LIVN - Earnings call transcript Q4 2019

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Operator

Good day, ladies and gentlemen and welcome to the Q4 and Full Year 2019 LivaNova PLC Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference Mr. Vice Corporate Senior LivaNova's, Dodds President Development. of Matthew you may begin. Sir,

Matthew Dodds

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

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

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

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

website the investor.livanova.com. You Investor Events and presentation release and of our can find at press under Relations the in News section Presentations

the With over that, to will now call I turn Damien.

Damien McDonald

region, was The explain shortly. largely our XXXX Rest below will Thanks, XXXX. were recent Matt. in provide by Welcome sales in shortfall to detail challenging Today, guidance the XXXX I'll World results, in was and provide sales our for more discuss some quarter conference our we of fourth our quarter year and fourth which our call. expectations. driven overall highlights, a

strong range of did the tax profit reach rate. by a However, end our and a favorable margin EPS guidance upper driven

on Thad of you region. wrap-up initiatives provide VNS support additional by epilepsy, will to will on recent provide strategic before details Then, the with some Rest depression heart discuss our portfolio I'll growth and or guidance. three and results our to comments closing sales DTD comments, off on then with World focusing and to U.S. moving Then results advanced going highlights my circulatory Q&A. difficult-to-treat move our our start XXXX After first primary I'm discussing drivers: failure. the I

committed VNS sub-segments are released and the we new data ongoing to of Lennox-Gastaut Therapy. Therapy Meeting providing American Annual difficult-to-treat for of We received In the Mark status super-refractory for Epilepsy clinical at use epilepsy: our device epilepticus CE December, depression. two syndrome. related Symmetry, debilitating Society data on VNS early to We

first Somerset and thanks U.K. for teams Our collaborative commercial a severely earlier month, NHS Thank Trust group. occurred these and Trust. Foundation the the Symmetry effort Partnership you of implants to the with the affected Somerset both in both this patient Foundation supporting NHS to Taunton

the This a clinically and consensus of several written treatment-resistant February, more than approach. renowned Disorders depression. of more definition psychiatrists, use useful a by In Journal statement treatment the depression as consensus Affective published difficult-to-treat assessment an empathetic emphasizes proposing international

and going decision of or a will as embrace DTD forward. this difficult-to-treat As commend designation the a company, we use depression

the Yesterday, This through is Heater-Cooler. XXX(k) of residual modification we for a the FDA step important received warning as we device to our our resolution an U.S. letter. clearance XT work of issues

in World rose epilepsy of our were U.S. first sequentially will U.S. XXXX, the the DTD quarter – within calculation basis. drivers a excludes constant be Now, and but quarter. million high support guidance region. results digits in advanced on the growth our quarter This declined single recorded epilepsy, fourth range. versus in $X the fourth stated sales of three sales I'll discuss net circulatory All and sales Rest currency

circulatory Advanced performance to the from low epilepsy XXXX. we XX% next-generation quarter, our This DTD expect $X quarter of support any fourth our in sales million business mid from were to grow system. the XXXX, in excluded single-digits benefit of U.S. an sales. In the excluding increase LifeSPARC

The with a used kits growth recovery the kits modest deeper ventricle TandemLife October changes also right on growth saw of to was X. ProtekDuo reimbursement and penetration for existing pickup by due accounts driven in code DRG

the XXXX. least issue of very we limit still additional expect the XX% year. quarter, in require release our While This That the will have to at release said, grow did in business a we initiate some our of U.S. limited LifeSPARC commercial faced time late commercial the rectify. fourth second will until half we ACS to yield full that

decline million $XX were sales of quarter a compared World to in quarter, X% the of of Rest XXXX. the fourth

a the fourth Canadian in located and of were from beginning sales we And this a $X.X agreement terminated distribution quarter region. the million XXXX. were agreement reminder, As XXXX, in this of at

grew Excluding this and trends World recent to below due factors. impact, performance Rest was single-digits. of sales mid This two primarily

our faced for to a Rest region, in highest of the we oxygenators we of that unexpected issue a experiencing led where have of demand. been First, an backlog key component World the supplier level

capacity. currently additional Our manufacturing is out supplier building

Japan we the execute in did during quarter. Second, not

high to grow the compared both market heart quarter we our from to to expected distribution in While did benefit and fourth more in the direct a single-digits mid of valves shift neuromodulation. XXXX, of see to this we in

our for from DTD million in and for million $X now study, $X consistent full RECOVER the our $XX XXXX, implants replacement benefit to of In Depression. patients a a sales and fourth with combination of Sales year quarter approximately the we million guidance. CMS-eligible payer from Turning Difficult-to-Treat modest the were efforts. expect commercial

ahead XXX trial enrolled. continues ANTHEM-HFrEF our failure patients expectations of our heart over with in pivotal progress to Finally, U.S.

an the for results. over to now of Thad? Thad turn overview our I'll call financial

Thad Huston

I'm greater to $XXX of discuss the detail XXXX. fourth results the and XXXX provide compared guidance. quarter Damien. in to then our going fourth million you, quarter Thank X.X% of declined Sales

XXXX. Damien from of included beginning million $X.X an quarter XXXX agreement distribution in the earlier, fourth terminated was mentioned As the in that of sales

down decline comparison of fourth $XXX a to quarter, difficult the in the versus machine of a sales the of XXXX. $XXX World Heart-lung Rest the low in XXXX. million, due single-digits X.X% were in sales of primarily year-over-year million X.X% sales quarter quarter region. the fourth declined were from Cardiovascular Cardiopulmonary

of addition, stronger of purchases the timing led equipment performance In in to half XXXX. first the capital a

Excluding single-digits of the declined an supply low of due impact to components. sales distribution issue oxygenator agreement, key unexpected Canadian the of one our

in valves. primarily heart were to $XX XXXX, quarter Sales heart to increase in of the fourth an valves favorable quarter, Rest Turning for of versus World of the region. the XX% due comparisons million

Perceval quarter grew XX% globally. this

and U.S., comparisons region, Middle World saw we the year-over-year they While were the in primarily Japan. Rest than in of by by the East favorable declines offset more driven

$XXX XX%, turn were flat versus which Rest Neuromodulation. the SenTiva, X% the to adoption million, of U.S. which XX% grew sales. global World Sales grew declined XXXX. Europe were quarter now fourth represents of continued behind and let's while generator XX%, of Now Neuromodulation of

XX percent the our the XX.X%, The quarter margin on by mix the points was up of basis a quarter net Adjusted gross fourth pricing XXXX. discipline. focus and of was sales in as from margin improvement driven

ANTHEM-HFrEF was Adjusted behind XX.X% quarter and a in the net was trial of compared percentage $XX of R&D fourth initiation versus the our quarter of RECOVER the as million in expense is XXXX. sales fourth of the the million, pivotal the increasing R&D quarter to R&D progress XX.X% XXXX. in in continued fourth $XX study.

building of fourth and quarter as Rest expense compared sales, percentage $XXX quarter to quarter of World XX.X%, million, commercial of related the was million increased Adjusted for XXXX. of SG&A, expanding in SG&A The infrastructure XX.X% a fourth from was capabilities, $XXX net including investment out is the U.S. the Neuromodulation for largely fourth XXXX. DTD. up our to

was $XX fourth operations of quarter from in in was compared income of the Adjusted Adjusted million $XX compared operations to XX.X% million income margin XXXX. continuing the operating last fourth year. from quarter XX.X% to operating continuing

the primarily adjusted X.X%, XX% in effective improvement efforts. in of to tax the to our attributable tax benefit rate ongoing related an The quarter quarter Our an from tax ongoing is rate planning XXXX. lower fourth was

Finally, EPS within to continuing operations guidance in adjusted the quarter quarter of the $X.XX fourth in and diluted XXXX $X, was range. was our from compared

Moving flow. to cash

quarter $XX costs for $XXX XXXX for was lower through flow the which XXXX. integration fourth million spending from Our payments Capital operations, XXXX cash million, $XX was excluding was restructuring than of onetime million.

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

debt up to million XT $XXX from year our in end a quarter at address XXXX million, net was $XXX settlement Our payments.

Now turning to XXXX guidance.

by growth rates In sales terms our XXXX a impacted to up X% of X%. full will between negatively to and unchanged, guidance revenue remain constant we exchange X% on be company's current year forecast guidance, overall basis. be If the currency

our Neuromodulation Rest of World business high-single-digits the and We sales. to in expect DTD mid driven to region the incremental by grow

late-stage HLMs. largely replacement the to expect low-single-digits with strong Cardiovascular by franchise We growth offset in of cycle the our from ACS grow

margin gross Adjusted to turning to be back the the range. to P&L. the in XX% XX% of rest projected Now is

in of be to to R&D to by range sales, adjusted XX% XX% to driven investments. range adjusted of expect be sales DTD of and our XX.X% the part of in large We incremental XX.X% the in SG&A

projecting We range. to operating operations to are the margin XX.X% XX.X% from be in adjusted continuing

rate to be to range is tax effective XX%. adjusted expected the Our XX% in of

share operations currency. a $X.XX from range adjusted which to of minor We projecting are includes $X.XX impact be from dilutive earnings foreign continuing per to the in

The share $XX count be expected to million. is approximately

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

integration, restructuring, remediation excluding XT to is million. and be to range litigation product adjusted expected $XXX of flow Our from cash million $XXX in operations, payments the

in and range of million $XX expected to approximately million million and $XX amortization is be in be expense is depreciation are to XXXX. expected million. $XX compared million to million to $XX to spending and Capital Integration $XX $XX projected restructuring and between range the

With turn some comments. to call final Damien for that back the I'll

Damien McDonald

Thanks Thad.

we've and as growth in building expected, prospects. as confident a go be blocks remain company lot not putting to place stronger did XXXX While in learned a our

improving delivering our be XXXX the in execution portfolio of on culture LivaNova. will developing talent We laser-focused and and management strong

thank in months. past this highlight constructive for hope that several you please to refer that and to XX to you framework presentation. take focus like of slide. see over areas the slide the the a moment on on our provided I you To reflected thorough feedback those investor call feedback in many I'd the

this LifeSPARC cardiopulmonary strong epilepsy, ramp-up higher a DTD While we in the XXXX, year. drive of global in release sales the expecting some of are challenged growth and efforts our growth will be in to businesses

to forward look updating that on ready delivering our questions. Sydney commitments And value. on drive and to progress continued shareholder for our with we're We you

Operator

first Rick Our Instructions] question Wise. [Operator from comes

Damien McDonald

Rick. Hi

Rick Wise

indicated Maybe but the takes One, understand help What takes resolve? six what detail factors. more is six us on little on starting you is clear as us months the major two mostly supplier to Maybe a I'm what give Rest could of the months? even World. cardiopulmonary, revolving you issue, off in seems on biggest just more underperformer. color That Damien was be the to this

How to I'm do happen sure And I'm make doesn't other again? be. not as the clear I'd it you part -- less just like as

of total You a the that clarification Rest World. that shortfall? was talked Is was impacted portfolio where or only there the or cardiopulmonary little a -- Just about there.

Damien McDonald

to our execution off and fair to game. step And a changes But metrics to was back good year first and to it's me let made we've we taken made changes all we've say say Well changes We focus. that our changes like Rick. to our time XXXX us. Thanks and processes just our for not to teams, made roster. our playoff evaluate

setting stronger year. ourselves we're for up a So

an mentioned. a And issue them. the very That group that in but For you additional been things. seen The number quarter. they one CP, number capacity with responsive ongoing was growth supporting of in there putting that been group. impact are going place a we've that supplier one the plans of discussion and has They've are us really our improvements did forward, with for thing

but was I performance to would were heartache model models. economy. was we'd stronger distributor very Japan and strong grew we our really we that were that expected shifting thing us them, mid-single expecting caused from digits But as that they the say significantly as different for a direct some second from performance

We some put place things. in different

deployed the particularly we've the effectively key transfer. that, proctoring As around account that heart opinion very of leader increased a in planning valve result engagement our Europe, processes

I that thing. big us So think for another is

thing of World And HLM Rest growth XXXX was the comps. versus three in quarter, – third lastly, we strong the was a and some that thing. very the faced for XXXX HLMs comp pretty tough

Japan then really comps back about in and supplier coming issue the So around. HLM

So that's CP wrap-up. the

Rick Wise

why if not you could you. will if I'm to Got to – understand trial. the you you understand implants? better us as cycle turning moving us, and The factors single-digit mid if high factoring dive guiding the Maybe correctly business some growth you're even and core potential out there. from contemplate help us neuro clearly for ex million those deeper competition it is you drug $XX it about versus stronger understanding calling you are a of DTD you the better little you replacement the in do to thank again, of the – competition pieces. as How Help XXXX if incremental into – could trial? new Just some performance the

Damien McDonald

Sure.

So the the growth performance pleased they performed QX the the year. with they double-digit I well of the done reset I great team year. of have first and of all, will back half think really and that this we're job. plan international U.S. the that exceeded say, and from results since Europe in team And a their And

So I'm pleased with that.

account number that think a as competitors alluded said you in before. factors. we've thoughtful had and the of really we've idea considering into a the area really in number are take we've put place going of of a So to forecast drug that additional changes forward, we And I

for my that, to Our growth comments and also market go-to of blocks field. has the changed evidence intelligence all support Account starts. changed to Clinical approach our things has into and that, different. so back is We've building MSLs competitive targeting U.S. and prepared on I earlier are added the market. we've mentioned in drive important would selling changed. those I us say

forecast thoughtful we see consider ourselves So driver. think up the our prudent U.S. international drug and markets. and setting in think performance been been strong That's platform. a I for launches. as with new And great we I double-digit growth a we're We've European

Rick Wise

who a us for on a understand, better came mobility. last potential is like was yesterday half sort yield Damien the on just a second maybe little up better patient say language And Help about LifeSPARC you of topic conservative I'd the new was a future launch sounds help pump, product just better better doc he happened the understand great to Yeah. And that. me. and in different it me LifeSPARC through the have the His optimistic? enthusiastic bit side talk to and and – us – the issue for help enormously think flow. just –

or does maybe described quoting better You your delay in than it. – representative guidance concern a this this how half reflecting you're I'm huge reaction? second deal. delay as Does look him that us today? And is could XXXX maybe

Damien McDonald

actually lot Rick. great think there, of a I Well, information

be growth So that's from to the think our guided the initial in the we having been and than But this demand what the is we start And yield. we're component first the sure me around experience say, full about stop-start important. with a for platform. well to received. make approach let I what I the think flow that to important It's us expect a we've really yield the think controllers the this And thoughtfully production that, better important the think I signal of this pumps greater is controller with taking an we meet, has have and an about we than have field want XX% we think to continuous and year.

we're from think I think The on fix to job growth of a this I have some it. to tremendous done forward identifying this. team great look And group. how we're So going to

or an similar simpler. of experience flow that experience It's to important think an your people a important up. are as to is is aspect pleased the rate, is that that set see interface. much And I'm I has us. easier to simplified patient incredibly recovery. priming It high hear The going to is And your It doctor's product. something

the Rick. same -- hearing hear Thanks, to we are. feedback pleased So

Operator

our Matthew the you. comes next question And Thank line O'Brien. of from

Your now line open. is

Matthew O'Brien

the Thanks. And thanks for taking questions.

Just real the Thad, of quickly impact Damien just the or can QX? supplier quantify you in issue

Damien McDonald

into giving create did not for we're but No, numbers, us. a it Yeah. specific backlog

good very has going XXXX. through I -- start we've I numbers and we're to this worked in normal a very in that As But XXXX think been especially responsive. I be of really said, later team lot going a as think we and and on that forward return to

and into the we're team Our numbers supplier quality job, exact backlog. the a team on have great but going not done our procurement

Matthew O’Brien

issue to Okay. Are back now? Are full you through capacity? you that

Damien McDonald

Yes largely.

Matthew O’Brien

Okay. strip up you're of haven't basis. drugs, it any an new of that's on the which -- then I you the Thanks. accounting And number Rick's to from for business. know out guys kind single-digits. on commentary. low a Again, implies longer-term World really kind the a the historically and had following impact on you the U.S. And DTD question over shifting When on Neuromod contribution of Rest the pretty

I'm conservative upper you worried business? curious, about still think so then specifically? the that when maybe back why So And you get other business into just are that range? Neuromod domestic Are single-digit device can you competition in do

Damien McDonald

And said and team earlier, with and really reset, this I'm how that Like I'm that I their continue since deliver performance. encouraged pleased responded. to team by has QX met numbers the

And new impact, said launches may the forecast. thoughtful long-term, at as some we're XXXX our that, sure an we mid reflects say, making you that expectation all drugs be looking we Having seriously. single-digits had take low about And drugs the there are impact. to but

hugely And on plus still picture, focus drug VNS. DRE Big our the is is under-penetrated.

of in support targeting market in the are a approach evidence. this. version said MSLs believe put number Therapy VNS account more drugs of also that the and with go-to I've before, ramp to we've of we a important can't new efforts a benefits that field, And marketing said, As our I achieve. there sales as and newer And really place beginning clinical with

encouraged, for thoughtful this I'm but I think a So forecast XXXX. is

Matthew O’Brien

but on then thought I many how your patients study. can here Can are you clinical squeeze in was commercial this point? commentary interesting that enrolled the side? the if you're some positive very in just potential commercial progress And as here as I short, us coverage at DTD And far fair. some side Okay. That's tell making kind Can we more there. updates on expect any on the one of XXXX

Damien McDonald

Yeah.

year. not enrollment. to this of good I look study, They've But to the really overall pleased we will enrollment the accelerate number similar opening the sites. specific made the see we're give is number, great on really hires. A I'm And going ANTHEM So how details on ramping. team to the through on progress say, really expect with

first is most the CMS-eligible looking think as patients, patients I on private single thing. of out focus. for some we the who end and probably that, really our forecast the said of especially trial. and important therapy. Having we're payers This but based with nevertheless the primary then is It's some screen RECOVER all service modest the of of RECOVER trial, gains at the for with eligible efforts ramp there also

an population. I important think they're

So behind we're this. investing

the As spend, Thad of engagement these we're said, support with field the patient augmenting really and for private. recruitment really our and end service and R&D

and for important that think has a for of value So, lot of again, LivaNova. an focus us, one the create things potential I to the

Matthew O’Brien

Very you. helpful. Thank

Damien McDonald

Thanks, Matt.

Operator

next Thank from our Denhoy. you. comes And question Raj

is line open. Your

Raj Denhoy

morning. Good Hi.

Damien McDonald

Raj. Hi,

Raj Denhoy

with if guidance. I you could the maybe wonder start

like think of heart-lung could pretty some I prove significant of those of the there's think one as upgrades. sounds of thinking And our with of both going some in I side cadence be things well you, that it significant as to in machine be generator. VNS, product business Both to new is the a launches, the the in launches. XXXX been conversations about new your in we've

of customers the the thing year XXXX? new those potential we're as is that curious about in towards so, incorporated purchases how of this much in launches And end you've anticipate products maybe the slowdowns

Thad Huston

for some how drug new of what purchases Therapy, very XXXX. impacts We we and things VNS in of obviously at being or and our the I of in in Raj. landed learn trended Thanks, we with we that this from both terms for with we numbers guidance where the anticipate CP year. But big looking is entrants want XXXX to Yes. forecast for for think thoughtful HLM saw slowdowns didn't

we product after investments at looking were prolonged we that have time, to have shut resources the pipeline. side, so, the think with at we address issues. allocating redesign make disappointed to safety same the down those opportunity also the efforts had that program and support One the investments. and to that to failure others TMVR And this support and fantastic to I heart TRD we and

did. And guided that's so, why we where we

Raj Denhoy

question can I maybe Well, way. different ask

you've Have launched too, things about what a generator one you past or new business? machine, slowdown the XXXX. launches of maybe I pretty significant of that is In the front any think the has started launches? the that heart-lung And machine. been upgrades of I sort in Bluetooth the in also chunky we're have to kinds when in you've a these you impact new fairly launches articulate purchases launches, generator, seem of front of So, product seen the VNS cadence business your past, adding to are any in those launches? VNS on coming the in times asking seen heart-lung with mean those like of

Thad Huston

Not impacts launches. previous in material

Damien McDonald

Yeah.

HLM that it HLM, us. that's aspect a and So look, And footprint the the for different very of mean last launched now. is opportunity I significant global was other years XX is, ago. was our And specifically

we way launches, would of sort go world. the the phase roll and really around out So

seeing first, still double-digits. SenTiva continue selling so would for European things release we're us the and U.S. example, geographies, -- in in to So, where allow the neuromod, like international strong the

all those launch thoughts for So, XXXX. are as going into our planning we're expanded

Raj Denhoy

supply flow update been anything any guys presence Okay. point? this out Fair Is or there where Northern of of you disruptions just the then, Italy. Sorin in you expecting there. And still enough. some at any can potential on in impact in of news lot given There's coronavirus business whether a maybe history terms you're your of impact one Italy, have

Damien McDonald

Yeah.

question. good So,

affected in facilities virus. regions any sales both guidance. Italy have than haven't is on in currently by not manufacturing that, our impact in our We of less X% and They XXXX. coronavirus -- located the one overall Mirandola. that Saluggia We are in two said forecast Having one there: are do in

outside zones. are current the exclusion they So,

administrative in And for office monitoring we've We Milan, about small just week. daily. that closed facility that this like the everyone else, have we're a

of We with to Tier on taken X have measures appropriate monitoring like But a steps discussions appropriate vendors X going whole this, and they the think I and everyone world, the show in have far. place. number in we've our we're so Tier

Raj Denhoy

you. Thank Okay.

Damien McDonald

Raj. Thanks,

Operator

you. Thank

comes Bardo. Our question Scott from next

is Your open. line

Damien McDonald

normally Hi like…. Scott. We

Scott Bardo

I Thanks beg your pardon. Yes. Damien. Sorry.

first So question just performance fourth Neuromodulation relates please, of the to quarter. the in

was I think commentary your a previous America to patient in doesn't of in X% stack quarter return the new and performance XX% negative your appear to North replacement. business surrounding a fourth growth with that around as

talk think bit growth happened you and than I can about rather a new rightly Bloomberg And what patient seeing also, so. you're little expected? coming there? And in So whether contraction as [indiscernible]

guidance please? for Just some your on clarification Neuromodulation,

And been I in expect you growing I North single And around the single said, digit epilepsy. low to XX% digit outside grow American -- low mid of to you've think think you've U.S..

epilepsy, imply expecting So guidance for the unless of high for Rest you're single to that mid me World digit that would materially is to your at least change.

right is and that can the TRD you that So clarify please top? the on interpretation comes

Damien McDonald

Yes.

want you go… do So to

Thad Huston

Yes. That's correct.

that first all, mean to back is correct. yes coming of So XXXX I

growth about for We guidance the overall in reset since for U.S. April had. We the of year that beat pleased XXXX million full the $X are that we reset has QX full by epilepsy, and year. that we the were assuming given in the our

XXXX QX really When to that have look with was it at SenTiva. the a tough in XXXX it mean related comp. XX% was grew we you the momentum QX, I U.S.

entering. where feel I good about So we're

or about $XX TRD for I think that we're thoughtful XXXX DTD for -- in will us million being, the our are help. epilepsy deep also help guidance We also will building and sorry

Damien McDonald

Yes. got your on I you've the Scott, sure is to that analysis basically right. make XXXX. want enough just So

Scott Bardo

Thank you.

So just to be XXX%.

in well be going mid for we single high a should digit situation of epilepsy? all So to

Thad Huston

Yes correct.

Damien McDonald

some recall round and QX, that market. December to think plan. just performance thing And caused executed the for did out I the of ahead strong in classification from that think the overall We And we was recall have August. I our other a in us XXXX confusion the a

the a But at but in there of really why team. overall, a that than slight anticipated. downturn was moving the So funnel that's strong, really slower of implants. performance our the of top we're patient was was And still velocity funnel that little we new happy with through

Scott Bardo

Thank Okay. you.

group the to guidance, your come is assuming that your revenues. be pernickety franchise but growth of then XX% top group that sorry basically from is on guidance is and on given that case no depression And if so revenues your guidance cardiopulmonary,

a bit I than think to for XX the issue understand want little oxygenators. this just years seen I've better never issue for oxygenator because I XX, supplier

a your us some talk And single-digit the what here? you give supply flavor maybe about what bit is can So also issue that embedded low for within little cardiopulmonary assumption? oxygenators is for

Damien McDonald

Why supplier do and you do don't I the forecast?

Thad Huston

Yes.

performance I that the forecast cardiopulmonary single-digit the think year we're given I on saying low projecting mean so. you're just right. fact ACS we're XX% the for

Damien McDonald

I history. enough supply, component don't the on have And

market. issues I'm sure for name to majority going the is been this the longer component but instance, I, supplier that a there have In supply not of but this in have our past. history You we're oxygenator a supplier than particular the

expect the for XXXX. this back there's on resolved on which so been portfolio And to but backlog of supply they're working We've with some growth. manufacturing all And that they're clear return demand closely not as working capacity we and great. issues support a contiguous the stronger earlier is to of some I issues, them to and said the

Scott Bardo

you're for XXXX. right. And consider a good is, upfront question in challenge you weak over being learned the XXXX. you've of last some Can you also changes company? made? -- guess, bit do I being And some a they Thanks. think what maybe you structural LivaNova? may. you including Very leadership Perhaps you've about lessons I a that one little explain why sales growth talked if guys. us go one dynamic course you All this a into appreciate I Damien, mean, you the with I quick share more for just can about were of that issue the

Damien McDonald

I a think mean, that to have, who and people let on had but do growth of forecasting conversations based case, that's able think we're a me will following. and I the anticipate summarize be it. that company. show That's try Right. extensive us we're And set pretty year the I to growth those that and the this in I on we'll faith we deliver

drive of simplifying international. to And our U.S. we are that the what First things those changes things refer made focus are you XX of ACS I the and epilepsy, all, we've on. again U.S. to to focusing page organization growth.

So the is focus there important.

think system that The to number for LivaNova sales of that in the we changes in more quarters implemented nine example, put seen making of effectively and we're we've business we applied contiguous way how about are place, Europe, those things growth. processes the operational of Where a the effectiveness broadly. efficiency,

The quality to the remediated. of through for clearance the XT key to methodologies used has point these processes. fact significant that team efforts that came have XXX(k) to a there I And number change

reduction lastly, in specifically And then and logistics, to the team supply orders change there, operations where enormous back a in chain we're see process starting globally.

we have processes vertically for of throughout changed, how important us the the So those set internally that's have and execution changed apply an and and the behaviors company. metrics

the changes the organization. the leadership R&D to seen that X-Ks made of will have we've operations some And have With changes, you Section XX. some respect we've combined to been that following and

think is a medical to back I critical this innovator. being

execution, pipeline and the things and is RECOVER drive the to very is the and focus on focused LifeSPARC, important to groups together trials And area, program. they're which Polaris which two the ANTHEM near-term second those bringing with market are speed

the the and for global out a now that focused innovation execution. important greater regions and marketing Neuromod teams commercial into delivery regions. And and opinion we much for again, franchise on leader those And structure, squarely Cardiovascular then for the market were have development, and speed-to-market more key verticals and accountability insights responsibility also lastly, level back took of the the the put more

how a on wanted, definitively generation to taken. this then on trying So answer specific probably point cash EPS is longer you more page as well. than also can looking And in you XX, but we're to I'm actions focus to see very we've and

Scott Bardo

Understood. jump in the Good back I’ll answers. Thanks, Damien. queue.

Damien McDonald

right. Cheers. Scott. Thanks, All

Operator

from next question our And Mike you. Thank comes Matson.

open. Your is line now

Mike Matson

Hi. Thanks.

XXX% headcount reduction Caisson savings going guess implementing shutdown from that or Caisson. So I and ask combined to the I you're with about be wanted just the in your Italy, then to

like be of you're to to that. So, of reinvest savings. all It the what virtually on some planning going sort guidance obviously that's sounds generating based implies,

quantify falling savings? going line? it that of One, the you is to getting all or reinvested? whether through not two any confirm be bottom can you And Or is the can

Thad Huston

Thanks of Mike two It's there. $X.XX, And Caisson made pointed savings. We back for about did are the into mainly. depression the opportunity. that question. Clearly, between do about restructuring the as we we where a generate and Cardiovascular, also, it putting out see investments tremendous ultimately $X.XX you were we the disappointed that roughly landed

really ensure RECOVER a complex We to We're the the we and also study think of very commercial big driver investments work know that on engagement. analysis also We've you also doing the is of the we're depression is And as the have a embarked on completion sub-study lot substantial prospects this the the study. large looking DTD. that We're but really patient making and study. of enrollment. investing, and recruitment post pipeline, at strong the rest in

Mike Matson

my question. leads Thanks. helpful. And next then of kind That's into Okay. that

confidence then, for that of imply I type you how outcome you fund And Just that so of all understand, decision? in trial an of that -- making the eventual is around did is investment the and of itself what sort laying mean, there. favorable groundwork your actual of but does coverage the degree investments call out much on to the coverage trial, what a activity DTD, that of part investment? towards going ultimately? of to that I And the about you're number are kind trial And

Damien McDonald

is that spoken Let the trial past. on Aaronson we've the about based in the confidence me paper the largely in that. take of outcome The

changes significant see significant remission response in changes those period. are You a rate, in rate and long over

see years. up You five over improve the that of performance continues to period to

So, that's in confidence we're us gives where the what going.

has we've know happen? we trial do what the to get of First to all, So got enrolled.

as patients quickly with patients ICON partner trial as to all may in So, a and enroll remember, in possible lot you bipolar. of unipolar our to and the up the this XXX its XXX effort

and aggressively very drive sites patient we're to opening enrollment. So, trying

Importantly sure to there, trial. engaged patients and are the participate you in continue have to make

done engagement. at to great to have And a patient in made look steps some that online have spending make we're really apps. tools sure there the tools -- drive we that So team there think place engagement on I they've to resources great

the well and are the the for are And really and there. then ensuring engineers lastly, blinded that responsible clinical support in so also investment resource available the field study who programming versed and ramped we've our

to patients of the I encouraged and into private CMS-eligible the of payers. of think, possibility moving overall, possibility by also we're service end

recruiting efforts. as support access help to those also we're that area us market so, in people well And

the So, three there's all And us. and are trial investment commercial there's significant clinical ramp. there's pieces execution by trial, those the of then clinical

Thad Huston

relatively are the be to once I in add. team, just support XXXX is is remains trial our a then would building because, I high also in is completed. for ultimately building why to the infrastructure, we trial, reasons of Yes, the the to support that capabilities mean SG&A still position the guidance start to but one

Mike Matson

minutes. components it the apologize the I first mentioned Okay. five about on to China? or degree getting out regards any to I And -- what And with know Do if missed Italy, of XX regard coronavirus to do your -- you with at much call. then Thanks. you any of you But very but in generate commented you of supply you I how the China? what beginning China? are revenue

Damien McDonald

good So, follow-up that's another that. question on

X% So, of in sales less XXXX. China represents than our

into manufacturing our account any supply yet, said. So, in agreements. China don't we We we've have limited only but I don't taken that in disruption anticipate as not guidance huge and

don't currently Chinese the we supply to exposed on any So, we're market. anticipate not impact our since really

two there we Tier any sure communicated quickly. continuously are and our one are Tier supply to said, Xthat monitoring vendors However, changes that make

seen of haven't procedures our we support oxygenation in as we also at but know that also a We we're that elective this we And sure -- with products. way an can is making moment. government If we're monitoring yet, important any the well. change the aspect in Chinese

through so we're requirements. their any working aspects of And

said the Italian steps. and like appropriate think with we fluid. starts, it's I again overall, we we've So We're day taken monitoring the think every it

Mike Matson

lot. a Thanks Okay.

Operator

from follow-up next -- Scott Bardo. Our have we a question

is line open. Your

Scott Bardo

Thanks guys.

given targets when puts of about Obviously a little and but before set. your You've few commitment a know been a quickies. we've your deliver discussed a of medium-term takes. there's just lot I bit me couple to time,

and to confirm commitment your to margin years? transfer talk you XX% you've take investments I get this But the margin, -- also from profile will production just like maybe out to with to can you today managing from couple your cost Saluggia. the to start next of little would of respect just business in also of a about where some that got be bit given to deploying some mitral you the

is that where yet? margin So money flowing just to not going? It's through

Thad Huston

Yes.

we absolute set Scott commitment a and we is We XX%. to have an that get we've rather there that soon goal get will we So understand out that that to than believe later.

we're the redeploying to the related savings a given lot For XXXX, depression Caisson back of significant opportunity. into

that. generating we're the is which is million business. the We're capabilities initial building investment commercial $XX R&D great level in making of excess and revenue to of in support But that both in

seeing that target we're kind great XXXX is opportunity I that and number. of that we why XXXX. that's not that like So in be this believe more should But we a to think XX% dropping

Damien McDonald

you Gross a -- is this So to Maintaining continues SG&A as us. for be a an margin XX. us. expansion revenue slide I'll for to refer signal important year focus percentage we of again

investing. upside that's leverage So where also is key, know everyone of DTD we and the sees but we're I think

Scott Bardo

Great.

thanks guys. Okay,

Operator

this showing time. not I'm further any questions at

Damien McDonald

And behalf everyone on support discussion. team, everyone. as the Thanks on entire updating we you And and appreciate again, of Well questions. thank always thanks, thoughtful the you we continued call. your look And forward to next our Sydney.

Operator

in thank you participating gentlemen the program. concludes today's and This Ladies conference. for

have day. You may all disconnect. Everyone a great

Matthew Dodds	Senior Vice President of Corporate Development
Damien McDonald	Chief Executive Officer
Thad Huston	Chief Financial Officer
Melissa Farina	Vice President of Investor Relations
Rick Wise	Stifel Nicolaus
Matthew O'Brien	Piper Sandler
Raj Denhoy	Jefferies
Scott Bardo	Berenberg
Mike Matson	Needham & Company

LivaNova (LIVN) 26 Feb 202019 Q4 Earnings call transcript