, 202253,852 $82,424 $2,157,724 $(375)$(48,119)$(984,030)$1,207,624 
Stock-based compensation plans52 67 22,937 319 — — 23,323 
Net income— — — — — 1,207 1,207 
Other comprehensive loss— — — — (6,682)— (6,682)
September 30, 202353,904 $82,491 $2,180,661 $(56)$(54,801)$(982,823)$1,225,472 
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The tables below present the change in each component of AOCI, net of tax, and the reclassifications out of AOCI into net income for the nine months ended September 30, 2024 and 2023 (in thousands):
Foreign Currency Translation Adjustments (1)
December 31, 2023$(27,883)
Other comprehensive income before reclassifications, before tax1,180 
Tax expense— 
Other comprehensive income net of reclassifications, before tax1,180 
Net current-period other comprehensive income, net of tax1,180 
September 30, 2024$(26,703)
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 before reclassifications, before tax(433)(5,716)(6,149)
Tax expense— — — 
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 expense— — — 
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)
(1)Taxes were not provided for foreign currency translation adjustments as translation adjustments are related to earnings that are intended to be reinvested in the countries where earned.
Note 8. Stock-Based Incentive Plans
Stock-Based Plans
During the nine months ended September 30, 2024, LivaNova issued stock-based compensatory awards with terms approved by the Compensation and Human Capital Management Committee of LivaNova’s Board of Directors. The awards with service conditions generally vest ratably over four years and are subject to forfeiture unless service conditions are met. The market performance-based awards that were issued cliff vest after three years, subject to the rank of LivaNova’s total shareholder return for the three-year period ending December 31, 2026, relative to the total shareholder returns of the S&P Healthcare Equipment Select Constituents index. The adjusted free cash flow and return on invested capital operating performance-based awards that were issued cliff vest after three years, subject to the achievement of certain thresholds of cumulative results for the three-year period ending December 31, 2026. Compensation expense related to awards granted during 2024 for the three and nine months ended September 30, 2024 was $3.4 million and $6.0 million, respectively.
Stock-based awards may be granted under the 2015 Plan and the A&R 2022 Plan in the form of stock options, SARs, RSUs, and other stock-based and cash-based awards. As of September 30, 2024, under the 2015 Plan, there were 90,081 shares available for future grants to LivaNova’s non-executive directors and under the A&R 2022 Plan, there were 1,496,770 shares pursuant to stock options or SARs and 948,029 shares pursuant to other types of awards available for future grants to LivaNova’s employees. In June 2024, the Company’s shareholders approved amendments to the 2015 Plan and the A&R 2022 Plan. The 2015 Plan Amendment increased the number of shares that can be issued from 50,000 to 150,000. The A&R 2022 Plan Amendment increased the number of shares that can be issued pursuant to options or SARs from 2,250,000 to 2,950,000, and the number of shares that can be issued pursuant to other types of awards from 1,500,000 to 2,000,000.
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Stock-Based Compensation
Stock-based incentive plan compensation expense is as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Service-based RSUs$4,288 $5,690 $13,662 $16,103 
Service-based SARs3,480 3,886 10,003 10,713 
Market performance-based RSUs257 1,071 1,303 392 
Operating performance-based RSUs255 866 1,119 7 
Employee share purchase plan279 266 897 854 
$8,559 $11,779 $26,984 $28,069 
Stock-based compensation agreements issued during the nine months ended September 30, 2024, representing potential shares and their weighted average grant date fair values by type, is as follows (shares in thousands, fair value in dollars):
Nine Months Ended September 30, 2024
SharesWeighted Average Grant Date Fair Value
Service-based SARs729,482 $26.28 
Service-based RSUs411,799 $55.15 
Market performance-based RSUs69,797 $74.32 
Operating performance-based RSUs69,790 $55.33 
Note 9. Income Taxes
LivaNova PLC is a resident in the UK. LivaNova’s effective income tax rate fluctuates based on, among other factors, changes in pre-tax income in countries with varying statutory tax rates, valuation allowances, tax credits and incentives, and unrecognized tax benefits associated with uncertain tax positions. LivaNova’s tax returns are periodically audited or subjected to review by tax authorities. The Company operates in multiple jurisdictions worldwide and assesses the recoverability of its deferred tax assets for each period and jurisdiction by considering whether it is more likely than not that all or a portion of the deferred tax assets will not be realized. The Company considers all available evidence (both positive and negative) in determining whether a valuation allowance is required. Depending on operating results in the future, a release of a valuation allowance could occur within the next 12 months. The timing and amount of the valuation allowance release could vary based on the Company’s assessment of all available evidence.
LivaNova’s effective income tax rate for the three and nine months ended September 30, 2024 was 25.9% and 76.9%, respectively, compared to (268.4)% and 90.1% for the three and nine months ended September 30, 2023, respectively. The change in the effective tax rate for both the three and nine months ended September 30, 2024, compared to the prior year periods, was primarily attributable to changes in valuation allowances, year-over-year changes in income before tax in countries with varying statutory tax rates, and certain discrete tax items.
On July 11, 2023, the UK Act implemented the Pillar Two framework, providing a minimum effective tax rate of 15.0%, including both a multinational top-up tax and a domestic top-up tax for accounting periods beginning on or after December 31, 2023. The UK Act also included a transitional safe harbor election for accounting periods beginning on or before December 31, 2026. This minimum tax is treated as a period cost beginning in 2024 and has not had a material impact on the Company's consolidated results of operations for the current period. LivaNova will continue to monitor related guidance in the UK and other jurisdictions that impact LivaNova’s operations.
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Note 10. Earnings Per Share
The following table presents basic and diluted earnings per share:
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Basic income (loss) per share$0.61 $(0.14)$0.14 $0.02 
Diluted income (loss) per share$0.60 $(0.14)$0.13 $0.02 
The following table presents the reconciliations of net income (loss) and weighted average shares outstanding used in the calculations of basic and diluted earnings per share (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Numerator (1):
Net income (loss) - basic and diluted$32,953 $(7,318)$7,343 $1,207 
Denominator:
Weighted average shares outstanding - basic54,352 53,989 54,194 53,837 
Add: Dilutive effect of share-based compensation and convertible debt instruments (1) (2)
233 — 332 270 
Weighted average shares outstanding - diluted54,585 53,989 54,526 54,107 
(1)For the three and nine months ended September 30, 2024, the 2029 Notes were outstanding and potentially dilutive securities, but were excluded from the computation of diluted earnings per share, because their effect would have been anti-dilutive.
(2)Excluded from the computation of diluted earnings per share were stock options, SARs, and RSUs totaling 3.1 million and 4.0 million for the three months ended September 30, 2024 and 2023, respectively, and 2.8 million and 3.1 million for the nine months ended September 30, 2024 and 2023, respectively, because to include them would have been anti-dilutive under the treasury stock method.
Note 11. Geographic and Segment Information
Segment Information
LivaNova identifies operating segments based on how it manages, evaluates, and internally reports its business activities to develop and execute its strategy, allocate resources, and assess performance. Prior to the first quarter of 2024, LivaNova operated through three segments: Cardiopulmonary, Neuromodulation, and ACS. During the first quarter of 2024, the Company reorganized its operating and reporting structure upon initiating the 2024 Restructuring Plan. This involved transitioning all ACS standalone cannulae and accessories, including ProtekDuo and transseptal (TandemHeart) cannulae, into its Cardiopulmonary segment. Operations for other ACS products, including LifeSPARC and Hemolung systems, will be discontinued by the end of 2024. For additional information, refer to “Note 2. Restructuring.” This restructuring, along with changes in how the Company’s CODM regularly reviews information, allocates resources, and assesses performance, resulted in modifications to LivaNova’s reportable segments. Specifically, LivaNova’s former ACS segment is now included in “Other,” excluding the ACS standalone cannulae and accessories business, which is now included in the Cardiopulmonary reportable segment. As a result, LivaNova now has two reportable segments: Cardiopulmonary and Neuromodulation. Net revenue of the Company’s reportable segments includes revenues from the sale of products that each reportable segment develops and manufactures or distributes. The segment financial information presented herein reflects these changes for all periods presented.
LivaNova’s Cardiopulmonary segment is engaged in the design, development, manufacture, marketing, and selling of cardiopulmonary products, including heart-lung machines, oxygenators, autotransfusion systems, perfusion tubing systems, cannulae, and other related accessories.
LivaNova’s Neuromodulation segment is engaged in the design, development, manufacture, marketing, and selling of devices that deliver neuromodulation therapy for treating DRE and DTD. Neuromodulation products include the VNS Therapy System, which consists of an implantable pulse generator, a lead that connects the generator to the vagus nerve, and other accessories. It also includes the development and management of clinical testing of LivaNova’s aura6000 System for treating OSA. LivaNova’s Neuromodulation segment also includes costs associated with the Company’s former heart failure program, which the Company wound down during 2023.
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LivaNova operates under three geographic regions: U.S., Europe, and Rest of World. The following table presents net revenue by operating segment and geographic region (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Cardiopulmonary
United States$62,504 $52,281 $177,954 $141,891 
Europe (1)
40,894 35,484 120,387 111,208 
Rest of World68,841 61,190 203,503 185,713 
172,239 148,955 501,844 438,812 
Neuromodulation
United States112,906 102,475 330,518 301,029 
Europe (1)
11,922 12,661 40,919 41,066 
Rest of World15,033 13,744 45,172 40,689 
139,861 128,880 416,609 382,784 
Other Revenue (2)
6,020 8,278 13,154 21,817 
Totals (3)
United States179,828 161,583 519,985 461,823 
Europe (1)
52,815 48,129 158,414 152,231 
Rest of World85,477 76,401 253,208 229,359 
$318,120 $286,113 $931,607 $843,413 
(1)Includes countries in Europe where the Company has a direct sales presence. Countries in Europe where sales are made through distributors are included in “Rest of World.”
(2)“Other Revenue” includes revenue from the Company’s former ACS reportable segment, as discussed above, as well as rental and site services income not allocated to segments.
(3)No single customer represented over 10% of the Company’s consolidated net revenue. No country’s net revenue exceeded 10% of the Company’s consolidated net revenue except for the U.S.
LivaNova defines segment income as operating income before restructuring expense, amortization of intangible assets, merger and integration expense, and other income and expense not allocated to segments. Other income and expense not allocated to segments primarily includes corporate expense, rental income, and the results of LivaNova’s former ACS reportable segment, as discussed above. The following table presents a reconciliation of segment income to consolidated income (loss) before tax (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Cardiopulmonary$21,669 $(2,192)$56,007 $19,794 
Neuromodulation49,533 41,930 151,023 107,084 
Segment income71,202 39,738 207,030 126,878 
Other income/(expense)(35,584)(35,280)(115,000)(107,386)
Operating income35,618 4,458 92,030 19,492 
Interest expense (1)
(15,878)(14,986)(47,303)(43,232)
Loss on debt extinguishment— — (25,482)— 
Foreign exchange and other income/(expense)24,701 8,550 12,585 36,810 
Income (loss) before tax$44,441 $(1,978)$31,830 $13,070 
(1)“Interest expense” includes contractual interest expense associated with LivaNova’s short and long-term financing arrangements and the amortization of debt discount and issuance costs of $5.5 million and $15.7 million for the three and nine months ended September 30, 2024, respectively, and $4.7 million and $14.2 million for the three and nine months ended September 30, 2023, respectively.
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The following table presents assets by reportable segment (in thousands):
September 30, 2024December 31, 2023
Cardiopulmonary$966,769 $964,735 
Neuromodulation635,272 647,391 
Other assets (1)
919,917 817,437 
$2,521,958 $2,429,563 
(1)“Other assets” primarily includes corporate assets not allocated to segments and the assets of LivaNova’s former ACS reportable segment.
The following table presents capital expenditures by reportable segment (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Cardiopulmonary$7,383 $4,144 $18,657 $11,485 
Neuromodulation1,379 597 2,380 1,089 
Other capital expenditures (1)
5,318 3,441 13,241 9,514 
$14,080 $8,182 $34,278 $22,088 
(1)“Other capital expenditures” primarily includes corporate capital expenditures not allocated to segments and capital expenditures of LivaNova’s former ACS reportable segment.
The following table presents changes in the carrying amount of goodwill by reportable segment for the nine months ended September 30, 2024 (in thousands):
CardiopulmonaryNeuromodulationTotal
December 31, 2023$384,187 $398,754 $782,941 
Foreign currency adjustments(1,388)— (1,388)
September 30, 2024$382,799 $398,754 $781,553 
Geographic Information
The following table presents property, plant, and equipment, net by geographic region (in thousands):
September 30, 2024December 31, 2023
United States$73,323 $62,701 
Europe89,226 85,606 
Rest of World6,768 5,874 
$169,317 $154,181 
Note 12. Supplemental Financial Information
The following table presents the components of inventories (in thousands):
September 30, 2024December 31, 2023
Raw materials$74,339 $81,878 
Work-in-process17,617 12,901 
Finished goods70,308 53,108 
 $162,264 $147,887 
As of September 30, 2024 and December 31, 2023, inventories included adjustments totaling $21.1 million and $24.4 million, respectively, to record balances at lower of cost or net realizable value.
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The following table presents the components of accrued liabilities and other (in thousands):
September 30, 2024December 31, 2023
Legal and professional costs$19,075 $17,794 
Italian MedTech payback measure16,756 8,223 
Contract liabilities10,279 10,725 
Operating lease liabilities9,477 8,362 
Interest payable7,359 7,840 
Research and development costs6,232 2,462 
Provisions for agents, returns, and other4,570 4,464 
Royalty accrual4,400 4,441 
Restructuring liability3,384 911 
Current derivative liabilities2,245 3,883 
Contingent consideration— 13,750 
Other accrued expenses20,746 24,446 
$104,523 $107,301 
As of September 30, 2024 and December 31, 2023, contract liabilities totaling $13.7 million and $15.3 million, respectively, were included in accrued liabilities and other long-term liabilities on the condensed consolidated balance sheets.
The following table presents the items included in foreign exchange and other income/(expense) on the condensed consolidated statements of income (loss) (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Embedded derivative fair value adjustment (2025 Notes) (1)
$2,829 $402 $1,466 $32,372 
Embedded derivative fair value adjustment (2029 Notes) (1)
18,423 — 10,488 — 
Capped call fair value adjustment (2025 Notes) (1)
(1,668)1,635 (10,201)(10,724)
Capped call fair value adjustment (2029 Notes) (1)
(2,517)— (2,040)— 
Impairment of investment in ShiraTronics (2)
— — (5,750)— 
Foreign exchange rate fluctuations220 420 (2,885)(588)
Interest income7,139 5,921 21,497 15,985 
Other275 172 10 (235)
$24,701 $8,550 $12,585 $36,810 
(1)Refer to “Note 4. Fair Value Measurements.”
(2)Impairment of equity investment related to LivaNova’s preferred share ownership converting into common stock during the second quarter of 2024.
The following table presents a reconciliation of cash, cash equivalents, and restricted cash reported on the condensed consolidated balance sheets that sum to the total of the amounts shown on the condensed consolidated statements of cash flows (in thousands):
September 30, 2024December 31, 2023
Cash and cash equivalents$346,366 $266,504 
Restricted cash (1)
320,210 311,368 
$666,576 $577,872 
(1)On March 18, 2022, LivaNova PLC, acting through its Italian branch, entered into an Indemnity Letter and an Account Pledge Agreement with Barclays, further to which Barclays issued the SNIA Litigation Guarantee. As security for the SNIA Litigation Guarantee, LivaNova is required to grant cash collateral to Barclays in USD in an amount equal to the USD equivalent of 105% of the amount of the SNIA Litigation Guarantee calibrated on a biweekly basis, which is presented as restricted cash on the condensed consolidated balance sheet. For additional information, refer to “Note 6. Commitments and Contingencies.”
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Note 13. New Accounting Pronouncements
The following table presents a description of future adoptions of new accounting standards that may have an impact on LivaNova’s consolidated financial statements when adopted:
Issue Date & StandardDescriptionAdoptionAssessment
November 2023
ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
This ASU expands public entities’ reportable segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the CODM and included in each reported measure of segment profit or loss, the amount and description of other segment items, and the title and position of the Company’s CODM, as well as an explanation of how the CODM uses the Company’s reported measures of segment profit or loss in assessing segment performance and deciding how to allocate resources.This ASU will be effective for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, on a retrospective basis.LivaNova is currently evaluating the effect this standard will have on its consolidated financial statements and related disclosures.
December 2023 ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures
This ASU expands annual income tax disclosures primarily related to the rate reconciliation and income taxes paid.This ASU will be effective for annual periods beginning after December 15, 2024, on a prospective basis, with early adoption and retrospective application permitted.LivaNova is currently evaluating the effect this standard will have on its consolidated financial statements and related disclosures.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and related notes, which appear elsewhere in this Report, and with LivaNova’s 2023 Form 10-K. LivaNova’s discussion and analysis may contain forward-looking statements that involve risks and uncertainties. The Company’s actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Risk Factors” in Part I, Item 1A. of LivaNova’s 2023 Form 10-K, as updated and supplemented by LivaNova’s Quarterly Reports on Form 10-Q, including in Part II, Item 1A. and elsewhere in this Report. The accompanying unaudited condensed consolidated financial statements of LivaNova and its consolidated subsidiaries have been prepared in accordance with U.S. GAAP on an interim basis. The capitalized terms used below have been defined in the “Definitions” section and in the notes to LivaNova’s condensed consolidated financial statements of this Report.
Description of the Business
LivaNova PLC is a market-leading global medical technology company. The Company designs, develops, manufactures, markets, and sells products and therapies that are consistent with LivaNova’s mission to provide hope for patients and their families through medical technologies, delivering life-changing solutions in select neurological and cardiac conditions. LivaNova is a public limited company organized under the laws of England and Wales and is headquartered in London, England. LivaNova’s ordinary shares are listed for trading on the Nasdaq under the symbol “LIVN.”
Macroeconomic Environment
The current macroeconomic environment, including inflationary pressures, geopolitical instability, and supply chain challenges, has impacted and may continue to impact LivaNova’s business and profitability. Furthermore, LivaNova continues to experience logistical, capacity, and labor constraints. However, to date, the Company’s supply of raw materials and the production and distribution of finished products have not been materially affected. The Company continues to respond to such challenges, and while LivaNova has business continuity plans in place, the impact of the ongoing challenges the Company is navigating, along with their potential escalation, may adversely affect its business.
Cybersecurity Incident
As previously disclosed, in November 2023, LivaNova detected a cybersecurity incident that resulted in a disruption of portions of the Company’s information technology systems. Promptly after detecting the issue, LivaNova began an investigation with assistance from external cybersecurity experts and coordinated with law enforcement. The Company quickly implemented remediation measures to mitigate the impact of the incident. The Company also assessed the nature and scope of the affected data, analyzed its legal notification obligations, and notified affected individuals and regulators as required by applicable law. The Company believes the incident is contained and mitigation efforts are complete.
Through September 30, 2024, LivaNova incurred direct costs totaling $10.8 million in connection with this cybersecurity incident, including $2.5 million and $8.2 million during the three and nine months ended September 30, 2024, respectively. These costs primarily include external cybersecurity expert and legal fees, system restoration costs, and a $1.2 million provision related to the class action settlement, as discussed in “Note 6. Commitments and Contingencies” in the condensed consolidated financial statements in this Report, and do not include business interruption losses. The Company expects to incur additional costs related to this incident in the future. LivaNova maintains insurance, including cyber insurance, which is subject to certain retentions and policy limitations that will likely limit the amount that the insurers may pay the Company. LivaNova has filed claims for insurance reimbursement of covered costs and business interruption losses related to this incident and has submitted additional claims and supplemental requests for reimbursement as new costs have been incurred. LivaNova has not yet received reimbursement or recognized a receivable. The Company’s insurance coverage will likely be insufficient to cover all costs and expenses related to this cybersecurity incident or may be unavailable to cover all costs and expenses related to this cybersecurity incident.
Business Segments
Prior to the first quarter of 2024, LivaNova operated through three segments: Cardiopulmonary, Neuromodulation, and ACS. During the first quarter of 2024, the Company reorganized its operating and reporting structure upon initiating the 2024 Restructuring Plan. This involved transitioning all ACS standalone cannulae and accessories, including ProtekDuo and transseptal (TandemHeart) cannulae, into its Cardiopulmonary segment. Operations for other ACS products, including LifeSPARC and Hemolung systems, will be discontinued by the end of 2024. For additional information, refer to “Note 2. Restructuring” in the condensed consolidated financial statements in this Report. This restructuring, along with changes in how the Company’s CODM regularly reviews information, allocates resources, and assesses performance, resulted in modifications
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to LivaNova’s reportable segments. Specifically, LivaNova’s former ACS segment is now included in “Other,” excluding the ACS standalone cannulae and accessories business, which is now included in the Cardiopulmonary reportable segment. As a result, LivaNova now has two reportable segments: Cardiopulmonary and Neuromodulation. The segment financial information presented herein reflects these changes for all periods presented. For additional information regarding LivaNova’s reportable segments, historical financial information, and its methodology for the presentation of financial results, refer to the condensed consolidated financial statements and accompanying notes of this Report.
Cardiopulmonary
LivaNova’s Cardiopulmonary segment is engaged in the design, development, manufacture, marketing, and selling of cardiopulmonary products, including HLMs, oxygenators, autotransfusion systems, perfusion tubing systems, cannulae, and other related accessories. In particular, the Cardiopulmonary segment includes the Essenz Perfusion System, the Company’s next-generation HLM with an embedded patient monitor for tailored patient care strategies and sensing technology for data-driven decision making during cardiopulmonary bypass procedures.
Information on the Cardiopulmonary segment that could potentially impact LivaNova’s condensed consolidated financial statements and related disclosures is incorporated by reference to Part I. “Note 6. Commitments and Contingencies: Product Liability Litigation.”
Neuromodulation
LivaNova’s Neuromodulation segment is engaged in the design, development, manufacture, marketing, and selling of devices that deliver neuromodulation therapy for treating DRE and DTD. LivaNova’s principal Neuromodulation product, the VNS Therapy System, consists of an implantable pulse generator and connective lead that stimulates the vagus nerve; surgical equipment to assist with the implant procedure; equipment and instruction manuals enabling a treating physician to set parameters for a patient’s pulse generator; and for epilepsy, magnets to manually suspend or induce nerve stimulation. The lead does not need to be removed to replace a generator with a depleted battery.
Obstructive Sleep Apnea
The Neuromodulation segment is also engaged in the development and management of clinical testing for LivaNova’s aura6000 System for treating OSA. The aura6000 device stimulates the hypoglossal nerve, which engages specific tongue and palate muscles to open the airway while a patient sleeps. LivaNova’s OSPREY clinical trial seeks to confirm the safety and effectiveness of the aura6000 System.
In March 2024, the Company announced that the OSPREY clinical study had achieved a positive predictive outcome, and as a result, enrollment concluded early. This development signified that there is a greater than 97.5% probability that the OSPREY trial will successfully meet its primary endpoint.
Depression
The Neuromodulation segment also includes the VNS Therapy System for the adjunctive treatment of chronic or recurrent depression for patients 18 years or older who are experiencing a major depressive episode and have not had an adequate response to four or more antidepressant treatments. LivaNova initiated the RECOVER clinical study, a CMS-approved, double-blind, randomized, placebo-controlled trial, in connection with its request that CMS reconsider its previous non-coverage determination.
In June 2024, the Company announced the preliminary results for the unipolar patient cohort of the RECOVER clinical study, assessing the use of VNS Therapy in treatment-resistant depression. The study did not meet its primary endpoint for the unipolar cohort; however, statistical significance was achieved in select secondary endpoints. The Company expects to publish two manuscripts on the unipolar cohort data, including details on the primary endpoint and secondary endpoints, in peer-reviewed journals in the fourth quarter of 2024. The Company intends to continue pursuing coverage for VNS Therapy while reducing investment in the DTD program in 2025.
Heart Failure
LivaNova’s Neuromodulation segment also includes costs associated with the Company’s former heart failure program, which the Company wound down during 2023.
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Critical Accounting Estimates 
For a discussion of LivaNova’s critical accounting estimates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the 2023 Form 10-K. During the nine months ended September 30, 2024, there were no material changes to the application of critical accounting policies and estimates previously disclosed in LivaNova’s 2023 Form 10-K.
Results of Operations
The following table presents LivaNova’s condensed consolidated results of operations (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Net revenue$318,120 $286,113 $931,607 $843,413 
Cost of sales92,856 84,310 280,088 262,330 
Gross profit225,264 201,803 651,519 581,083 
Operating expenses:
Selling, general, and administrative131,661 134,794 390,642 384,795 
Research and development48,805 46,541 139,206 147,651 
Other operating expenses9,180 16,010 29,641 29,145 
Operating income35,618 4,458 92,030 19,492 
Interest expense(15,878)(14,986)(47,303)(43,232)
Loss on debt extinguishment— — (25,482)— 
Foreign exchange and other income/(expense)24,701 8,550 12,585 36,810 
Income (loss) before tax44,441 (1,978)31,830 13,070 
Income tax expense11,525 5,308 24,469 11,776 
Income (loss) from equity method investments37 (32)(18)(87)
Net income (loss)$32,953 $(7,318)$7,343 $1,207 
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Net Revenue
The following table presents net revenue by operating segment and geographic region (in thousands, except for percentages):
Three Months Ended September 30,Nine Months Ended September 30,
20242023% Change20242023% Change
Cardiopulmonary
United States$62,504 $52,281 19.6 %$177,954 $141,891 25.4 %
Europe (1)
40,894 35,484 15.2 %120,387 111,208 8.3 %
Rest of World68,841 61,190 12.5 %203,503 185,713 9.6 %
172,239 148,955 15.6 %501,844 438,812 14.4 %
Neuromodulation
United States112,906 102,475 10.2 %330,518 301,029 9.8 %
Europe (1)
11,922 12,661 (5.8)%40,919 41,066 (0.4)%
Rest of World15,033 13,744 9.4 %45,172 40,689 11.0 %
139,861 128,880 8.5 %416,609 382,784 8.8 %
Other Revenue (2)
6,020 8,278 (27.3)%13,154 21,817 (39.7)%
Totals
United States179,828 161,583 11.3 %519,985 461,823 12.6 %
Europe (1)
52,815 48,129 9.7 %158,414 152,231 4.1 %
Rest of World85,477 76,401 11.9 %253,208 229,359 10.4 %
$318,120 $286,113 11.2 %$931,607 $843,413 10.5 %
(1)Includes countries in Europe where the Company has a direct sales presence. Countries in Europe where sales are made through distributors are included in “Rest of World.”
(2)“Other Revenue” includes revenue from the Company’s former ACS reportable segment, as discussed above, as well as rental and site services income not allocated to segments.
The following table presents segment income (1) (in thousands, except for percentages):
Three Months Ended September 30,Nine Months Ended September 30,
20242023% Change20242023% Change
Cardiopulmonary$21,669 $(2,192)NM$56,007 $19,794 182.9 %
Neuromodulation 49,533 41,930 18.1 %151,023 107,084 41.0 %
$71,202 $39,738 79.2 %$207,030 $126,878 63.2 %
(1)For a reconciliation of segment income to consolidated income (loss) before tax, refer to “Note 11. Geographic and Segment Information” in the condensed consolidated financial statements in this Report.
NM - Indicates that variance as a percentage is not meaningful.
Cardiopulmonary
Cardiopulmonary net revenue for the three and nine months ended September 30, 2024 increased 15.6% to $172.2 million and 14.4% to $501.8 million, respectively, compared to the three and nine months ended September 30, 2023, with growth across all regions, driven by Essenz Perfusion System sales and strong consumables demand.
Cardiopulmonary segment income for the three and nine months ended September 30, 2024 was $21.7 million and $56.0 million, respectively, compared to segment loss of $2.2 million and segment income of $19.8 million for the three and nine months ended September 30, 2023, respectively. These increases in segment income were primarily due to increases in net revenue, as described above, as well as decreases in the litigation provision related to LivaNova’s 3T Heater-Cooler device of $5.9 million and $8.9 million, for the three- and nine-month comparative periods, respectively.
Neuromodulation
Neuromodulation net revenue for the three and nine months ended September 30, 2024 increased 8.5% to $139.9 million and 8.8% to $416.6 million, respectively, compared to the three and nine months ended September 30, 2023, with growth in the U.S. and Rest of World regions, partially offset by a decline in Europe.
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Neuromodulation segment income for the three and nine months ended September 30, 2024 was $49.5 million and $151.0 million, respectively, compared to $41.9 million and $107.1 million for the three and nine months ended September 30, 2023, respectively. These increases in segment income were primarily due to increases in net revenue, as described above. Segment income for the nine-month comparative period also increased due to a net decrease in R&D expenses, primarily associated with the winding down of the Company’s heart failure program of $21.7 million, partially offset by an increase in R&D expenses associated with the Company’s DTD program of $6.5 million. For the three-month comparative period, the increase in segment income was partially offset by a net increase in R&D expenses, primarily associated with the Company’s DTD program of $6.0 million, partially offset by a decrease in R&D expenses associated with the winding down of the Company’s heart failure program of $4.9 million.
Cost of Sales and Expenses
The following table presents costs and expenses as a percentage of net revenue:
Three Months Ended September 30,Nine Months Ended September 30,
20242023Change20242023Change
Cost of sales29.2 %29.5 %(0.3)%30.1 %31.1 %(1.0)%
Selling, general, and administrative41.4 %47.1 %(5.7)%41.9 %45.6 %(3.7)%
Research and development15.3 %16.3 %(1.0)%14.9 %17.5 %(2.6)%
Other operating expenses2.9 %5.6 %(2.7)%3.2 %3.5 %(0.3)%
Cost of Sales
Cost of sales consists primarily of direct labor, allocated manufacturing overhead, and the acquisition of raw materials and components.
Cost of sales as a percentage of net revenue was 29.2% and 30.1% for the three and nine months ended September 30, 2024, respectively, down 0.3 and 1.0 percentage points compared to the three and nine months ended September 30, 2023, respectively. For the nine-month comparative period, cost of sales as a percentage of net revenue decreased primarily due to a decrease in amortization resulting from the impairment of the ACS segment’s developed technology intangible asset in 2023.
Selling, General, and Administrative Expense
SG&A expenses are comprised of sales, marketing, general, and administrative activities.
SG&A expense as a percentage of net revenue was 41.4% and 41.9% for the three and nine months ended September 30, 2024, respectively, down 5.7 and 3.7 percentage points compared to the three and nine months ended September 30, 2023, respectively. These decreases were primarily due to a decrease in sales and marketing expenses driven by the winding down of the ACS segment, as described above, as well as an increase in net revenue, partially offset by $2.5 million and $8.2 million in costs during the three and nine months ended September 30, 2024, respectively, associated with the November 2023 cybersecurity incident, as described above.
Research and Development Expense
R&D expenses consist of product design and development efforts, clinical study programs, and regulatory activities.
R&D expense as a percentage of net revenue was 15.3% and 14.9% for the three and nine months ended September 30, 2024, respectively, down 1.0 and 2.6 percentage points compared to both the three and nine months ended September 30, 2023, respectively. These decreases were primarily due to R&D expense declines of $4.9 million and $21.7 million for the three- and nine-month comparative periods, respectively, associated with winding down the Company’s heart failure program, which was completed during the fourth quarter of 2023, and R&D expense declines of $1.7 million and $4.4 million for the three- and nine-month comparative periods, respectively, associated with winding down the Company’s ACS segment, as described above. These decreases were partially offset by increases of $6.0 million and $6.5 million for the three- and nine-month comparative periods, respectively, associated with the Company’s DTD program.
Other Operating Expenses
Other operating expenses primarily consists of the litigation provision related to LivaNova’s 3T Heater-Cooler device as well as restructuring expense.
Other operating expenses as a percentage of net revenue was 2.9% and 3.2% for the three and nine months ended September 30, 2024, respectively, decreases of 2.7 and 0.3 percentage points compared to the three and nine months ended September 30, 2023, respectively. The decreases were primarily due to declines of $5.9 million and $8.9 million in the amount recorded for the
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litigation provision related to LivaNova’s 3T Heater-Cooler device for the three- and nine-month comparative periods, respectively, and a decrease in the Saluggia decommissioning provision of $2.3 million recorded during the three and nine months ended September 30, 2023. These decreases were partially offset by increases in restructuring expense of $1.4 million and $11.8 million for the three- and nine-month comparative periods, respectively, resulting from the 2024 Restructuring Plan. For additional information, refer to “Note 2. Restructuring” and “Note 6. Commitments and Contingencies” in the condensed consolidated financial statements in this Report.
Interest Expense
Interest expense increased to $15.9 million and $47.3 million for the three and nine months ended September 30, 2024, respectively, compared to $15.0 million and $43.2 million for the three and nine months ended September 30, 2023, respectively, primarily due to increases in average borrowings and the amortization of debt issuance costs. Additionally, interest expense for the nine-month comparative period increased due to an increase in interest rates. For additional information, refer to “Note 5. Financing Arrangements” in the condensed consolidated financial statements in this Report.
Loss on Debt Extinguishment
In connection with the 2025 Notes Repurchase Transaction, during the nine months ended September 30, 2024, LivaNova incurred a loss on debt extinguishment of $25.5 million. For additional information, refer to “Note 5. Financing Arrangements” in the condensed consolidated financial statements in this Report.
Foreign Exchange and Other Income/(Expense)
Foreign exchange and other income/(expense) consists primarily of gains and losses arising from transactions denominated in a currency different from an entity’s functional currency, FX derivative gains and losses, interest income, changes in the fair value of embedded and capped call derivatives, and an impairment of LivaNova’s investment in ShiraTronics.
Foreign exchange and other income/(expense) was income of $24.7 million and $12.6 million for the three and nine months ended September 30, 2024, respectively, compared to income of $8.6 million and $36.8 million for the three and nine months ended September 30, 2023, respectively. For additional information, refer to “Note 12. Supplemental Financial Information” in the condensed consolidated financial statements in this Report.
Income Taxes
LivaNova PLC is a resident in the UK. LivaNova’s effective income tax rate fluctuates based on, among other factors, changes in pre-tax income in countries with varying statutory tax rates, valuation allowances, tax credits and incentives, and unrecognized tax benefits associated with uncertain tax positions. LivaNova’s tax returns are periodically audited or subjected to review by tax authorities. The Company operates in multiple jurisdictions worldwide and assesses the recoverability of its deferred tax assets for each period and jurisdiction by considering whether it is more likely than not that all or a portion of the deferred tax assets will not be realized. The Company considers all available evidence (both positive and negative) in determining whether a valuation allowance is required. Depending on operating results in the future, a release of a valuation allowance could occur within the next 12 months. The timing and amount of the valuation allowance release could vary based on the Company’s assessment of all available evidence.
LivaNova’s effective income tax rate for the three and nine months ended September 30, 2024 was 25.9% and 76.9%, respectively, compared to (268.4)% and 90.1% for the three and nine months ended September 30, 2023, respectively. The change in the effective tax rate for both the three and nine months ended September 30, 2024, compared to the prior year periods, was primarily attributable to changes in valuation allowances, year-over-year changes in income before tax in countries with varying statutory tax rates, and certain discrete tax items.
On July 11, 2023, the UK Act implemented the Pillar Two framework, providing a minimum effective tax rate of 15.0%, including both a multinational top-up tax and a domestic top-up tax for accounting periods beginning on or after December 31, 2023. The UK Act also included a transitional safe harbor election for accounting periods beginning on or before December 31, 2026. This minimum tax is treated as a period cost beginning in 2024 and has not had a material impact on the Company's consolidated results of operations for the current period. LivaNova will continue to monitor related guidance in the UK and other jurisdictions that impact LivaNova’s operations.
Liquidity and Capital Resources
Based on LivaNova’s current business plan, the Company believes that its sources of liquidity, which primarily consist of cash and cash equivalents, future cash generated from operations, and available borrowings under its revolving credit facility, will be sufficient to fund its uses of liquidity, primarily consisting of day-to-day operating expenses, working capital, capital expenditures, acquisition earn-outs, and debt service requirements over the twelve-month period beginning from the issuance
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date of this Report. From time to time, LivaNova may access debt and/or equity markets to optimize its capital structure, raise additional capital, or increase liquidity as necessary. LivaNova’s liquidity could be adversely affected by the factors affecting future operating results, including those referred to in “Part I, Item 1A. Risk Factors” in the 2023 Form 10-K, as well as “Note 6. Commitments and Contingencies” in the condensed consolidated financial statements in this Report.
LivaNova’s operating and working capital obligations primarily consist of liabilities arising from the normal course of business, including inventory supply contracts, the future settlement of derivative instruments, and future payments of operating leases, as well as contingent consideration arrangements resulting from acquisitions and obligations associated with legal and other accruals.
The following table presents selected financial information related to LivaNova’s liquidity (in thousands):
September 30, 2024December 31, 2023
Available Short-term Liquidity
Cash and cash equivalents$346,366 $266,504 
Availability under the 2021 First Lien Credit Agreement
225,000 125,000 
$571,366 $391,504 
Working Capital
Current assets$1,093,113 $988,158 
Current liabilities324,402 334,983 
$768,711 $653,175 
Debt Obligations
Current portion of long-term debt$21,253 $17,484 
Short-term unsecured borrowing arrangements698 627 
Current debt obligations21,951 18,111 
Long-term debt obligations604,287 568,543 
$626,238 $586,654 
On March 8, 2024, LivaNova and LivaNova USA entered into Incremental Facility Amendment No. 3, which provides for LivaNova USA to obtain revolving commitments in an aggregate principal amount of $225.0 million. For additional information, refer to “Note 5. Financing Arrangements” in the condensed consolidated financial statements in this Report.
On March 8, 2024, LivaNova issued $345.0 million aggregate principal amount of 2.50% notes due 2029. The 2029 Notes are senior unsecured obligations of the Company. In connection with pricing the 2029 Notes, the Company entered into privately-negotiated capped call transactions with certain financial institutions. The Company used part of the proceeds from the issuance of the 2029 Notes to repurchase $230.0 million aggregate principal amount of the 2025 Notes in privately-negotiated transactions for an aggregate cash repurchase consideration of $270.5 million. Contemporaneously with the 2025 Notes Repurchase Transaction, the Company and the financial institutions party to the 2025 Capped Calls agreed to terminate a portion of the 2025 Capped Calls in a notional amount corresponding to the amount of 2025 Notes repurchased. For additional information on LivaNova’s debt obligations and Capped Call Transactions, refer to “Note 3. Derivatives and Risk Management” and “Note 5. Financing Arrangements” in the condensed consolidated financial statements in this Report.
Cash Flows
The following table presents net cash, cash equivalents, and restricted cash provided by (used in) operating, investing, and financing activities and the net increase in the balance of cash, cash equivalents, and restricted cash (in thousands):
Nine Months Ended September 30,
 20242023
Operating activities$104,331 $20,956 
Investing activities(37,452)(28,193)
Financing activities21,995 26,502 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(170)(2,161)
Net increase in cash, cash equivalents, and restricted cash$88,704 $17,104 
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Operating Activities
Cash provided by operating activities during the nine months ended September 30, 2024 increased $83.4 million, compared to the same prior year period, primarily due to (i) an increase in net income adjusted for non-cash items of $61.3 million, (ii) an increase in customer collections, (iii) reduced cash outflows for inventories, and (iv) a decrease in 3T Heater-Cooler litigation settlement payments of $17.1 million.
Investing Activities
Cash used in investing activities during the nine months ended September 30, 2024 increased $9.3 million, compared to the same prior year period, primarily due to an increase in purchases of property, plant, and equipment of $14.6 million, primarily related to purchases and development of internal-use software, partially offset by a decrease in purchases of equity investments of $5.7 million.
Financing Activities
Cash provided by financing activities during the nine months ended September 30, 2024 decreased $4.5 million, compared to the same prior year period, primarily due to payment of the ALung contingent consideration arrangement of $13.8 million during the nine months ended September 30, 2024, partially offset by an increase in proceeds associated with net debt borrowings and repayments of $6.5 million.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
LivaNova is exposed to certain market risks as part of its ongoing business operations, including risks from foreign currency exchange rates, equity price risk, interest rate risks, and concentration of procurement suppliers that could adversely affect LivaNova’s consolidated financial position, results of operations, or cash flows. The Company manages these risks through regular operating and financing activities and, at certain times, derivative financial instruments. Quantitative and qualitative disclosures about these risks are included in this Report in “Part I, Item 1. Financial Statements, Note 3. Derivatives and Risk Management,” “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Part II, Item 1A. Risk Factors” and in LivaNova’s 2023 Form 10-K in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part I, Item 1A. Risk Factors.”
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
LivaNova maintains a system of disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. The disclosure controls and procedures are designed to ensure that information required to be disclosed in the Company’s reports filed under the Exchange Act is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to management, including LivaNova’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Applicable SEC rules require an evaluation of the effectiveness of the Company’s disclosure controls and procedures. LivaNova’s management, under the supervision and with the participation of its CEO and CFO, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the most recent fiscal quarter reported herein. Based on that evaluation, LivaNova’s CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2024.
Changes in Internal Control Over Financial Reporting
There have been no changes in LivaNova’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-5(f) under the Exchange Act) during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, LivaNova’s internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For a description of LivaNova’s material pending legal and regulatory proceedings and settlements, refer to “Note 6. Commitments and Contingencies” in the Company’s condensed consolidated financial statements included in this Report.
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ITEM 1A. RISK FACTORS
There have been no material changes in LivaNova’s risk factors from those disclosed in Part I, Item 1A of the Company’s 2023 Annual Report on Form 10-K and Part II, Item 1A of the Company’s 10-Q for the quarter ended March 31, 2024.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
During the three months ended September 30, 2024, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, terminated, or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Act).
Disclosure Pursuant to Section 13(r) of the Exchange Act of 1934
Section 13(r) of the Exchange Act requires issuers to disclose in quarterly reports, among other things, certain types of dealings with Iran and other entities, including transactions or dealings with government-owned entities, even when those activities are lawful and do not involve U.S. persons. Two of LivaNova’s non-U.S. subsidiaries currently sell medical devices, including cardiopulmonary and neuromodulation products, to distributors and a non-governmental organization in Iran to support patient care in that country. LivaNova has limited visibility into the identity of the customers of these distributors and non-governmental organizations in Iran. It is possible that their customers include entities, such as government-owned hospitals or sub-distributors that are owned or controlled directly or indirectly by the Iranian government. However, to the best of its knowledge at this time, LivaNova does not have any contracts or commercial arrangements with the Iranian government or other relevant entities.
LivaNova’s gross revenue and net profits attributable to the above-mentioned Iranian activities were $1.4 million and $0.7 million for the three months ended September 30, 2024, respectively, and $6.7 million and $3.3 million for the nine months ended September 30, 2024, respectively.
LivaNova believes its activities are consistent with applicable law, including U.S., UK, European Union, and other applicable sanctions laws, though such laws are complex and continue to evolve rapidly. The Company intends to continue its business in Iran.
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ITEM 6. EXHIBITS
The exhibits marked with the asterisk symbol (*) are filed or furnished (for example, in the case of Exhibit 32.1) with this Report. Exhibits marked with the cross symbol (†), if any, are management contracts or compensatory plans or arrangements filed pursuant to Item 601(b)(10)(iii) of Regulation S-K.
Exhibit
Number		Description
Trui Hebbelinck Settlement Agreement, dated September 7, 2024
Certification of the Chief Executive Officer of LivaNova PLC pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of the Chief Financial Officer of LivaNova PLC pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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, 2024 and 2023, (ii) the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2024 and 2023, (iii) the Condensed Consolidated Balance Sheet as of September 30, 2024 and December 31, 2023, (iv) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023, and (v) the Notes to the Condensed Consolidated Financial Statements
104*Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 LIVANOVA PLC
   
Date: October 30, 2024By:/s/ VLADIMIR MAKATSARIA
 Vladimir Makatsaria
  Chief Executive Officer
  (Principal Executive Officer)
 LIVANOVA PLC
   
Date: October 30, 2024By:/s/ ALEX SHVARTSBURG
 Alex Shvartsburg
  Chief Financial Officer
  (Principal Accounting and Financial Officer)
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