LIVN - Earnings call transcript Q3 2020

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Matthew Dodds

Welcome to our conference call and webcast discussing LivaNova's financial results for the Third Quarter of 2020.

Joining me on today's call are Damien McDonald, our Chief Executive Officer; Alex Shvartsburg, our Corporate VP of FP&A and International, who will be appointed our Interim Chief Financial Officer, effective November 1; and Melissa Farina, our Vice President of Investor Relations.

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

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

You Relations can Damien. investor.LivaNova.com. to turn find events, under the the now presentation and over at press section news release in With presentations website will call Investor that, I of our the and

Matthew Dodds

and these your healthy continue safe Matt, and times. remain challenging families thank Thank joining you, us, you and to during for you and hope I

having During ongoing the across across been team the execution global continue The has the COVID-XX results, full local and varied focused On of impact regions. business of to toward second all from recovery the basis governments compared hospitals segments, to scale realizing remains on a third navigate and the pandemic. our improved the portfolio. our September pace potential and and remained quarter, with as quarter, sales strongest

into update results, Before you we to get take our to to plan. strategic quarterly on I'd underway a moment like deliver the actions

We to there highly years, and to few growth and to taken opportunities LivaNova be the to management cardiovascular, and and our positioned platforms, is Board drive deliver achieved past deliver areas: ensuring we have that third, advanced on and more ACS; the LivaNova end, remain portfolio epilepsy beyond drivers, in to which and execution circulatory consistent shareholder work value have compelling shape to or value. our drivers, cash has generation. on support, second, growth of we serve X first, and core. initiatives are neuromodulation respect businesses. profitable on two the what revenue growth key and focused targeting our that primary on With number up best are are focused recognize Over embedded we achieving our date. is improving underlying profitability U.S. set team done To both pipeline; in ensure of enhanced organization growth delivering they have a patients the to their that our structure to

a of clinical VNS are patients We the and new process DRE supporting in will expanding care. strategy research of standard the as and targeting implementing continue go-to-market therapy

at XX% recent XXXX For the XX% we XXXX, expect of LifeSPARC driven at in continue least and growth least our to ACS, growth platform. in launch by

expect in or we machines make depression, HLMs. significant failure and execution, to pipeline heart heart-lung near-term For advancements

For early 'XX depression, that transitioning RECOVER late XXXX. by study or registry includes to the

of plan XXXX. we position HLM patients is the to failure, in commercialization, expected towards initiative enrolled clinical is leadership first continues progress heart market a For The in next-generation half first which milestone XXX that program our support achieve make our of will to and key XXXX.

and benchmark or medical technology world-class we we on we accelerate multiple to to initiatives and we a investments growth, to number taken increasing to cost these have right-size we opportunities improve as be margin along closer margins to have To leadership operational that positions position by in pipeline our steps and profitability. believe where will While levels. drivers. margins expanding segments any are in our improve plan company, the ourselves long-term operating growth. near- for clear, We drive have committed underserved excellence fundamental our end, core operating driving generation, focus of that result plan markets expansion are innovation with and To also growth recent to to structure, cash growth

drive to will need the dedication strategies, enhanced in core why we ongoing the elements we areas investors, these intensified months, growth and opportunities, believe investing near-term of strategy of respective over As each area committed part and on to Accordingly, are value. product our our key large and unmet therapeutic go-to-market communication share coming business shareholder detail updates we on pipelines. will of

flow to ACS, now to the results third on in of pipeline the US move sales review of reaffirm and our Alex the new Lastly, our patients detail I with quarterly finish our is XXXX. I of deliver our drivers, during growth the comments, the versus want and will to attributable and quarter results, pandemic, full-year before reviewing cash or the XX% of declined in X,XXX update to have the sales free you This for of who, guidance, remaining guidance. After will our additional results Epilepsy this goal my financials, replacement growth. provide quarter. long-term the our on both impact of decrease team towards then EPS acknowledge sales end-of-service XXXX our nearly and dedication the and patient implants. members primary Epilepsy and COVID-XX XX% continued epilepsy, execute with I'll declined businesses.

East prior-year second in both Importantly, patients the with end-of-service in business sequential grew new and of improvement declined third the region. the significantly impact reached the as COVID XX% -XX, quarter region performances Nordic epilepsy and over Europe implants. continued strong in levels, the sales XX% Germany particularly in with a at result The quarter, In regions. Middle LATAM and rest-of-world the of

at million now the In we commercial ACS full of XXXX. epilepsy still quarter business, XX% full nearly expect this non-emergent which compared in the cardiovascular an commenced represents our For of increase to we decline XX% U.S. of release continued XX% $XX XX% the the due DTD, excludes point, to LifeSPARC. across of third or That sales, quarter, on July, of anticipate progress to quarter. we fourth to COVID-XX impact sequential the U.S. the year, procedures. said,

quarter. into current on we our the some call, were mentioned orders As second quarter deferred

to team's in existing ability the with pleased and drive new both are uptake We accounts.

XXXX. grow in to XX% our to ACS continue We expect at least business

to of to million the Turning pause sales depression, in $XX previous the anticipate million. million $X.X treat for Consistent $X the difficult our now with approximately quarter were year. DTD Despite expectations, we caused to after heart due by now In failure, RECOVER target was pivotal in U.S. enrolling March COVID-XX, trial half to our over just over paused our ANTHEM-HFrEF sites have COVID-XX, patients. been just temporarily activated. sales XXX

has of quarter, able During patients. more reinitiate XX% to team the third more XXX the to than date, sites, was than the enrolled recruitment and in the trial

budgets sales were for a teens million the of due recovery less experienced third For the capital faster Oxygenators equipment. Europe, the quarter, high of a declined than declined XX% U.S. hospital the procedure our impacts COVID-XX in in the each quarter in business, in cardiopulmonary HLM XX% to sales third versus quarter. decline $XXX volumes and XXXX. and for on region

the heart Perceval quarter double-digit segment were in valves, Japan. performed for well in solid of to XX% growth, region, by sales $XX in returning the the million third decrease to XXXX. Moving driven quarter, the a versus rest-of-the-world of performance a

capital quarter sales cardiovascular in cardiac range estimated tighter and from are XX%, and and heart For to costs by some surgery the oxygenators of procedure of second Starting both growth sales largely on the to still reduced the in full-year flat we valves. impact the we third volumes be the offset portfolio, quarter, LifeSPARC offset decline. continuing from in the lower budgets our in down spending with to continued

actions delivered to $XX savings in priorities. reallocate resources our continue to We have approximately million These fund year-to-date.

initiatives key hiring adjusted and expenses, following: to government-sponsored first, include work freeze, we these participate a the Specifically, employee-related instituted in continued programs.

working shifted reduced marketing methods. field to related with our have presence, and events, to Second, stakeholders using remote travel, spend customers and we

consulting and output Third, we reduced external our with to temporary reduction our to demand. related we in staffing. other balanced the fourth, And discretionary spend anticipated coincide manufacturing

contributions for during valued thank his and I his tenure. I worked want to patient integrity Before transform many as call I LivaNova turn his the partnership, over, LivaNova. we focus, to Thad have

To of of COO as of right will the I'll Fisher. now to held to basis. was variety we has clinical President to roles, Alex he Vice a Now including FP&A the responsibilities call end, Thad Thermo for in prepare LivaNova, and region. of and Previously, to Corporate to divisional organization, this a and phase. the in turn responsibility, you, an organization. is roles leadership is well-known services finance you. equity-backed Prior on joined over at the end as us Shvartsburg our of information. private Thank will CFO review of of Sciences Alex. recently Alex He most interim a CFO the increasing CFO international at XXXX for next us our Genetic transition, of some the financial transfer Alex acted leave time Alex and to

Alex Shvartsburg

the the percent the XX%, spending versus for in net The reductions quarter sales is in R&D planned quarter and margin versus to quarter in quarter highlighted. a same income expense Adjusted Sales $X of from the third of of R&D $XX XXXX quarter from compared mix $XX were and was XXXX. third Thank operations to previously third year-over-year in the XX.X% SG&A compared expected manufacturing in quarter decline the million, in Adjusted sales XX.X%, XX% $XX Cardiovascular XX.X% results million a which the of a for of unfavorable XX% million percentage as primarily second XXXX. is million quarter third expense compared million by XXXX. actions result products. the continuing in was the year. were from Adjusted for third payment you, from down prior quarter The compared $XXX operating lower as R&D gross in This a sales of decline of third to costs quarter in third quarter the I'm were the net quarter was going XX% $XX XX%, driven up XX% XX.X% due the a $XX as of and for of Adjusted sales was expense operations third third of year. to Damien. margin million, million million, to down income sales SG&A $XXX to the continuing improved decline of Neuromodulation from from from third percentage the XXXX. net in XX% was in SG&A million, a compared spend third of sales was XX% greater XXXX. margin decline sequentially legacy quarter quarter. quarter third million was XXXX. detail. of variances. operating quarter neuromodulation XXXX. quarter in third million, discuss Adjusted $XXX last is was to of $XX decline $XX the

rate allowance partial tax in to is the The the tax XXXX. in income compared rate effective the lower X.X%, of mix adjusted and a quarter related third Our valuation geographic quarter was in XX.X% changes US. to in

compared operations income continuing the third was Finally, quarter the from in share quarter in per adjusted XXXX. diluted $X.XX $X.XX, of to

XXXX, XX, $XX $XXX September moving at December XX, million, up at was XXXX. from Now our cash, to cash balance million

In Our the financing impacted $XXX quarter quarter up was end year-end changes recent based of reflect million, net quarter, free was completed at XXXX. hedging of second decrease debt flow on of settlement U.S. the items, in dollar. XXXX. $XXX quarterly the the These negatively a from million our several including impact our sharp by the cash at

platform. Additionally, sterilization Capital develop innovation which working to cardiopulmonary higher our capabilities XXXX further spending our support Arvada we to and million the Houston first for million, the epilepsy both a related than for not $XX finally, year ATS; and manufacturing sales. relative to did to and year-to-date capital initiatives improve of as expected and is $XX in quarters was digital X

mentioned, full Now, turning and our are announced guidance. EPS reaffirming to Damien as sales guidance, our XXXX year we previously

updating assuming from cash and X% basis, between and free a extraordinary EPS, flow, XXXX full are recap To a items. to year impact sales exchange sales our excluding are constant-currency XX% forecasting rates the We in on minimal decline also we sales.

estimating share to operations adjusted $X.XX. of diluted from range are per earnings in the continuing We $X.XX

the items, in This We back call cash capital down some outlook the more of and $XX expenditure that, the million Damien comments turn to final With on change range million, $XX excluding and third reflects a working are million $XXX conservative from earlier remainder previously estimating to capital extraordinary now free flow, $XX on the of to to I'll million. projected for for my comments. year. the be quarter

Damien McDonald

Thanks, why questions. that, Alex. open for With don't Catherine, we up it

Operator

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

Rick Wise

changes, momentum details, year. that changes everybody. laying sales business 'XX, place. the you're start, the feeling these we all stepping that's ahead both side? morning, for Obviously, flow get maybe as has Damian, It before to sounds investors so many should Thanks for just reasonably taking XXXX? big it direction are are going point, on program does of reasonable fourth at on a about think next and setting it's the that, that Good actions But like, how up this I positive sounds the how some to cash set clearly, cost we into back us LivaNova are and for like look that quarter. out about positive the -- to side and up and and question. you're the the appreciate how

Damien McDonald

Rick. thanks, and very all, of what we're first we to the how And is we've clearly driving Yes, Well, lay intent think strategic out I to triangle. tried our call it that.

the First, it's signs to momentum 'XX focus And think intent tried trial but development. October, into with with on ACS. excellence trajectory. cash or what listen listen to maniacally seeing the out, on and focusing the like COVID to we're these we on operating margin early to global the the have U.S. system and our epilepsy discipline everyone, we growth encouraging. operating using been Alex from customers has opportunity pleased be momentum on to a clinical runway to lay about continue in there's what and how expansion to we've The LivaNova lastly, key growth both I, in out, about for the areas, pipeline, and focused tremendous particularly evolving, laid and and October there. operating that more billing and sequential QX is And and for enormous I we're drivers We the and generation. headlines, as QX focus is continue early growth, track days the guess, with business

but demonstrating, we We're shareholder believe on believe, very bullish about focused in can do, we So, drive we're we how we're things. But strat discipline is the there's recognize important. that work do and to quarters our what those value. more plan we to

Rick Wise

hospitals year. that's concerned that think next that pressure, -- the and been or you spending, give this right guidance? factor are in you're you Turning How you finishing you And the quarter, into again, to under been obviously, this head et that's into cetera, a year? as unhelpful capital heading a year headwind fourth as place you us about

Damien McDonald

we're of all I customer say said, COVID pleased track Like initial with continue I really Yes. would got that, lot the of feedback. the QX. we news. of trajectory a again, We've to

work You there. know HLMs and on ATSs rely are going continued to

with the able to we are We to number ensuring respond we're programs be capital interested of place and spend, a have support them. in able customers in to way to deal

it to cardiopulmonary. context, are Just put HLMs in of XX%

oxygenator portfolio ACS. have as We much cardiopulmonary are the also very focused that I on a ensuring us of ACS. other environments to expand, with is with opportunity that, importantly, in for we with tailwind the and mean, the we think continue that are parts I COVID-related

think that capital. think that's ECMO by really I And to impacted is I less key opportunities us,

Rick Wise

timing expect along? be, And progress you correctly, How you much. you just your activated. to enough be? is of Are one making it remembering be? some hasn't one you in for Just, last about thinking Are Damien. enrollment if TRD, where that about the sites you quick And me, where where expect you're it Are to accelerating? you clearly, commentary you changed I'm XX% far are again, the expected it? to of

Damien McDonald

Look, key for program again, a us.

And review again, to as said, 'XX transition CMS or timing. assume to on so, registry I in XX, dependent continuing early a late we're

is we've the more as we'll of been half headlines, February. But the But do next there, environment. progress able happening this sites, our everyone the thing we than of what's sites we we target quarter, sites. of think in in reactivating best I I think, more provide our importance the since especially and lots importantly, patients, started to as and depression to through for activate this to all do reads and patients with understand an there's that update believe know

people So study. think argument we in for there's a the engage compelling to

Operator

next comes with Our Jefferies. Denhoy question Raj from

Unidentified Analyst

on is for Zach This Raj.

for Just two questions us.

XXXX feel where do in also, comfortable On as And where provide to OpEx you X%? XXXX levels? the to then, you spending, out the see guys down comparison down on volume a you guide, little bit color to more XX% models falling can

Damien McDonald

guide, days think seeing seeing is giving in, in about world encouraged, We're improvements. I said, programs. I the October, best we're what seeing again, how those said viewing what we're So notwithstanding on you And XX view for our I as we're the COVID. first

very we're operating OpEx to OpEx margin are of and trying R&D again, on we ensuring in guidance, discipline ensuring terms here we're expansion. core have focused and But more focus is what on give focused XXXX on going In in guidance that February. programs, I SG&A and we're to think message a and

Unidentified Analyst

bit flow bridge and can the on And XQ updated a provide for color cash you the then, guidance, also, guidance? free on expectations more from the

Alex Shvartsburg

I'll one. the hedge really say relative for the debt Zach, our X X the question. out we positions, and which intercompany at time that dollar, sharp and issues to thanks your we Canadian of in take the came impacted or QX: saw in hedges dollar this euro the would settlement. areas I declines U.S.

the just or we capital, the The in really we that quarter. see around expected velocity is had item second the improvements, second and issue working the didn't

So just [Technical looking Okay. at Difficulty]…

Sorry about line that Zach, cut. sure that folks. how We're got not

Operator

go Okay, ahead.

Damien McDonald

Okay.

cash know folks. that just about how not come you you Do Alex? cash I flow to cut. on flow. that lost back got sure Zach, on you Sorry and want where where don't free the we line to were, the We're Zach free

Alex Shvartsburg

two saw items I just we in wanted So quarter. third the highlight that to

relative the and -- debt dollar settlement the those the positions. dollar dates. And impacted First dollar Canadian of currency, sharp when really all, decline on euro to intercompany hedges the we hedge the our the

on relative sales progress the in the one So we didn't capital, receivables then velocity. one, the was area. to working And see just that other particularly

of much as DSO, expenditures I see -- outlook year. just we're earlier, didn't but for and as just we're remainder the capital of taking terms was And conservative working in We guide, to saying more a progress progress. continue on capital on make the the

Damien McDonald

I'll it about back Catherine, you. sorry folks. send that, to Again,

Operator

Our next Piper question comes from with Sandler. Adam Maeder

Adam Maeder

from in couple any patient you're maybe And but QX. and levels. Are starting in then we epilepsy I'm me, get terms the follow-ups. a the to might all and snapback to of it way an just to the few the with this back, drug and that compares how update activities around saw that business nice Just additionally, maybe visits And referral updates nearly pace new what I a a epilepsy, have curious of all front, the side? in just back? on on the be tough way decipher then seeing competitively environment, pre-COVID

Damien McDonald

I QX. mean, over quarter will very say the team's we're with the execution and I pleased the improvement sequential in

Let's I what we faster given one how in-office And NPIs end-of-service neurologists And that's than than implants, believe we probably to I procedure backlog since before context it surgery, and patients. all rebounded device patients again, final we return Xx of NPIs, recovered end-of-service put important, a at for think that compared they large new for end-of-service not and levels. that's end-of-service But interrogation probably are to think know elective believe and their patients seeing in of to a both rebounded. doctor there's NPIs. less represents and a scheduled require pre-COVID critical

in early encouraged by on. by improvement. encouraged we're the think I We're So QX we're what sequential seeing

I and think data comes neurology down we've And fundamentally neuromodulation. other between of difference a I data looked few a think that things. there's business internal our to and at as devices external

for skew that pediatric you Firstly, patients us. have

aspects key neuromodulation than of we probably a our that of one more pediatric other have is So businesses. lot patients

we're watching seen other other And patients thirdly, in very neurologists. faster in-hospital rebounded procedures, rebounded I'm also need surgery make So than -- to I neuromodulation I'm I for the for we've than ACS. epilepsy. we specialties than about I devices carefully how three neurology visits like in-hospital Ambulatory centers haven't using. And just extent clear gone seen ambulatory work centers, letter surgery have also same back have with skew we've think pain. sorry, more which think acronym In-office to sure those ACS, secondly,

we factors I'm So monitoring of us really what seeing, important the I'm quarter. for by are the continued encouraged drive I'm those encouraging sequential three our improvement. how in but

Adam Maeder

side? On the drug

Matthew Dodds

our drug guidance broadly, our into still On did indications. launches, impact baked new our That seen some would I as recall, forecast. XXXX, can you which, be side, we've what from force third-party we've the again, in nothing both factor, say impact field data new and on the minor. tracking is our year, we -- initial has in think feedback, this we relatively from has drug been drug influenced forecast

Damien McDonald

And question. you said had another you

Adam Maeder

I portfolio in the and more. in There strategic if you on few Actually, update two sneak color including a that the appreciate call. on beginning or My question certain gave actually of at divestiture letter, proposals I the is letter, next shareholder the shareholder can outlined businesses. the of were management

that you something in that potentially could or So you any CP my give looked be with the at that question is, color would is that specifically, past? would entertain? is explored appreciated. you that something And much If there,

Damien McDonald

good feedback for I continue that. raising engagement the all sought we say, shareholder say the not Yes, honest to me with just candid all I received. would appreciate and really see And our we and and a all, first letter get. Look, shareholders, thanks we -- let of

strategic this, appropriate right think with I opportunity we've past most the is footprint. aspect portfolio On investment discussions issues think, to that continually done, to Board ensure the management, have we about and for our our the best And would were say know us. I I evaluate continue we've of got several we the in raised. the what particular that portfolio

a So we've number past. in taken the of steps

untapped say, those recently, realize continuous Board of the scripted both most comments, I those both would neuromodulation We strategic potential. as July and said we I have And full set of my X their up of that potential. and today, dialogue to plan. ensuring have meeting with cardiovascular, the devoted compelling these have was as we're our to platforms, Board, are in And think I businesses and

Adam Maeder

get timing. I this update since gotten on there, potential there, about a ImThera, while if hoping so an color to how last and it's appreciate you're can just one I thinking And think was it. sneak we've around commercial incremental in just Damien. pathway the latest been Got pipeline thoughts that initiative, just I regulatory

Damien McDonald

to the do two with to has a and that Yes, protocol close study what much stable that how FDA, with IDE design more completed we the We've submitting and very it this generator. a that the we to things to that. the we're that the FDA. make come aspects device. And modifications discuss you the One auraXXXX to secondly, IDE. team was But clear, those, we're pleased needed preparing then, we can to we'll pathway on back submitting to the And have to once dependent the is next. all really with responded

Operator

comes Our Baird. question Michael with from next Polark

Michael Polark

a has call the variances. another But about your structurally, margin, looking obviously heard anything your gross that that. unfavorable here manufacturing the from to say, is I major and comment is call; platform, changed On on margin today get understanding revenue influence potential hard versus, gross mix and XXXX about all manufacturing XXXX? at

the more future, want what year as normalize mix were were "normal" just years, future next to there last understand, we margin continue structural or of I So to into can't why out and are reasons the model if normal saw beyond, revenue approach any couple epilepsy we to gross and the to a year recover?

Alex Shvartsburg

the fixed think I'll the on about way Alex. within The to it manufacturing take dependent facilities it's Michael, is is, overhead throughput. our one. this

impact reduce overall as as the our under-absorbing we velocity, on as preserve well of inventories capital, just plants sales So, reduced given running essentially, and our fixed manufacturing the build we're our that overhead. COVID working through situation to the volumes

think rebound, moving So, we as that will and itself. about expect take our business to care we forward, of

Michael Polark

my numbers one you the in a and lot that this it's so, your like and numbers, the of contingent But if out If million for a not, only reconciliation, But mention adjusted cost unpack there's I early, And up, the tied I'm $XX.X together? remeasurement. and of R&D Alex, screwing if that in me. Are halfway for line, non-GAAP what I'm metrics. those one please line? me that more? through in A GAAP is consideration a you. of R&D looks pulled item see adjustment can forgive maybe release, another in two coffee. the a little the it's in

Alex Shvartsburg

So related our ImThera and this acquisitions to TandemLife. was of

And well really assumptions earn-outs. quarterly accounting as mechanisms, on as or of basis, the that. rate, discount drive at it's so around kind considerations the a that we discount remeasure dependent looking contingent our They're rates, on so, the probabilities the

these of No real So our there fundamental. kind adjustments, nothing changes are accounting fundamental structure. in cost

Michael Polark

though, on presume, P&L, bit a reflection on it's absorbing it's the since right? I a quarter-over-quarter. the liability, that cost are contingent better, a little a cost things You're of

I better. This seem looking that at something is, experience because has So an that's a bit is unfair way least at of something, it? benefit, mean, that to my has unfavorable. relative little big to you with took these if imply gone would XX, June a gotten

Alex Shvartsburg

and all just so to based it's it we're an discount on change. kind of reality, estimate, The -- market that's natural rates tends and change

had seen prior you've ups we've quarters, on our that downs front. some If and

leave just I'll it So that. at

Michael Polark

in Damien, the what terms communications communications Last months LivaNova some about of should I'm like and/or coming about and over one. mention What that I expect? we various and/or upcoming a heard from business events look just lines, might curious, quarters?

Damien McDonald

one? want take Melissa, do you to that

Melissa Farina

of the over few Mike, side. next with a months, be we'll So, in education holding series the events conjunction sell

support. is Support Simplified, depression, advanced follow event We'll those with up first and epilepsy, failure. in will be the sessions scheduled X November heart Our and circulatory about for so Life education

year into definitely as so, the year. more through we and progress this rest of next to And come

Operator

with Bardo comes question Scott from next Our Berenberg.

Scott Bardo

to, pent-up VNS XXXX? you're the it And but any bit like, second down reason please, cash. for is, demand neuromodulation is declines. business. Abbott's neuromodulation quarter, to in to nature the a alluded as was neuromodulation sharply, relates having if you flat, I performance on business, in still there you little think was leading neuromodulation side, broadly I I growth in the of Damien, but to some not quarter, such third it question, the here broadly the look aligned assume question disproportionate with some in guess at your Second that just

group measly million, the million ago, was months million, XX than $XXX $XX operating so. a $XXX in cash, only was million guiding see now we rather $XX million, it $XX think I and for or

has is a proxy up that broadly, So, cash getting for XXXX, to reasonable look elevated as we debt. be and likely down been thoughts margins into paying historic -- on And XXXX? more

it quick have a follow-ups. couple So I'll leave and I of there,

Damien McDonald

Well, a few things.

quarter me for in XXXX we'll release fourth let we February guide when Firstly, say broadly the results.

In October, markets we're I'd are And here do on for about to it and opportunities saying solid say performance. continue evolving to are like And the see epilepsy, seeing again, with of pleased COVID. other focus are seeing how the improve pent-up what what us a terms this people I'm end-of-service. sequentially to to notwithstanding I'm team that their what

on. little engagement already right One the is I've is to populations. our that go-to-market changing of, at with a focus sequential to to on are regardless not, aspects bit commented End-of-service, two DRE the who with U.S. thing NPIs more in more we how what we're improvement. one So, that driving strategy CECs, There's end-of-service. continue the is going that. the XXXX aggressive about thing we've our be have talked to NPIs, levels and other or recently believe we're the large

educators. focus there the intent our to MSLs patient-nurse clinical to discussions, evidence key management, account is engaging with and So continue and with our

that. looking we'll about talk guide we're the year. on you new group the more Do said, execute want XXXX in continuing So to broadly forward cash? about I with to to as And

Alex Shvartsburg

and the in cash trying to definition free recall, XT We're quarter this activities, for the onetime kind flow. easier for from us. metric the any just make cash you really tightened guys to announcement, in up if less second Scott, benefits excluding operating the flow it for reflects free of follow we stimulus. of tax you earnings extraordinary activities So our adjustments really current It case, litigation the big investing

Scott Bardo

And definition. XXXX the under was old

Alex Shvartsburg

Yes.

Scott Bardo

And paying maybe part that I'd attitudes of there's broad a like which to please, profitability your improving which to you down is just debt. hit, question, and

guidance update quick, of out new in excuse the have some talk appears Polaris maybe to pipeline What we -- real me, the and some market we that broader that, the new education lastly, a (inaudible)? could heart-lung an giving be developments, somewhat helpful. framework If thoughts you which a And base medium-term whilst can outdated. having please, I And are business just would to on here? events, the guidance your have appreciate

Damien McDonald

things. language. few and operating uses that excellence OpEx, Broad a of So attitude of both

more that operating to SG&A more being reductions And respect. and and those more R&D. in quarters prudent be lines be focused drive Our disciplined both on with last intention two the to seen in that in is expense you've

intention prudent our more is be there. to, So A,

like like at pay around appropriate Secondly, down a that. past. generate there. program application cash. talked we preservation And the the what and do would lastly, normalized of this so intend our to looks that debt we've more And about back in more look that we get But to and cash again, ratio whole

Polaris we pipeline, business the base rollout machine One program, trials. to continue commence to expect is major Secondly, have that the two programs, heart-lung excluding internal in next-generation XXXX.

development. we around us and in impacted As but a the of COVID, call, suppliers software by with we the their importantly, engagement last mentioned were by number

with and this. there's we'll work SenTiva, as pleased be update that we're And And again, And the programs to on that we're there. in to XXXX. how is So SenTiva, multiple out along those is next-generation pathway on multiple to continuing aspects that evolve next-generation there's One expect to this. rolling aspects we program and that IPG, progressing.

initiatives. is FC program. to and investor want program the of our that pleased the important that talked aspects and The digital one about… the whole how Do importance app other development patient other of but And aspects our and world, COVID are to thing to Those the epilepsy that's that less about, that attachment clinician update Hub have we information probably we've and on provide of patients, in mentioned able we're roll our FC calls. talk this we'll that started in you to engage with we've out, and been very focused with being of

Matthew Dodds

that gone I and XXXX. have know right into couple picked. picked, our that well. would to On expectation site, virtual. that's done a for it's roll our But an once seem Day. Investor actively we looking at decided we're They XXXX, We the thought now the and Day out. site have but the to pretty hit, was date XXXX. date of we We push companies Scott, had Matt. planning were the it And Investor in the COVID

Operator

next Our Matt UBS. comes question Taylor from with

Matt Taylor

cash by flow I the wanted I'm guidance. just confused clarify, to

$XXX XX% So, the on a you're year. to you're then for GAAP XX% basis, minus million forecasting and year-to-date

step-up So flow. it huge Because bridge? a correct? excluding $XX implies adjusted the a with minus I that on million But litigation, big it's step-up cash basis. GAAP it's QX. QX? in help us that you're guess So so to implies Is get to you that a Can just

Alex Shvartsburg

correct. That's

in the settlements we -- under definition. excluding are revised litigation So

is And look -- obviously, generation cash cash working be profits, improvement, QX, this which our so, to in continuing QX, well drive driven we as our capital going improving as to improvement by, are as our down. at

Matt Taylor

guess you about then, review love That the How of businesses. reflecting see last synergy you several on basis sense. you could talking efficiently merger together? different as thoughts businesses Could lot years as see that a on stand-alone they operate nearly strategic just think more together? rationale I you that the separate Or between Do with these And I'd strategic the on that? Okay. on the really do do do your all to them? here, much makes a you're keeping and you

Damien McDonald

with great discussions And a we is the this a say question. the of part Board. That's would have I

going is I are think Both ensuring them separate. of have look that a we set have, on get separate, two to of is at to fact both what deliver into should I'm up not businesses think, the towards not we these important to potential. platforms. we're able working those I the And thing potential. that be compelling uncapped -- to

ensuring towards we can is to exploring the grow. that of and develop, of plenty I those that important they that work both their still them think, can way profit. they're their operating can think And grow, way thing sure making have room of are improving the pipeline both the I exploring businesses,

Operator

from with Needham. next comes Our Mike Matson question

David Jackson

Damien this on Mike. and Jackson David is Alex, for

programs. some clinical on of couple a Just these

us XXX when cohorts? think those bipolar the any I First, in unipolar patients and many color now so expect to and on are analysis, for you where to on you've get interim you RECOVER, levels? you enrolled how on can update and XXX milestones were

Damien McDonald

people got two of know Yes, you're those studies. and has of a I one detailed the who spot you're on, view

data. at unipolar the that milestone in XXX we the XXX in can arm, the bipolar the right, first take review where arm of You're a look is

milestones least We of to expect 'XX. the at arms XH in one those reach Both are enrolling.

between And by We believe that know And that get start data. we target arms at to enrollment looking continue to mid XXX the both we once you once then, and separation. that, those we'll power if add 'XX. we'll know at the to anything to that, we start there's be able get to want in more? of study, significant milestones, don't so I looking you

Matthew Dodds

what that's I spot on exactly told. No, was

David Jackson

and quarter you then one at a clinical stuff. think XXX, think functional 'XX. label you're you can you I on XXX, On said ANTHEM, And another get said and I at first

patient So XXXth to how enrolled the that get after do label? expect long is you

Matthew Dodds

So XXX follow we We up months, time that after them so to it, have bit patients, to a of the at the we that. review data for nine submit essentially, is little once FDA. obviously can

for essentially then the XXX, the starts at follow-up. So, clock

cadence we XXX. the submit. be The other nine looking have enrolled at is we with that an in should to also XXX go caveat before should all, patients to the But issue months, it that have hand-in-hand the not that, at

essentially, an XXX-patient submit milestone, nine be we'd and enrollment the to idea you'll when the FDA. get then add probably of to a So, months to to year ready

Damien McDonald

discussion that designated that and a do sign what product, products are hugely breakthrough. U.S. expedited and for CMS is is And access normally very about a going year on reimbursement exciting the the collaborating. have approval this that encouraging pathway through we FDA so from we think this right the with for current approval payment window is full bridge bridging in long -- What's between CMS

David Jackson

Is XX or is XXX of one the two after hit you and flip independent months to RECOVER. And a enrollment milestones? the XXX, that sorry, another on just I registry those

Damien McDonald

No, data what registry. to need you to be that's flip to that able

So 'XX, CMS' on 'XX, early depending that's why we're saying review. late

As in the been our or with milestones requirement. constitute we've said them the working statutory relationship before, there's and of a registry. defining well that this would on whole we've But study flip time-bound no terms

we're early on 'XX, continuing target 'XX, that again, to their So, late review. depending

David Jackson

Right.

Matthew Dodds

time is registry a that depending so It's be than And endpoint, the for it patient Mike, could there the months, conversion response. it's the XX is during their less doing endpoint months. in how well but primary XX-month on XX [phasing],

obviously, low. So follow-up getting odds hitting submitting, low plan and we the if with patients talking getting when to a little of because, is at lag it we're on of but XXX to XXX look bit not there's you the -- a about XXX -- impossible, statistically at exactly when and there

time how in of So follow-up the the you back each we into can patient's of about think kind trial.

Operator

to in back I'm any showing turn to management queue. questions closing I'd like call the no further for remarks. the

Damien McDonald

and to delivering forward and you, is LivaNova. updating of support Well, world like We look an forward you. mission, patients your thank important our thank And and and Thank joining you, next everyone, we'll updating that and on Catherine, continue in you. you going I'd just on shareholder today. around our driving engagement again We're the to call. our believe thank you of look progress value lives all for for us improving We the to hard to drive commitments.

LivaNova (LIVN) 31 Oct 202020 Q3 Earnings call transcript