LIVN - Earnings call transcript Q4 2018

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Operator

Good day, ladies and gentlemen, and welcome to the LivaNova PLC Fourth Quarter and Full Year 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions].

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

Matthew Dodds

Thank you, fourth discussing LivaNova's year Leandra, and financial call and XXXX. results welcome to for the quarter full our and conference webcast

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

Reconciliations will to could would like We in measures that most forward-looking the available the today's certain is in materially discussions this the call be our website. to measures. that directly website. cause discussed to discussions undertake include that SEC, found release Factors results you I include statement. the GAAP remind comparable do to is can today's begin, the statements. most we recent financial Also, differ available any update documents press Before are filings including will actual our on forward-looking furnish release during financial on company's not press and non-GAAP to

our tool. is be posted points This call. We have other today's of enhanced presentation presentation the summarizes website to an communication as materials a and that used call the should complementary also to

website, the www.investor.livanova.com. You Investor Events, and over presentation Damien. will call release to that, and of now our can I find at press under With Relations the in News section Presentations turn the

Damien McDonald

transformative LivaNova to quarter for full call. and a welcome was year fourth Well, our conference Matt. our year portfolio. Thanks, This and XXXX

our Then integrated and we self-growth, additional I'll our year margins, before updates guidance. reflects by R&D ImThera closing our In and full with filings provide this TandemLife. on Form success with sales to from addition recent comments highlights further XX-K acquisitions. And gross then the comments, my we our of will The quarter going and CRM business, moving some business. you our on also completed to results the Thad and the expanded color after growth the to on achieve discuss wrap acquisitions our pipeline closing and XXXX increased sale up Q&A. as of the fuel strong strategy the results provide I'm financials,

recent with finalized and for for or On of TRD. Determination National use the the CMS February its Therapy Coverage XX, VNS treatment-resistant starting So highlights. events depression quarterly

We include meaningfully are that with pleased to CMS the expanded beneficiaries see disorder. potential to bipolar patients

questions with In to of both to guide the CMS measure. ill by of treatment current study. in of expanded include XXXX. projection shared a quarter the to very population this that research benefit as of preference us addition, to its clinicians. primary provides now response working CMS patient finalize a much to This outcome We're And details is and begin enrollment third better

thank to and decision. the year. on to from size the forward CMS for a This patients debilitating in has treatment like outcomes We'd be this study alternative. Perceval their step the regulatory and of severely received disease positive the consideration beginning XX and with of to this important all input clinical monumental since approximately enrollment take is months. XXX two reaching have front stakeholders expect We patients the to for careful potential a

access disease. physicians First, and and Japan's biological Labor national to heartfelt. have Health, to favorable Japan's reimbursement we XX announced versatile to granted aortic treat insurance system, for Ministry February this health on Welfare that valve Perceval adding of patients By greater Perceval

and safety that to valve Perceval on support new announced we the valve in use February information added and we the Second, procedures. to for XX instructions U.S. technical

to ANTHEM-HFrEF continue in we trial. make progress Next, pivotal good the

based and number activate via adaptive North and therapy arms. on control highly in you total autonomic subjects being design, randomized Europe it VNS. Beside are recall, System As patients the FDA. to delivers the may is is study encouraged which The that America, the enrolled and therapy an by VITARIA to evaluating was of regulation randomized

term the in Cardiology that posters of this should will three longer on presented American pilot New upcoming addresses These follow-up additional original approach be addition, the College at In ANTHEM need will the durability March Orleans regarding in therapeutic large therapy provide insight XX. insights additional on promising meeting a and study new data include unmet a from of that healthcare. provide posters

obstructive TMVR, apnea, experienced for on FDA Turning with we a our regarding we events patients. the study THM And treatment to the and obstructive adverse serious interlude discussions to system the stopped in XXXX. expect start recently confirmatory Transcatheter design after trial Valve Replacement this of of sleep or remain sleep the apnea for trial in Mitral into

of expectation is Our modification, current half determined in enrollment the system our anchor of has cause design to that XXXX. and analysis first require root trial the restart will

strength modestly And In in driven recorded sales business while the growth and grew sales by quarter, inclusion circulatory quarter, and of million advanced conversions and Autotransfusion strong Cardiovascular the to several double in in to the strength for full in the in net on fourth and international back our were half that an we this of of fourth be declined low increase also support. now $XXX competitive net X.X% lumpy XXXX. results X.X% quarter for constant stated basis. which can from Total sales Turning quarter, seeing machine the of growth to driven the markets. by we're quarter in by the a all set cardiopulmonary the business in XXXX. digits, competitive placements. both fourth million, sales, year. Heart-lung the the Cardiopulmonary showed this of oxygenator a year currency sales were the should trends quarter sales as the a conversions growth compared the bit of robust up in for mid-single X.X%, Neuromodulation we Cardiovascular digit in quarter but in due our XXXX. our fourth solid SX business versus up up $XXX U.S., the XXXX, double digits, low grew were

Heart quarter, Valves. in fourth the were XXXX. Valves the million $XX for decline Turning the Sales XX.X% of a versus quarter of Heart

[ph] X.X%. sales offset declined the mid-single single pleased the the recently of We and declined Excluding overall sales. representing of to sales unfavorable business. excess reflects XX% were contract fourth TandemLife growth Support in strength saw million across U.S. The Europe Circulatory board in OEM the acquired by high the the than in was Perceval very the greater quarter international impact growth business $X see digits quarter and versus in our Japan in fourth especially protective termination, category. of Advanced and digits XXXX.

continued an than Latin the a driven Rest adoption the of call increase XX% performance and China, over Thad overview fourth implants, financial on region adoption quarter for Neuromodulation. strong Europe uptake adoption U.S., of million, based and last and with Japan delivered XX% our comparisons in greater the of Thad? continues generating of of EU increased of sales $XXX I'm turn SenTiva quarter. represented the SenTiva U.S. our SenTiva, implants XX% growth generated the results. Nordics strong both. our of America. performance turn now launched was were more April. a by We In saw now XX% the up initial XXXX. growth fourth World in let's sales challenging now of despite So Sales growth, strong to to is than in Italy. end-of-service and by sales XX% U.K., similar which XX.X% driven in the versus in for sales in

Thad Huston

this that you, fourth some occurred Damien. and guidance the going accounting our through items I'm detail, Thank discuss provide in greater to quarter. walk financials quarter XXXX initial

As of by Damian the in $XX in The to fourth driven quarter sales mentioned, the - sales million a Neuromodulation, quarter sorry growth of points versus margin And the net expense by net up quarter Investor improvement XXX Adjusted XXXX. fourth goal quarter basis XXXX, versus - of XX.X% was was and HLMs our digit of led double sales growth for in a the quarter XXXX the the in was in in percent margin of the fourth up points Adjusted of year fourth of XXXX. per million percentage was fourth full XXXX XX.X%, the Day and quarter the basis margin R&D price XX%, versus fourth points oxygenators. XX.X% X.X% R&D mix. of the XXX gross basis XXXX. from $XX was quarter fourth of XXX as was gross as XXXX, for compared quarter primarily year.

TRD, generation TMVR, heart As next sleep we previously clinical in and development discussed, and SenTiva R&D is with increasing products trials including apnea behind TandemLife, investments strategic along failure. and the of HLM,

U.S. Adjusted key to expense For of percentage of million which and and epilepsy, capabilities operating partially was Adjusted is XXXX. drivers in million last markets. $XX R&D. margin, of fourth from income the fourth versus operating continuing support This reflects million $XXX XX.X%, prior points million versus organization $XXX points quarter the net margin continuing fourth DTC to our investments XXX compared was investments XX basis an and commercial sales. in in of was of campaign $XX XX.X%. year expense million, quarter SG&A in for by XXXX, a from improved basis advanced XX.X% operations Adjusted strengthening up up for was net to XXXX compared fourth quarter the year, due the growth year operations circulatory XX.X% largely SG&A offset in sequentially. representing sales our in gross improvement full in X to international commercial the quarter $XX as increase R&D the

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

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

XXXX, to year year was the adjusted prior For compared $X.XX, the EPS X.X% increase full of period. diluted an

to cash flow. Now moving

and $XXX.X versus costs Our ended the one the million million for for excluding was from operations flow million. the to cash $XX year payments from December $XXX $XX full XXXX million, time prior XX% for Cash year. compared up full XXXX. integration was flow for was restructuring XX, spending year operations, Capital year

from $XX XX, XXXX. down Our cash December XXXX balance million, December at at XX, million $XX was

at net end M&A end repurchases. was $XX share $XXX Our million debt at year the from up year and the impacted XXXX, million, by of

additional Heater-Cooler, company's a because we to in does quarter future of cash is liquidity which Sanpaolo to globally. a sufficient BNP Paribas information provision the debt as in enough million there the and Damian Barclays, a outstanding financing million release, I'd Lynch, Merrill XXXX, increase and us payments Intesa identified expanding established the $XXX legal received was have related any provide global facility there to a the recovery for We $XXX related carving our capacity our insurance items believe SAP reflect business and accounting our pretax debt In reserve. aggregate a platform America from commitments claims. reserve discuss. accounting significant made and Bank not to these involving fourth In to we We of XXXX, other the about address claims estimate to that address like some now press quarter. As provision. XT items important mentioned, are now out were this this to complexity CRM noted litigation few for

of in As two internal design a the to result, report expect and weaknesses. we controls material we identified two deficiencies two

the resulting First, and intended to at we financial levels. end-user to a both access system technology controls potential the related our inappropriate in deficiency restrict design to identified primary access information

to billing and of process identify This we billing primary of system. deficiency review issue the related the price the to to the access financial our related quantity Second, processes. linked deficiency is in

file form the in XXb-XX we we that And the XX-K. have for Form are material XX-K Securities a our respects. accurate financial with extension statements No calendar Commission Exchange been to and and our identified material to providing believe expiration for We the a file also consolidated day of extension. expect the expect prior Form to all XX misstatements

- have initiated of performing our deficiencies our identified we controls. a in and efforts IT the comprehensive application, were the IT remediation improve order review control were reporting which provide financial We to

design controls the the to billing prevent and process enhancing of errors. are possibility we addition, the price over quantity In

in remediation complete to XXXX. is objective Our

Now XXXX guidance. turning to

the opportunity guidance. overall provide XXXX TRD First, on I'll and discuss detail then

comments, heard our refined Damien's As in you for pathway patients. for obtaining we CMS expectations on the have coverage reimbursement TRD

range the and Given engagement, the replacements, of XXXX. the to $X in private to and the TRD expect of from be clinical in revenue payer million half $XX timing start million studies for build second of infrastructure we our

clinical our While replacement pay VNS the CMS study using to has agreed Systems for implants. for and Therapy

We study such electronic clinical will incur the CRO, core as lab capture, additional management, data R&D costs and psychiatric for headcount. additional

therapeutic be private $X.XX device professional spend expect TRD market to our sales consultants, will include initiative Our engagement payers and and and field and Overall, or initial expectation per to is marketing will in assistant and approximately based programs XXXX. geared access is towards generate patient our education. $XX we replacement specialist, XXXX. less are to In will that share XXXX, to million diluted per million we share of earnings diluted impacts $X.XX compared earnings to $XX be sales current the

Given million believe initial modest our $XXX epilepsy this success a market in investment is opportunity. given the franchise, creating in we TRD

overall to and constant low X%. between revenue currency growth OEM X% range. sales having be full by adjusted to sales of terms in additional quarter margin gross basis range. closing to we and April added represented In in a XXXX, to the deal In unchanged, one XX.X% XXXX from SG&A impact of distribution of on remain $XX an rates projected includes to to each noted, with guidance of TandemLife in guidance, XXXX impacted points are R&D company in in range Adjusted XX a current agreement the sales, prior exiting margin XXXX. XX% Also XX% sales this expect of is XX% negatively XXXX, range in TRD of of the sales forecasting basis. X% be and be year that in the the to If exchange be XX.X% the guidance million XX% will Canada of we adjusted to in

to And XXXX result are in we rate a XX% to a tax of XX%. operating operations factors, XX% are be As the for range to adjusted XXXX continuing from be of XX% margin to effective these range. in projecting adjusted

We the from are share projecting $X.XX of operations account disclose negative to impact of $X.XX to currency, continuing to We previous includes the million. $X.XX for range $X.XX TRD. transition share count to be $X.XX, assume XX.X which impact to diluted the earnings from cent our the be negligible a per in OEM and aforementioned adjusted from approximately in $X.XX to Canada impact foreign

quarterly in particular, evenly guidance, the In While more our we quarter and provide historically softest first basis quarters, third don't our earnings the out. generally quarter. lower our expenses are first sales spread is

financial and some I'll well of range capabilities and and a commitments we financial our turn on to the are exciting $XX while and portfolio, is to flow payments growth, $XXX to capital million integration, product be investing restructuring and operations to future global accelerating in a call $XX and a Our the amortization XT position $XX be projected The million. of remediation million XXXX, the restructuring, Capital excluding us million. adjusted integration $XXX spending payments product in $XX range million. are building to range projected to by for product a working be that to $XX strong million. perspective, from From comments. our is This delivering for litigation cash an improving of Damien bright liability. for remediation between final XXXX. With depreciation expected expected be in to million back $XX addressing And expenses million and

Damien McDonald

Thanks, delivered with kick the U.S. ready we our XXXX value. the and next a pump. on benefit our drivers in. generation making to we're disciplined upper progress in that the approval next include sleep apnea increased should of improving And XXXX. and and TMVR. in product continue oxygenators continued a to fronts continue significant improve shareholder our and and forward our above expanding the to TandemLife products, updating guidance, and In demand we SenTiva sales and strategic upgrades look see margins, our in for DTC of end In on drive number of expansion you heart the growth very gross Thad. pipeline, Cardiovascular, start machines in Europe Therapy great their which commitments see We Leandra, in drive benefits our TRD to our and and growth initiatives, is our and efficiencies. funding to both of future, in VNS We encouraged portfolio heart-lung innovating for studies from and SX portfolio. of obstructive campaign Neuromodulation, while begin commercial questions. repricing on should cardiopulmonary failure, other progress products generation cost off our System delivering also growth for We're by mix investments I'm to

Operator

Instructions] from question [Operator Stifel. line with And Wise Rick comes first the your of

is line open. Your

Rick Wise

Damien. morning, morning, Good Good Thad.

Damien McDonald

Hi, Rick.

Thad Huston

Good morning.

Rick Wise

you get Maybe word, just us start any color of of Can how thoughts timing XX off to underway third that many us U.S., quarter. next and enrollment your XX about with some want the on little on you and focus decision as in hoping you're you more mix the of centers the you'd the big to better know, level TRD just a terms roughest over And that any indicate give trial. in even metrics to at us at OUS months? the the to sense

Damien McDonald

Rick. TRD. for Thanks, sure. We're Yeah, this news really thrilled about

a then about we with You timeline, for only this campaign think know patients, protocol know studies out, the got that's, you if legacy people. CMS then think agreements the be for to the know, panning the process about the the of to going XXX know, is with negotiate through the begin opportunity them know, with just of And clinics excited and the U.S. IRB it's you study And we And, you is one going know, but finalize at the start, to discussions three been enrolling. patients. we've way months, team various you this look know, you plus and you you the trial all us, XX a not we you in centers, are lot for

we've done way whole up kicking of discipline, phenomenal living accounts off identified, and know, over discussions in the job building system team before leads So the to we've have a all of the we're you had you QX. going know, the track this, business the the we've that about to talked us And, already.

this we up like is us. for So what opening really

Rick Wise

questions, on. epilepsy I'll more color Maybe on move the campaign DTC give other two then just side. the And on a little us

is know do a talking the to benefits kick you the why it said again just last from you're with in, you You hope of one And those are see benefits question. hope What a comprehensive to you see about? you doing now?

back and a you after redesign little mitral you more talk and much. issues this get could program about confident how this Thanks you can track? valve If so are the get bit on

Damien McDonald

Rick. thanks Yeah,

The So for epilepsy. And about of with you therapy treatment we know, talking start to then you the think, in and for second of and to DTC, patient off half awareness, and web this the engagement. we the responsive definitely the about seeing And us also one testing. director we've creating started paradigm epilepsy. an for an the position clearly metrics campaign. DTC point significantly. is in is the the the as We demand We know, very is the create awareness VNS it's whole were year. way. that increase doing DTC know whole opportunity in of been this and think We We're issues of definitely ramps tracking physician started some

bright generation And can and conversion down ramp up lead the off. you and therapy. really quite some spots on fascinating. turn You and we it we've on know, It's to metrics seen see, when

So for awareness. is about us, this creating

we've in into the press a this did understood stop valve one about - the anchor. you it, And and the to the why within anchor decided system, the the physicians for pause. a yeah, the because the you we've of We trials And our around it. it's of participate And take you trial, things in patients know, XXXX. campaign issues we why a issue into early On, in You And way the but and know design as while the process, where what know, about patients pilot with significant And do that's families trial the and back decided QX. enrolling is saw approached from think itself, that being turn we design in in responsibility run a not patients. bumps result into through our is the the and to where. to carers, to to that of this back [indiscernible] it adverse development we're lot reboot leaned very We and whole to that's that to modification definitely get who one is confident seriously. program events going we team two do go we we've and a with the at of into start this the so we worked IRB getting XXXX. the in can XXXX. They prototype stage in

Rick Wise

much. very you Thank

Damien McDonald

you. me. Excuse Thank

Operator

from Jefferies. with comes question of the Raj line Next Denhoy

Your line open. is

Raj Denhoy

Hi, good morning.

Damien McDonald

Hey Raj. How are you?

Raj Denhoy

few more could I'm couple Hey, I progress I seeing on thanks. months. maybe things. pretty good, a in depression congratulations curious progress you on the are ask the wonder few if and about the a last

at take how more required So that how you points you out? think we the their are provided you to you look end be maybe in around before just look point? it Will the look, that CMS how to at about patients response just going that get can can to bit is can interim offer quickly play data thoughts ruling, a will the important many any do think really be that

Melissa Farina

at studies. is and all this approximately work is Raj, endpoints looking the it at will XXX the be Melissa. The patients of study Hey

secondary at time. that endpoints and the be primary of So evaluated will study

Raj Denhoy

Okay.

- to So showing be need some efficacy and will it that both those on at will endpoints of both response need sort remission point?

Melissa Farina

on movement a so the predicated longitudinal I endpoints. secondary to the Yes, study isn't think

Raj Denhoy

low Okay, off? active other to understood. receives even the stimulation control the going sham, will the be whether entirely is or around And will and in level an patients then the it's question group, device be control

Melissa Farina

clinician to at this off stimulation. will the on you sub-therapeutic leave up So the whether a final or decision be that did or know device to

Raj Denhoy

being is negotiated. that or not you've which that decided yet And will be still

Melissa Farina

during device Yeah, off trial. will the the be likely

Raj Denhoy

then… enough. Fair And Okay.

Melissa Farina

The final protocol.

Raj Denhoy

trial a trial with timeline what year. that you will start Okay. to ask finalizing look sleep like? that Any apnea that the question updates expects you're this just on and the mentioned then and Great. wanted on, to And you FDA design ImThera, the

Damien McDonald

clear. over last when talked rather Yeah, things the that months. protocol went of the issues of the sort we've said very we a the than the around of a the trial, in THNX trial is And stability bunch four what cohort done of titration, one about into with the three, we definite were that very the THNX different in response. last and change work coming patients took types We algorithm for

So, had using with FDA confirmatory them doing up trial we've the going starting the about We're of doing study and back that a patients cohort in discussions XXXX. a wrapping small with in at and and design. March going look to meet

Raj Denhoy

When guess so really technology? you you of small to evidence the cohort, provide could think curious just that say a I that approval support I'm about when the trial

Damien McDonald

Yeah.

got we've XXXX. think discussions get the but pushing in we're the FDA, just through hard the to trial start with I to

Raj Denhoy

fair. that's position and Okay, thoughts cash one on last just Hey, around just M&A. question,

Maybe So offer the outlined you for the over term term? you you've the taken about M&A around could think costs some likely around more of your further bit do to you've over what you're is some you capacity that. your the additional debt for a out thoughts build capacity the to on whether anticipate and near near Heater-Cooler issue, M&A portfolio further around

Thad Huston

roughly of growth accelerated we first cash working strong mean, been I the We've flow million year. all, Raj. regenerating and have every operations we financially thanks, in improving from very are Hey, our and XXX capital.

do. thing to prudent So, us, of think liability a course, having is this behind I

is be still capacity we our acquisitions. And to going part to growth have strategy. As M&A do you of know, always

we But address alternative current look always address banks the if find to right at XT. secure able to will these why the we financing have from we that's commitments were clearly, thing. the liability and the We to

Raj Denhoy

helpful. Thank Great, that's you.

Operator

line the with from comes of question Scott Berenberg. next Your Bardo

open. is line Your

Scott Bardo

taking for thanks Yeah, please. questions, Three questions. my

a operational potential you if is confidence wonder calculation provision point to sort this with that question claim be respect the a I could forth. give and calling in an us gives be bit of your was second I innovation extended made the leaving of lot low absorbing XXXX XXX comfort inputs And operating future? somewhat of that please. and in for management led stable to XX% that it understanding basis that need have framework, to of over, in some will XT. to of more firstly, guidance So impacts. a for and margin, had decline And I little appreciate XX% from there's one, on in feeling What going my you're end. numbers what but adequate degree not and an standpoint so points the highlighting you some an know that margins you've prospects these so at

pretty can talk last on shocking consider we fourth more the developing considered in or the of or So and a in you last five perspective perennial quarter. question so Percival, shouldn't is are for the that operational than heart has I expected bit, And please. moving we cost the mean, here have your perhaps valves number what there you that cost from little some Obviously before? the to pipeline the been parts now LivaNova years disappointment for need

visibility add Percival. of do growth within to expectation you flavor a what from just highlighted So what that you've that around Can Thanks. double-digit your guidance, you have? confidence, little please underpins bit

Damien McDonald

Scott. - all of First hi

Let's and you SG&A I'll why about guidance back provision come don't in jump XT talk now, in on the on the Percival.

amount, XT, we number number it's of think for the So we think to for provision important And a issue. is line the and look this at appropriate and a reasonable cases under you us. if draw this total

continuing was avoiding that distractions provide was provision. from fact ambition for the expensive that that. again, decision, to I the inconvenience, the really patient were of able at operations litigation, banks And to the is, think take it's looked improving this the for the right four time think time - business thing taking also market important banks we that the and us care, an this the financial the commitments we

line this the is issue. this legacy under about So drawing

Thad Huston

Yeah, absolutely.

So thanks, Scott.

build the You margin in the and in lot of the out clear a we're pleased see. to growth that Investor gross we help a support in business and XXXX momentum that had as with plan we super clearly, to of XXXX very the these use know to but then And Day, invest highlighted investment. R&D pipeline back we

we at and a business margin both business look profile. the base, you If top TRD, excluding our similar bottom base line are in growing

investments the which prudent is that is incremental basically in that points operating making are We We opportunity. margin. size the TRD, think on XXX given basis investment of the

Damien McDonald

of I overall But is was And disappointing. growth. XXXX, is us overall, lastly, It's one spots in Percival, Percival our think bright I double-digit was that for perennially. it QX, on think the

and still high QX to us that But hit rather a patents just the So it. I - single international we think for sustainable the growth the build do. in than business the product. and of double-digit I'd I know for number plenty U.S. us in double-digit digits it's had by a Europe work fact like you a that there's were sake of ordering

identify this are So effort are been and it's disappointment. significant just a I plenty we And aware let know on we're portfolio. a issues done work expecting that. working well where in can say, say me team as we're that there's be to and the But the you of that

Scott Bardo

much. Understood. Thanks very

follow-up. one Just quick

And think complex inception the Caisson. delayed so program been program of the a obviously, has I is since this several times

effect, flavor what to Caisson give if some into us all further together been you give wonder for test decide asset just do could could not, some now. acquisition there of delayed when So come obviously I points just or your it's please? an wonder, impairment I flavor the you and you end write-off would

Thad Huston

The we is that market the in we taking pipeline. year and opportunity on to have the unfortunately every and of more the impairment all mean I Caisson in significant. have It is still things value costing do different testing longer. Yeah,

continually of the to look So we at net present value have that.

modest say amount owned to though a business for would spent also previously. I we relatively that the Caisson recall, we you had roughly given half If

been given to we that issue an hasn't So spend impairment fact didn't for an trigger that asset. se per actually the the much

Damien McDonald

know And importantly, We identified root and just program need developed think the I the issues fact we remediation we that healthy, that believe rectify identified. have the they've cause, we've to the the what these team looks like. timeline is plan a

Scott Bardo

in I'll guys. switch queue. Thanks, Understood. back

Operator

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

open. is line Your

Matthew O'Brien

questions. the taking for Thanks Morning.

is to do this commentary, or much, the the any And liability? is much a providers higher reasonable chance figure this estimate, are Just when liability? to XT being say insurance of whether going of could finish into snowball then some a cover out you you not off there this when

Damien McDonald

is are think this insurance provision reasonable. reasonable negotiations we for cover companies us. But believe whole that we've estimate. in is believe And we the so. don't So, with We that a taken a we amount the

Matthew O'Brien

about serves Thanks. And this about correct total. you TRD time bit commentary little the me I'm it. a if then you memory in patients and think you hard reconciling year year. revenue next please Got having and said I'm of XXX I on a know And expect XXX far as do wrong, if goes, cases I the then per year, as replacement

per So either is year, and that than expecting. terms in wrong folks the of I'm the getting I was ASP replacement XXX number much higher

two So those be? which of it the the two which of of - it would of

Melissa Farina

decision we memo incremental changing So, are it's - the plus due funding final replacement. in of that is replacements the for number the to replacements, some

trial clinical in there. are Additionally, units also

Matthew O'Brien

Melissa. sorry, so Okay,

to point Just that. bit on little a put finer

patients XX,XXX that's at If year an the you ASP do in half, apiece. this X.X at XXX it back call million

think do XXX XXX I you about be this would be you'd enrolled that what expecting then? replacements is year

Melissa Farina

due the final the additional have replacements, you memo. to then in consider decision And change the to

Damien McDonald

of the combination end-of-service a is clinical. plus This

Matthew O'Brien

Sure.

I number think the yeah. end-of-service -

Damien McDonald

Right. Yeah.

we to we're and up clinical So range the capabilities ensure the trying also around that. build doing we a everything obviously accelerate, running, provide get we're to think but to

Matthew O'Brien

Okay.

can then we patients Okay. ASP? follow-up because next $XX,XXX that's Maybe roughly X,XXX offline, to year

Damien McDonald

we're what roughly, thinking, That's yeah. yeah. roughly, That's

Matthew O'Brien

it. Got

real lastly And Okay. just quick. then

the pretty number, points TRD basis XXXX. out does contribution XXX On coming you're this that you when Cardiopulmonary monster business good a to a in six in year? six from four four net from to Neuromodulation Where guidance growth come the for core was off

Damien McDonald

seven. to Five

Matthew O'Brien

the XXX Right, when out you point. basis net

Damien McDonald

Yeah.

So we very similar me, have that great to have we have momentum. to probably And growth I the guess could this momentum But it's it differently. year. characterize we

Canadian recall, may were this you about we talked As exiting. OEM, that agreements distribution

that off So back million you XX there have line. the to off top

points. basis that's XXX So roughly

one to X% FX. have you due addition, In

I today. as we're a say it's we that would So kind into similar of growth seeing very go trajectory XXXX,

Thad Huston

the specifically into bps international. driving And leaning were

results that epilepsy the we the the in Europe to and second of commercial in heavily And ICS. improve ramp. for the in to productivity expect then know DTC, we again into U.S. you see and generation building ICS, TandemLife launching product continuing next half, You group that and really international self-driving the

we're is really TRD what excluding things those that leaning into. So

Damien McDonald

points the million about And XX to TRD Matt, basis XX growth. X for million to is up

Matthew O'Brien

it. Got

helpful. Thank Okay. you. Very

Damien McDonald

Thank you.

Operator

line comes question of the from next Your Mark with Taylor UBS.

line open. Your is

Mark Taylor

morning, for taking thanks Good the question.

Damien McDonald

Hey, good morning, Mark. How are you?

Mark Taylor

know I a you're - I Great. follow-up on for discussion. endpoints Damien. How and in I discussions, was trial hoping to just look was flavor in but TRD could terms primary of the like you could secondary of First hoping was, extent any wanted that I that? can the are could thing us it's the ask give the what reveal to you some you you? structure

Damien McDonald

yeah, I right For primary I is - focus our now, think obviously our responses is so on - your guess endpoint. primary

remission We blinded it as will double well. controlled approximately be look and patients. will We've said XXX randomized

which it of what have we the its March, the end and getting I know approval. comfortable on with that out, consistent the of final we should feel pretty very in it's You is talked trial, them is a lot clarity past, about guess laid why with we by

Mark Taylor

Great.

Damien McDonald

there a The important of the that patient the the in think That's which pool, really the back we important patients. things came inclusion XX% to is addition CMS bipolar population to. is, of

Mark Taylor

here And like about you talk if that. Thanks apnea, on could in XXXX? looks for sleep you the trial that what timeline could what started be then and

Damien McDonald

yet. not Yeah,

until on come either about we titration one. give more the dates And really a by it of a the we've in it us the the just of we'll months. that couple and March. talk us with give a dates clearly, saw with we'll press talk out last FDA about Just what improvements in or FDA But then encouraged couple release met as over April. made few that in we But we're separate

Mark Taylor

just specifics you fix? Okay. system to I you one guess, the right what and And TMVR. anchoring is the were clarify can the adverse on on why think wanted disclose more last events I

Damien McDonald

the of physicians, that the hospital. two adverse just entire the over all the that to talk going that with team the events so team not last Yeah, and physicians, work looking back have and cases, we've causes the two the the at piece of through let's root at look got months the done a significant

cases. been were And looking pretty confident the at value anchoring to So not a out to it's imaging, with review those all that the system, really the we be exhaustive do it's value, versatile. two is very of as said proven I

on So system. anchoring - our why efforts we're and focusing that's the

Mark Taylor

you Thank Great. very much. Okay.

Damien McDonald

Cheers, Mark.

Operator

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

Your open. is line

Mike Matson

questions. just start your my I U.S. to taking growth see outside for with guess wanted strong really to continuing Thanks Neuromodulation the

or So so in is you investments SenTiva the - products? the just know the the you driving markets, in the particularly is emerging growth, channel it curious what's

Damien McDonald

direct then Japan, international which have we generator And went and Yeah, sales I you the leadership to lot direct than the in also In SenTiva went tremendous. execution, international, team's but on group. our so XX% is focus with U.K. Italy. a in channel, particularly in put in They has Europe, it's Nordics of And the we changes will do say the more to execution, this don't of for the yet Australia. the in sales I SenTiva know just SenTiva. in and down is devices and epilepsy

really that it's So team on and possibility acquisition we're you But working say very XXX account being force and the the know account I about excited would of that. focused sales towards penetration.

Thad Huston

is in direct both the we've XXXX we as result. this growth on year out in amazing a curve real and focus key that basically ahead teams SG&A we're and reasons the going to about with our Neuromod been sell international investing markets seeing building in being a of talked One of bit that XXXX higher the

Europe, United quarter, in of So XX% this XX% it in region, the and past States. was Rest nearly the World XX% in

in with investment the seeing both and in signs that great U.S. international. we're So

Mike Matson

if Okay. you in threat thoughts ago then curious I the Thanks. week us your their that could launch Medtronic think epilepsy of U.S. on DBS announced give commercial just potential just a And of about product?

Damien McDonald

of campaign. Yeah, the that's is think a leaning why a say a into we're need. would few drug consumer thing. good anything And this large We direct look, epilepsy things, again, that to unmet awareness especially the rises resistant I is

DRE with patients of that's I therapy. XXXX new get X,XXX other roughly think drugs. XXX,XXX other you've of patients them me large roughly And identified of year. there's XX,XXX some not that than a are VNS a the year heard getting population. every leaves roughly getting say, them It therapy form therapy, unmet

any what we've therapy. think with implanted than really non-drug I XXX,XXX that than established with so patients more other VNS And more now,

about good We're the we improve that DBS with we to we've continuing product. with the drug so party great talking we're coming resistant And that. epilepsy, a and to think And VNS. think got opportunity

Mike Matson

around in some to finally, other called at happening. if for changes and shorter products that least that the higher And additional any for specifically curious are expecting spending, to driving example, been I R&D term? recertified companies factored expense over there have MDR just the go Are Okay. know then you there's as European - out had back you have

Thad Huston

Yes. Yes.

our included have in XXXX. projections We for that

Mike Matson

All you. right. Thank

Thad Huston

that that, into about leaned on as line. got it. working a doing Thought least the we've basically we've we've team absorbed But a And in largely at R&D business. great cost of

Mike Matson

Thank right. you. All

Operator

with of Mills Your comes line question next Jason from Canaccord Genuity. the

open. is line Your

Jason Mills

Damien, and Thad Hi, Matt.

Damien McDonald

Hey, Jason, how are you?

Jason Mills

for taking you the question. Thank Great.

question already a and smash ask So together I sort about and specifically the Caisson. Regardless Mitro. delay asked them take in and only of in two of questions M&A

I think argument is. with strategy talk one aortic taking of it's asked a size in we the broadly past and see I've how fits the not it. your a companies all to Mitro, in valve at clearly you least valve speaking Mitro in kind approach, like is about the when physicians, other an past the what that's That's to have need are

your curious that you're M&A just about ability. capacity asked I'm or So

talked with Caisson. have also extensively about what's going You on

talk of business? augmenting years for potential at the what portfolio maybe about your respect think that over Mitro you with would specifically acquisition couple about So next us the have

Damien McDonald

say agrees not repair. going largely would to just go different ways Mitro replacement, lot the that opportunity. just to our I of it's so even there's team Yeah, It's a after not be

we always our that again, on focused term So the comments replacement started and we're But for that toolbox why those. thought long looking about at has of is other areas we we That on therapies, looking and is the and largest at now. there. definitely other list that's areas opportunity are something

Thad Huston

in things unique really M&A to up as such other obviously built in have fit portfolio that heart us But even and it's natural relatively to of to is you're what ImThera for have short taken complicated from and at we you're see say of to Mitro and mean, assets. the we LivaNova. think replacement and have right why to happened. as things time I' look We're if program everything space, to a with you're clearly failure delays, continue going going approach. that's TRD going I them a And period evaluate to portfolio that I have more going a it's

Matthew Dodds

Matt. It's

approach. we're about, talking think it's I a structural heart

Jason Mills

approach, Makes for transseptal sense. issue, just transseptal you latest as to other to that delivery you this Damien, specific Thank that. your anyway avenues in on look at reduce or will the specifically follow-up And a are avenue? committed on this you comments

Damien McDonald

the very us it for that's to. way much field believe the still approach. about right the the views transseptal very and still clinician We committed. transseptal. to was committed go very I not the we're we're about to the Yeah, think Again And issue is so approach, is anchoring

Jason Mills

said then read And Got and that in confidence you I'll table question, access in and just the the and they of is had queue. made something like going to linked you there just completely of point. wanted sense your that to almost some access made I'll do follow-ups folks throw changes, it, two I in that on it didn't like but get get risk it your note my want at sounded you want I your in off much certainly that that - into Tandem. - systems the took two about potential the it. didn't stand so were which issues internal this the definitely perhaps there you and back that ask commentary And sound had too I were controls internal in then to I was

whether are could your with obviously us your fine have it if wondering on best you you show a upside went to think you're where guidance you be tune that through I'm hoping your the guys to to and completes guidance give guidance. opportunity sure to Just guidance I'm any exceed you on that specific maybe you didn't where margin helpful. sure see be then leverage guys. were you make or especially Thanks on more And line gross and wanted downside, ends you bit both area. a revenue guiding little areas would cautious any than the few

Damien McDonald

misstatements it's the have potential clear, identified was There more related financials. of and clearly extremely our in and CRM access issue. so there's in mean the to and an Yeah, both but comments, access. SAP to of complexity any It's I we so be a and I our divestiture because matter not accounting as I implementation design the more more my only a want had XXXX. mentioned we item not in lot potential, a of program Clearly we control have in identified

very we on So remediating our clearly addressing and authors are with on XXXX. we're this working in focused and

mean, On things momentum have we Neuromodulation doing look I'm driving the Clearly, guidance, I and we're about that financials the globally. great the in excited super business. the and

grow fantastic TandemLife in I the and basis the we we're well I margin. think showing with that also, we're really points above business excited results even and that an thing, there. also can P&L reinvesting think the within the We're we're XXX about But better gross Day do described Investor potential further. we've

Neuromod this but that have, line, internationally feel while more could bottom particularly So growth, maximizing accelerated again, in drop of the TandemLife. we the period and opportunities in I to really we we're

Matthew Dodds

Yeah, you growth, basically that's gross focus with ago really those years a for drivers for execution through. and I us. margin constant the had something the improvement. us, you mean us you're about watching you I that's know, Look, very think the is, think proud driving in things talked right. the starting to XXXX, break two Day Investor with disappointing The team know, at big for relationship I international closely. now And, we're Neuromodulation, we've really we achieved clearly possible on important is I But what's about think Jason. I'm what and it's are very you transparent guys, is the

Jason Mills

Thanks color. for the

Matthew Dodds

Thanks.

Operator

this I for at time. Damien call There's further the CEO, McDonald questions remarks. turn now closing back to no will

Damien McDonald

on of your to and quarter All And you and of team, entire if you, support in your thank thoughtful talk not sooner. behalf appreciate we for the thanks in Thank a and you we'll questions. interest Cheers. you. LivaNova your

Operator

This concludes call. today's conference

disconnect. now may You

LivaNova (LIVN) 27 Feb 192018 Q4 Earnings call transcript