LIVN - Earnings call transcript Q2 2018

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Operator

Good day, ladies and gentlemen, and welcome to the LivaNova PLC Second Quarter 2018 Earnings Conference Call.

As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Matthew Dodds, LivaNova's Senior Vice President of Corporate Development.

Matthew Dodds

Thank you, Matthew, and welcome to our conference call and webcast discussing LivaNova's financial results for the second quarter of 2018.

Investors call our McDonald, Melissa Chief new President today's Officer; Chief Farina, on Vice Huston, Thad Financial of me are our Damien Executive our Joining Relations. Officer; and

to Just yesterday, as CFO our of new having America previously the region. her North Melissa served role promoted was

the the discussions most on report that in today's exhibit financial to forward-looking be filings will Reconciliations include I that an certain statements. non-GAAP SEC. current recent Before in most measures you can Form I the financial measures. X-K, found differ press this to Also is during LivaNova's GAAP cause like would release discussions begin, results filed that directly materially Factors today discussed comparable are call to company's remind the actual can with SEC. the to the will with include

presentation used now that call. other We our call With be should This have will [Technical Presentations that, and at I over is www.livanova.com. the Events, the today's call complementary presentation to posted to the Difficulty] under Damien. as points and of to News turn a website an materials summarizes

Damien McDonald

to and up then comments highlights additional my and while moving I'm their with of is earnings, this and wrap commercial comments, some to Thanks, with The growth from XXXX Coverage Medicare The provide after initial grew to We second letter saw and NCD. to TRD System CMS results the in our discuss quarterly response National Medicaid quarter review will a of At portfolios. new Neuromodulation centered and to and a underlying before or U.S. within formal which treatment-resistant the our to success growth significant reflect of Services color our the and for Centers you significant the conference our results strategy, depression. sales on that NCD by evidence making end for Therapy and about our Q&A. submitted reconsider VNS closing events. financials, a VNS its a the investments. and published Therapy of Surgery call. of requesting Determination tracking sheet sheet quarter this Matt. the for May, Welcome Cardiac its Thad the treatment. in R&D tracking reconsideration body requested role acceleration sales Starting I'll we've We provide on recent business, with emerged highlights after going

of Directors. reimbursement board treated the of and a brings is aortic period, heart Depression he His global we days the failed. to broad coming initial is This valve Dickinson. in forward with most to smaller extensive Becton, up than healthcare By look allows and result for pleased to M&A We X We XX months. the offers Ministry the spans system. are more with and have more Once technology The who patients disability process strategy Bill conclusion with June at worldwide more patient memorandum decision adequate a more years transseptal million the make later decision. systems announce and to board to option opportunity LivaNova and step, of XX,XXX heart our one end end June. that of a us that new couple to where Bill assure evaluated this evidence. years valve an We're therapy. June for career of is comprised is the to to XX-day large people public comment announced been encouraged tried replacement severe welcome as A valve. have Operating the a will patients than clinical first-in-human clinicians render Perceval XXXX, and Japan's is affects more Caisson's patients obtain study by access recently of to public which Officer and have four knowledge Japan. aortic TRD a provide of a We're Kozy to the Welfare we XX medical a transcatheter in study CMS comment contribution. XX, This were weeks, the to And and working the take replacement. worldwide product The to date, than sutureless mitral supported approach. To will expect important Perceval. during a experience that moderate help final He in taking can of closed Vice in valve Health, and we on will or On another that approved of comments sutureless Labor U.S. received the Board using of treat PRELUDE, that LivaNova, XX, the Perceval the development. and difference. PRELUDE area LivaNova mitral treatments XXX manufacturing, need global hopeful the XX-day that subset feasibility proposed high-unmet was our TMVR depression to a release of than it Chief President and industry occurs, of is CMS elected his we cause period. and agency February Executive regurgitation The at leading announced can currently or TMVR

INTERLUDE in study, in finalizing be with European Following and on and will by expected INTERLUDE the will PRELUDE centers the Mark CE the America conducted encouraging enrolling trial The completion outcomes FDA trial enrollment for XXXX. pivotal focus US North the protocol patient with [indiscernible]. patients the we from trial

June to to X update THNX want provide I Before sales announcement I trial. OSA an turn our the on our a regarding in pause clinical results, ImThera

the patients as stopped progress have to XXX will this of at we While generally originally continue trial, treat pleased clinical are enrollment with and we patients planned.

and titration the to level data throughout of we variation can the collection that process be improvements product existed that However, believe period. made the

a to intend trial. with we FDA protocol factors, the concernity a for these approach Given

to Total up up otherwise. on basis net the Surgery now will and net and That a were acquisition currency, results and basis. contributor these we second mentioned. the million Both an XXXX. strong versus the of were X.X% SX in Neuromodulation the million, continue increase growth Circulatory legacy and sales in heart-lung for turning the in replace of with Advanced our both the on second quarter, of due were constant the quarter excluding showed was to impact current So XXXX, unless XXXX. Percival Double-digit Cardiac valves TandemLife an to previously the is sales as the United manufacturing Cardiopulmonary sales TandemLife quarter of sales quarter to in the we termination X.X% stated $XXX States World indicated quarter, foreign and of our our or quarter be Cardiopulmonary, Cardiac contract agreement underlying SX currency of growth inclusion from Surgery growth of heart the in within the machine of second X.X% Support. device $XXX the the compared major XX.X% device. Rest sales

in decline mechanical offset second were Heart quarter valves. the of Perceval excess in traditional Turning the and grew $XX of a declines regions quarter, for in quarter Sales sales three X.X% the X%. XX% XX% business, all TandemLife of from million and valves versus to XXXX. valves, second our $X second captures grew Advanced recently and Circulatory tissue acquired in Support the sales. million, versus quarter the excluding heart impact, the representing terminated sales company's XXXX growth valve were contract manufacturing roughly Heart

builds expanding business for the full salesforce this momentum going our year as the grow to second half of XX% expect into the We year.

a early We in and and of of were of Thad $XXX an to business the So And million, region adoption during sizable XX% the the XXXX. decisions over second now of growth the approval success Sales additional of our saw in over first second versus this continues now, the momentum let's implants Neuromodulation sales financial in implants, end of SenTiva initial model change increase, for versus results. continued in countries. five driven U.S. a the of to turn the reimbursement I'll service by our the based our up in represented in saw quarter Rest generated Europe an Japan U.S., XX.X% record turn Neuromodulation. XX% in of launch call we improvement the Thad? In to quarter quarter. of SenTiva in overview growth and quarter. XX% World Neuromodulation delivered sales on year.

Thad Huston

Thank about quarter speak you, Damien. second financials discuss the in I'm to and going guidance. detail greater further

a versus was the represents increase of mix, of improvement partially drivers from in increase due point XXXX. equates XX.X% quarter sales EPS to the foreign the currency a As was This Damien in $XX XX.X%, each million was of basis XXXX. up our quarter in versus of XXXX, sales margin of driven was in sales R&D growth XX an by by primarily approximately quarter of XX.X% pricing region. in as basis of to quarter the second second second net point as million over in second second to Adjusted in XX XXX second Adjusted the growth the percentage gross quarter mentioned, margin expense all XX% X.X% The a headwind. quarter percent XXXX. quarter and $XX $X.XX offset prior accelerated net sales compared R&D of the strong to basis year. points in

the in in well second TandemLife, our operating but development the clinical $XXX $XX investments to margin drivers, go-to-market margins the expected of R&D basis XX.X%, from the of SG&A products last As reflects from number for drivers our versus and million in infrastructure. second and is epilepsy, offset DTC of a was TRD, operations XXXX. year, HLM, of was million in our investments net XX.X%, XXXX. markets strengthening XX.X% to a sleep gross building quarter foreign factors up including compared investments is $XX second future an we foreign as of XX and and trials currency. impact XXXX. expense from support of TMVR, in million in headwinds of heart down in due quarter organizational up capabilities quarter key in by discussed, exchange growth, investments apnea SG&A which continuing including XX.X% behind from operating last Adjusted points capabilities next-generation quarter previously The year, second in Adjusted growth a for first of percentage currency SenTiva the negative IT as increasing key XXX TandemLife $XX growth sales quarter compared activities as including operations in Adjusted emerging failure. clinical our from income and increase was quarter our million our was the improvement basis the second to points, including continuing and to

in XX% efforts from effective Our XXXX, changes second rate of the quarter was laws. tax XX.X%, improvement in ongoing adjusted U.K. the tax and result and U.S. tax a quarter in recent of an as the

an Finally, the adjusted in quarter compared continuing quarter second diluted from the $X.XX, EPS X.X% to increase of of was XXXX. operations

moving Now cash to flow.

Our XX, onetime for the integration the million. Reflecting division, for million, the cash from from was ended same at million XXXX. period payment operations the the months of $XX million, June from for XXXX, of and March Capital the restructuring months payment $XX $XX June XX, for the CRM $XX X for million Cash million at impact down million. operations, balance of XXXX. from and cash our spending XX $XX the the divestiture flow TandemLife was down was net from for X payments XXXX million $XX excluding of flow costs, $XX million proceeds $XXX was ImThera, $XXX of

at of XX. $XXX was as net $XXX down million from XX Our June March debt million,

guidance. XXXX to turning Now

May from sales currency XXXX X, $X.XX unchanged to which guidance and to includes X% diluted continuing remains provided operations the X% growth constant range from per $X.XX. share adjusted in on the Our earnings of of guidance

expected for current XXX I'll and Assuming to sales earnings some by growth turn points impact basis comments. the foreign per With back XXX to to share. to final is currency rates, negatively approximately Damien that, $X.XX call contribute

Damien McDonald

Thad. Thanks,

date. the with back half of into pleased turn year, ramp very our we results As the to the I'm

our towards growth earnings guidance sales end delivered the growth. upper have We and of solid

our generation starting depression, apnea gross strategic treatment-resistant product initiatives, discipline, to cost sleep in next market price for growth future, of to business commercial the in Surgery, Heart significant expect We through now products grow on XX% machine behind year drivers XX% also for the while is seeing trials expanding accelerate of our and failure. are progress we're above commitments valve and the margins to off value. expansion. and our our and our innovating strong and And half back our with in north surgical represents Cardiac of post-closing, system clinical now a good for forward growth VNS double-digit that, efficiencies, is on TMVR, replacement positive shareholder demand rates, you which look Neuromodulation, and ready momentum to heart-lung of continues in and over U.S. well sales. we TandemLife our our making In Perceval oxygenators. investments updating the portfolio start our SenTiva, Europe. funding our and to to continued In improving in We delivering we are Matthew, to heart include questions. we're mix drive see obstructive pipeline, planned

Operator

first of Your Wise comes Instructions] [Operator Stifel. question from Rick

Rick Wise

would you the you what range. guidance about and help assume in range. of a just second top the through the with end I reason lower think we that nice in quarter guidance. you but those first grew upper I versus half about of confident half step off or no the the think variables ex-FX, think if end of back starting up the just of Obviously, first, should Maybe that did fronts drive step particular feel, decelerate Again, multiple factors. the line more X.X%. I have doing there's on upper in those if through you'll would half. that assume just some growth second to the that us Maintaining X% overall. the basically guidance Maybe at doing X% us -- imply some half that X% I can second range, of upper math the a the the end, talk just year And X% sort for your right, first am frankly, to

Thad Huston

do and with where performance. we're very given definitely and comp very half how QX for pleased kind we're we and that progressing. pleased where about Rick, results is we have quarter-by-quarter, think the somewhat range. the the we difficult one this Thanks are due range, consider of HLMs. great I And the you with particular very a and, excited strong in again, and comfortable to as thing to we in first know, with comparisons we the very, And have, question. we're of the SenTiva in clearly, And this that vary momentum again, are feel But of

Rick Wise

factors where us growth mentioned we second some as that sustainable Turning And of Obviously, first. maybe second through better Maybe points. to couple Neuromod. about are talk of that, much quarter the in drove representing talk do think than the this Neuromod SenTiva growth? more rollout? you the us how a grow? you quarter through But Is it should

Damien McDonald

fabulous, Yes, look, again starting strategy and I in the just proved were those mean, really all regions. I not the think in U.S., that Europe read in Neuromod itself, and go-to-market to international results through the really

service end think new things we there, was So continued U.S., as the the I in kicked. the I is performance SenTiva, of units there first great. are about. growth EU were here, World half think I of growth We which it The improved the our saw of QX, really patient Rest In I think, SenTiva. More drove implants. well. than really continuing spoke And XX% versus to mentioned, that mix

so the to numbers been that. I think about the and overall, we're see single-digit And I that for continuing talking is think we've portfolio, high

Rick Wise

depression. one last one just And me treatment-resistant for on Great.

And favorable commercially? the maybe but how expand or ruling, to you talk will us of that timelines, you it reasonable the impact can and assuming on bottom-line, to favorable expanding, of couple As making, if particularly in XXXX. the we make? decision, done? you you you front. of you have needs hoping be really, CMS do kind quickly, wait like made, capitalize the we'll a again investments how 'XX, more sales you a What commercialization you're for When expect a quickly for if are will have a it's no force? Do points, and highlighted, going on to What -- in through terms assuming

Damien McDonald

from That there's take and of we the positive, Look, Look, was on comments there's of I Rick. lot XX-day things really a patient a before. we item gaining the We're set CMS is believe, the of the CMS the to the result. the the neurosurgeon us the lead the talked find We're bunch a available to on demand think understanding at same to leadership with a there. way that. that team question, really and you pent-up back comprehensive pathway, had for was a implanting this ENT, we whole in for make think And psychiatrist how to really really the to patients. hope U.S. continuing broad and little going is surgeon, largest on European single said to That's can a psychiatrist. this working then we're Having an wait bit time, more German move that, or a I taking have about which really

until the how German learning it? that's more less see to patients So we CMS. we're covered. from move meantime, with Did get we'll, the about pipeline. in In you think to where this through team or U.S., I the get we wait

a long the that learn then clearly understand not CMS. come we're to back ramp, So and conversation trying we're around, and we'll with waiting

Operator

from line with comes Our Raj next of Jefferies. Denhoy question the

Raj Denhoy

sense maybe particularly can recognized delayed How from follow-ups some got of second quarter first the that to was a then maybe quarter? much first United from ask procedures of on quarter. the in the the catch you if results could that up the and rebound say the of couple in VNS the during So What questions? the Rick's just I States, maybe the quarter, in

Damien McDonald

an to service, lot but Yes, really the catch sales would for up, of say wouldn't lot execution. a a as it we force wouldn't up. catch in of was characterize There sure I I uptick point end it’s

really some movement, a that it -- talked last minimum a from contract think it's in quarter, the about I mean, full contract. quarter, I a benefit saw was year we

the I'm about just read team, through. really it's of and pleased really focus again So U.S. their efforts continued that

Raj Denhoy

Okay, that And million little rollout the just quarter more be has own $X-ish What's in I ask a that's initial going the product? we better TandemLife fair. the can little been receptivity expect maybe that of than were now initial there? the a that helpful. Does can Maybe was detail probably will that How contribution a you forward? represent about expecting. been we case

Thad Huston

this I of is, Raj, we excited think the more about a even great look, think, and more that, we about the that business learn portfolio example management, really good I a opportunity. it, get

I engaged really we year to confident continue think start, target full the the some really highly The others growth for The engaged. again good time, that and the are about we're Pittsburgh. off highly to to spent a and sales team and We team's opportunity. expand went Damien up feel XX% out out the the as going back ramp is resource leadership team to business. support about and

Raj Denhoy

and other that of sort Okay, segues question. my to

over on the sort invest of that you we the going conditioned million the was So instance, an dollar here think How in the did short of SG&A the million over you've term? pretty in spending absolute the going as up expect investing to planning as think is SG&A, in and additional in still up us basis, in the quarter, higher term areas be higher absolute see for quarter, do $XXX or to significantly, XXX on tick you're Could near the things, R&D you but sort those I spending the level? spending on an again, about well. business numbers

Thad Huston

year the clearly should so a we're we're mean, a about growth There line grow. bit top addition, an confident but the very of in coming on this the that to to and with SG&A a rise. relatively expenses, FX I front kind the in phasing sales the level SG&A think it will expense of is, year the SG&A. through, the to back are had pleased And we deliver and is, about results think our remain range. investing for start flat that half we're sales would as full basically also the we I basis, guidance within very added of I XXX way at And absolute in Yes, performance, points the of, of of but dollar basis headwind half, overall, phasing

half, So you when not back we're expecting at look the that.

within So the I ranges. again, be believe we'll

Operator

Piper comes with line question from O'Brien next the Matthew of Our Jaffray.

Matthew O'Brien

put Just Neuromodulation finer the little commentary. of bit a on to point

question, since U.S., Damien, go, think, lot about opportunities especially that's of of clinicians layered talked in their you numbers I been I the this of provide the you've then the but capture of utilization those to detail on total the business, is growth of World. we there percentage trending? a bit business, some OUS are those a specific smaller where that far more course World how year? the Rest new think And Neuromod that are Can would top on physicians some as know the of of launch. as you've and that that, Rest and process regions? talk as eye-popping, about the new just in little about a able areas SenTiva you it's how of And strength, to you Can throughout

Damien McDonald

Matt. look, a things. trend Yes, great few there And

about, here. new important. is What come time physicians we've really normally remove has fact, there's -- talk number implanting is seen longer, things quickly, SenTiva but seen the on. we the two on of think think So has let's given -- our in That's I come I We've more unusual, that they the implanting new happening will a conversion physicians, which barriers. as been upgrade reasons is physicians

So technology, and the the age the making got then responsive it's MRI, indication. it smaller,

I barriers physicians. think has a it removed of for new number

been really to has So come the important which with that speed on us.

been greater group months. who've than physicians, back for other there's not of a people number the there's a as and VNS is people to And are returning these of have thing come SenTiva. XX of that think a I implanted result

that I other quarter-on-quarter. days, a is it's been think encouraged of still age by tracking things really two Look it's those early been So come continuing we've but the what metrics patient, average -- is some I pretty again, to which down have like think we're important.

still pleased a figures, So into patient year, in of have X,XXX talk let's have pool out of how new I'm the numbers. opportunity that's physician patients not implants enormous patient here, We leaned every about the an year. upside with really about that. getting the to team XXX,XXX a new U.S. DRE patient But round

So we just for see us do continue a as our upside activities. we tremendous go-to-market to

there's Now internationally, of look, would I number say a there. things

entity Japan, been and feet a in changed, put as we think direct teams and more Japan, street there upgraded. emphasis where on markets, Australia. Rest much changed I but Latin significantly have have the we've growth and The the Firstly, international and this combined the going of now, and it I shows a American Europe mean model And has on drive been of the World. we've to days, and particularly, now. number hybrid the business early in focus model

is it think cell. complex a is critical. This I

the with be that and physicians the it's alternative to do to in need hard structures. hand-in-hand You

has I started of results them I'm really is street through to putting the in we've there thrilled make teams lot tremendous. to a the So asked feet Europe and and international pull on and because think really for difference, see these a

Thad Huston

really for Damien And a Mark our growth think CE driver having as Europe. Neuromod in SenTiva addition we're said, key in is in globalizing for portfolio. I Europe And our really investing in

we're that So in And higher our time. many exciting is investing an go the direct one to it's of markets. is reasons SG&A

Damien McDonald

we the we growth. highlights Investor of opportunity the really as of want was to year, that's international a came growth one to where and said, focus of Neuromod, drive Day saw last our U.S., we the that from real And with revenue XX% on the of

Matthew O'Brien

all little bit reexamination better from follow-up get Rick's a of to We're And question TRD. it. Got CMS. then outcomes to on sense this potential on the trying by

another you the could coverage, of how when terms for we some that of was like have do there And coverage less now TMS in agency on put in invasive So had the variance depression? in it the plus then drug you VNS potential basically clearance VNS, think layer about Therapy. approaches back

is So just assuming provided some where that's year? sometime does the fit within VNS there treatment paradigm, that next coverage

Damien McDonald

the be coverage a allowing which coverage open think decision that, could coverage the is is they that so coverage could MEC-by-MEC with possibility. -- of end there other reverse national a still decision, decision. remains is a I options. or all up back is I that, look, into Yes, which or the And a which in the trial and clinical One sort to coming as a regional non-coverage XX a national on to completely There's reaffirm the pendulum, variations middle non-coverage, and get just the that, there's to a MECs regional ground get could of variations coverage, this evidence, it of registry. the

continue up to we're we've sure therapy to signaled interested we got them I And in we've that I them believe think great till with think needs. meet some incredible can patient with all of We've I we unmet really a working to CMS, make now. think answer the that questions. had interaction these tremendous

real four can -- to precedent so the So useful, decision. come is those like for handicap outcomes. no but particularly four the not as -- you we that I for that it more hopeful and are about think handicapping or to this, there's I'd less a expect positive love we're

think level there TMSs, and definitely And work. Nevertheless, X and is treatment an the there patient pathway. and learn I really occurred. In we treating why of terms the how discussion things I yes, see last to I sort UK intrigued do these One flow that and of clearly get work, I merit, which psychiatrists they've we when to is a us, that believe does got about convince the this was back, occurs we to earlier X and in of like this this. to is is treatment-resistant at huge, that other and discussion, market level enormous time with that's at wasn't look was approaches. is coverage, just again to demand, refractory, of this. to pent-up the couple clinic by a weeks of they is merit slightly of a really how had these for couple we this treatment-resistant opportunity the have the for we're of market what a about, And and of focus the you could this have quite is encouraged depression. trying of ramp the and the make the and I approaches, mean, market other do to in depression we've group where in think German me do no. payers There's that the what this absolutely accessible from ways patients, some seen make results --

So I'm something this desperately that really demand is pent-up just debilitating by patients. encouraged for for

Matthew O'Brien

one last are are get detail, to in in I the point? just doing starting to folks it appreciate to see a far SG&A clarity so on But this because mentioned. wait starting specifically sales place until But force or like Or put you bit you before Okay, me, you resource some it's you very of TRD, specifically reimbursement at going helpful. are Raj some little spike I TRD a resource be that? in and really to been put more all place for

Thad Huston

this TRD clearly around to point, investments more ramped have globally fully around haven't we we clarity some up made support also more but We've at scenarios data also decision. registries preparing both CMS's until and in really

Damien McDonald

the force, force we sales specifically U.S. hiring about sales haven't started but Yes, in

Operator

line Company. the Mike Matson of question comes Needham next with from Our &

Mike Matson

in issue approval around could start you mentioned. timing ImThera wanted trial if a the with provide Wondering U.S. for little that, bit that Just means that detail you for more and potential the of it what to the

Damien McDonald

they things about into glad design. improvements what's going to diligence, a going were when we were to make getting on Yes, And we titration there and And really learned in learn to we with that you improvements to period. to the process, bought improvements product, make to that We went. asset we what felt we we've trial look, that. the as do with thanks, were we the product, needed I'm as knew make fundraising needed we've was needed the raise

what these are best really look approval the think to cohort common in allow that, benefits does the we implemented reimbursement conditions. under really And and thought set a we one probably so the patient And and of do way optimize new enrollment we the of that the will at process. patients, us and

way this looking really think asset. of I this is a So at prudent

fixing like deep pretty really at You a taken this. know look things, we we've

PMA in 'XX, 'XX. terms of early submission original timeline, So our was late

I timeline. think that what you XX to is at least months do add

Mike Matson

helpful. that's enrollment CE then the the XXXX. [Technical just product to and finalizing Good, trial by the pipeline pivotal other And Difficulty] mentioned Mark ask about also wanted completing U.S. Okay.

that of guess, start time I or that, assume CE do with the expect you Difficulty]. to you expect to sort clarify when actually potentially, do I trial when a get what [Technical you -- and you So can Mark expect do

Damien McDonald

it on Caisson up team able I in additional pause Having to completion. think so the a on the that which well bring we we Yes, a has why done this were had size earlier of really really job. The PRELUDE little helped set back half has with great us is for trial. the enrollment,

then So been training in these I in has I out really European but were what think few now the are PRELUDE team -- XXXX development really Mark. guys way Minneapolis up U.S. progressing we we about not where or of And assuming And they sites, on procedure on But weeks what impressive. happened only XXXX and a in therapy the for really on we learned, INTERLUDE focus built and back, it's like this excited here how depending development. their really we're are CE in are XXXX. completion the the the year, and

Mike Matson

final approved you in launch Perceval growth just there? given then question in acceleration gets so that is that can you material Japan, on the -- enough an And Perceval's

Damien McDonald

past Perceval mean, first north look, is thing I growing of the in more been XX%, in the little the we've transparency there. Yes, a oblique

we're growth So hopefully, the that see little And Japan a as a of we declarative solid means. double-digit everyone do likes fact what more accelerant.

get we First, to have reimbursement. through

then going get same the to at more a It's some great we're So time, put after reimbursement to the down, street Japanese we that and opportunity. sure authority with locked make can this. get to feet growth on work the that

accelerate. So expect I would Perceval to

Operator

[Operator Berenberg. from Scott Instructions] with comes next line Our Bardo of the question

Scott Bardo

margin strong despite the in gross quarter appreciate robust I second progress pretty had machines. quarter quarter and bps and heart-lung relates this gross So the question second but you've gross in Neuromod, bps had quarter, the margin I margin. mix very first XXX in effects you which some progress this think the first to from were please, XX

So I wonder if there's any particular negative effects.

think That's was other please. quarter? your question, first in progression margin second worse effects even I limiting the currency related gross business the Were first quarter. in any there negative

outlined, growth we than cardiopulmonary you the question, upgrade Where machine on of which business. question Last of million plans end another the Can that is confirm -- please. us actually I another up accelerate that status relates you With you oxygenator just this to a to heart-lung follow-up, a this are or that the initially give initially expected our give XXX respect have may the where sustainable than now to then more ImThera the are to driver that? and be Second well, I the payout payments cycle? can think one progress update with business, full sum. less delay, earn-out you and I'll the paying

Thad Huston

take me gross as margin. first well. a could the probably I the on bit also earn-out Let comment

all gross the with pleased of extremely on progress. First we're margin,

very know, overall focused improving regionally sales have First drive on the also all, and profitable to both pricing portfolio, you as in trying we more of been sales. of our mix discipline,

be margin going lower cost factor in though, do out, on higher the than to to When us our headwinds lot And There a going quarter-on-quarter. at also quarter-by-quarter of trending issues you gross starting point look it currency improvements our plant see in in World overall was And QX, QX less the end QX. you in given discipline of we've had rightly towards of that We and should the forward. the had we're that we as for seen high QX, And so definitely pricing currency range, headwinds typically Rest grow absorption see in of due that. like growth. holidays QX level slightly a at business a Europe. we things we're and

mix of, Rest is lower kind So of, to the bit me than of changes margin regional World gross U.S. as the a

Damien McDonald

Although improving.

Thad Huston

improving, the it's over last significantly But year. improved

promised We're on will Day we that year, to improvement think, I track So we year. basis continue. and points Investor and see per would at do that communicate of that clearly this think XXX we that, very again,

Damien McDonald

you me Do do [indiscernible]? want to

Thad Huston

you Sure, do.

Damien McDonald

step. heart-lung oxy ramp focus asked the And on on ago, business as I'm is that to We critical quite given our phenomenal. needs really years, done. the we about XX more done, the selling pressing you again pipeline, and and critical has what was what the something the of CP one getting pleased first, XX into the Again, is heart-lung Investor that the team which the that cycle up were has to people that talked customer which was what for new first saw on And related XX here tremendous long, to Look, base they've consider shoring really to we months machines. machine Day, was ramp. where we been

on a is in really leaned investment effort now people period again, In but longer it's seeing days. put big and And see accounts. We're to and XX process recent and some account just some we've And long talked processes. the U.S. place on oxygenator. That come really to management wins the with really bit is long that and funnel tender anticipated, the runway really continuing on that we thing next to market, conversion. in into early it's I that. different machine, heart-lung a pipeline portfolio tender The focus have so And we've the about what is people putting What the kicking essentially in leaned management. asked way early read we're in we're account we've approach, place is simplification, was product. months with a international putting And through. The still for in we're to management same some very And trial into we focus see at think the in Europe that for into a both Europe. It's this, slightly that U.S. on nevertheless, international starting than driven. off better do team candid the that which by U.S.,

a think that and the sales then heart-lung I in to we rhythm right go, can and tail, it's going how So only We say expect it up with way And have one the coming in you early long days here organization ramp. I really throw did got second. think picked a in there's pleased first as can and that oxygenators at into oxygenators, we're see to much you leaned you people so because it.

Thad Huston

the ImThera, earn-outs then clearly, sales levels. related to And on the are

level sales are to of So then of obviously the course if tied that. earn-outs change,

Scott Bardo

for me. last just question Damien,

in respect I understand, Investor opportunity. But with think I confirm as you well. can scenario outlined your your just Day, Just analyses appreciate doing a guys treatment-resistant also you to then depression, potential to And depression treatment-resistant must you that as the be evidence XX% so. from of do coverage for would your targets you targets captivate event those CMS to evidence coverage where a are with they to a get then you Or with of acceleration X% that scenario recommendation or -- expect TRD? some Neuromodulation

Thad Huston

at beyond coverage you that we had evidence, accelerate if would Day. what had highlighted Investor with Yes, -- look we if

Operator

we question Canaccord Genuity. from a And with have Mills Jason

Jason Mills

with all fitting question you TRD But go I to talking previous continuum, appreciate, and if. treatment see to to about in in wanted respect hear going clinicians within back hypotheticals I Europe talking of we're back it��s gratifying how TRD, sort that here. Damien, a that not and are the when to to

business fit are were better, ranges within lower comfortably established require sort infrastructure and the or obviously, would this would still all range for scheme a ranges there of to pricing work to be do Just but you your the curious and be would hypotheticals, its working -- about your of the works they're through good the Can that same perhaps -- outcomes models, initially as higher see you gross are you a again you down its Within does levels reimbursement see path at to comes seems this. it need in sort previous a growth to appreciating that to this some conclusion, for reimbursement CMS of trying that toward like than we're ultimately on obviously potential there provide talking and expect there? you. speak or do provide margin for on

Damien McDonald

too Look, know this we said on we to Houston. I'd in love I CMS. it's really to for come how really to probably have to just to, team wait device I a competent and handicapping speculate, Having make Honestly, that, CMS. early have back could we us and think

in this to going existing So scaling infrastructure our simple. be relatively is

we think have we that to within up the meet demand. infrastructure So could any we ramp

here. going additional we're So costs really ramp to be to not adding manufacturing

any terms the early it's specificity. in of that really with into line but to -- get pricing, top So too

Jason Mills

enough. Fair Okay.

recent would characterize specifically as world originally they in very market. is does to level seem what it, that the so ask you? period fit you you what of good Do really a talked it for comments, have the the at analysis the different would way. what that and around it of clinical lack saw model better you've VNS evidence still standpoint, you've way and that large to for about, we question and put payers and that, get the -- seen in your study this look me the could a within of and over to trials there Let get I a represent the the your exposure data -- era Europe apprehensive from that scared most a that opportunity about, in you've sense sense very, therapy TRD. CMS they're of and are to, in that's the juxtaposed non-coverage, the you done the as for place about why you or and a Do reimbursement public seem country that's rightly a you to you asked well that for Based -- on is the

Damien McDonald

medical it a I XXX of patient look, significant [indiscernible] a And drugs, pretty benefit from therapy, health The rate very here response significant And, really discussions the is TRD. cohort is that the extraordinary. and you all and how We back really package up really the discussions systems, talk cohort XX%. is total XX% to people. you've it trial, that how rate economics of to the discussion the is incapacitates for its it debilitating look the if believe have for size but really a TRD years is, in XX% because health this to about was the isolation, impossible costs. to X the how quite some health incompletely It's the total trial remission pivotal mean a you consider our VNS have the it failed seem number, like X-plus a really might into in when again, Therapy around of getting at large without health at to available centered number, only make terms scary shown got system, care XX%. was study, cost look you shift centered When on device. which go Okay, from think I

Thad Huston

the of cost suicidal is treatment-resistant high depression. very Yes,

Damien McDonald

lot but a far. and think such of that we not crafted what fact and so the reaction has really that's the solid remission, the And I response, in payers just data, from have Yes. psychiatrists

step believe So really we we positive is help by again, healthcare for go systems. this, people a how you understand but with this effect really can step the

Jason Mills

commentary. helpful that's Okay,

do you productivity you. the portfolio question put Damien that you've forward expect management for to Thad barring Lastly, obviously, team other there is, about model and respect is are things X and or question your should out that it your potential a maybe over other a acquire, the elsewhere. to and the you Talk course with CRM suppose much better have portfolio done would see what The divestiture. see we the lot, quite that capacity management, fit to and is And look is X years, of business. about you the about change that next, you the could that's materially businesses as of what opportunities call your I as would it, that

Thad Huston

about company We low to is in, about from And portfolio year company or a let's great it year today. truly focus. have say, we've announced It's this that growth management. transformed X.X single-digit results the really

on acquiring a has so a trajectory us CRM, three those businesses growth. little year, totally different in over proceeds, And for put taking really divesting other

that can of ideally globally and We're invest is investing profitable accretive are want for to where behind have great And TandemLife that and them. near-term so do. revenue, those. a example we expand we looking things slightly we're deals around that

areas leverage about market And on and portfolio and point at upon can or would board our are, and bringing number we are we take deals, I TandemLife look the technologies given size that other insights, so to excited complementary and the that different where looking say, know really I'm do we We're super either a and call to his of potential. going Matt we scale up. to that or tuck-in the certainly existing could the that

can't say quarter, more I us. clearly see should but from So coming by you

Damien McDonald

I mean, the debt. And there. no capacity almost is

Thad Huston

focused position. Yes, exactly. very we're improving And on cash our

the and that this And able high-growth we CRM divest so same the time, were and have from a essentially room to get that's acquire even another that things, just the we're asset, we more business, you quarter at past focus business area. that going shows to more but fact in to proceeds do to continue

Operator

further I'll are back you. no call There to the questions. over turn

Damien McDonald

Matthew. much for evening, thanks great this Okay, prepared, appreciate we'll the joining afternoon, the thanks next forward very today. always, really And morning us we to being you. look questions. Again, Cheers. this us and as this everyone you're the well and call Thanks with for Look, everyone with for attention.

Operator

This concludes call. today's conference

You disconnect. may now

LivaNova (LIVN) 4 Aug 182018 Q2 Earnings call transcript