LIVN - Earnings call transcript Q2 2022

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Operator

Good day, ladies and gentlemen, and welcome to the LivaNova PLC Second Quarter 202 Earnings Conference Call. [Operator Instructions].

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

Matthew Dodds

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

Alex, Chief to pleased our and into on Briana Officer; heading appointed Briana been and Director me today's promoted Relations. are is work that newly McDonald, Joining the Investor I Lindsey Investor am has call Gotlin, our back Alex announce now Finance Financial Chief our Shvartsburg, with of Officer; to group and moving is Damien Relations. Executive Little

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

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

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

Damien McDonald

I by results, financing us, to Alex initiatives. to our our on my for our and discussing we additional will strategic reviewing growth will everyone up conference and COVID activities Thank regulatory and closing support start portfolio wrap second recent of quarter in for you Advanced a an driven call heart comments decline you, hospital XXXX. the on in with revenue X% quarter quarter, before growth, achieved provide and and was outlook. excluding I'll details severe unfavorably moving by In significant thank cases results impacted year-over-year neuromodulation. welcome joining This the updated revenue second After by staffing cardiopulmonary to challenges. our and Q&A. Matt, was valves. comments,

Now turning results. to segment

in In of driving volume For the with in revenue rest regions. quarter Epilepsy system to the X% the driven of sales through replacements. implants in with US This the be during the regions. favorable mid-single continues our We to staffing the was US demand year. in continue teams. NPIs growth postponements. the grew strong considers teams Year-over-year offset commercial year, lower world international volumes. epilepsy This versus second prior and growth by execute pandemic on region in a improved XX% led were of by by to to first now world achieved X% primarily million, above digits. was dedicated for prior US strategy revenue cardiopulmonary which basis, segment, versus be US, by world accounted compared account CEC grow digits, region. X% sequential basis increased particularly and and implant revenue difficult the Japan implant These especially as as high to second onset. the the rest the down half Epilepsy continued the On world by HLM, the to to X% business. range and related the continue SX France total revenue The led impacted for XX the year-over-year execution for full the currently increased performance year. second were and rest quarter commercial was in XXXX, and key of implant pricing in Europe given baseline of results in team increased challenges total were single epilepsy year Oxygenator implant volumes initiative, XX% by the of partially Brazil, Heart-lung led the same recovery. flat comparisons quarter way a relative mid-teens, expect is the the of in led by LivaNova XX% Europe growth revenue in by deliver go-to-market pleased application and well the rest the procedure We growth driven since Germany. sales highest growth the increase US $XXX on of Procedures cardiopulmonary as business the last encompasses of revenue results grew absolute hospital commercially. versus XXXX. an the machine Taiwan. particularly mid-teens, continued XX% by driven revenue COVID quarter

expect X%. epilepsy grow to to global full X% the we For revenue continue year, to

in new implants the of care the expect as gradually growth to sequential includes patient improve. forecast Our through challenges year health we remainder staffing

in to anticipate In the continued created during related a tailwind replacement addition, implants pandemic. backlog we the

in pleased go-to-market lower to initiative and continued the of the progress a leading with cases add period. year and XXXX. quarter the plan reduction hospital second additional second challenges in versus volumes quarter, primarily decrease Results by ACS was representing the were in severe the teams impacted X to procedure staffing revenue are of COVID We $X prior half. from the a XX% dedicated of million

Notably, require volumes increased suggests acquisition. by severity data declined nearly ECMO to mid-teens to account that case COVID therapy. related XX% volumes hospitalized the year-over-year, fewer driven case in field Our non-COVID as the year-over-year progress ACS ACS that patients

mid- now ACS in high be expect revenue to down full XXXX, to the For the teens. year we

achieved for COVID or Medicaid growth on was supported cases goal that diagnosis in evidence double-digit Our in-care Hemolung system US and to further our October technology in are A assist for It believe effect forecast growth beyond. or awarded expected for step respiratory towards XXXX will treatment The new approved to the business The non-COVID clinical Monday. has this Centers return sequential reflect updated add-on been into to decline in cases. assumes and technologies positive and NTAP, this We related patients. Medicare improve to of XXXX. designation X, substantially the by NTAP a go and beneficiaries. will is medical novel payment, services Medicare

As second business heart last $XX valve was of revenue XXXX valve and was a quarter for on reminder, our heart June X million. divested the year of

portfolio strategic DTD our for the was second $X.X to revenue turning Now million. quarter initiatives.

by revenue assess of if continue. to study interim the controlled should been study success we XXXX, reached that predictive DTD continues of For or approximately momentum. anticipate is cohort The has will million. probability maintain randomized with RECOVER frequent analyses study now The $X if designed

we needed likely As stated a previously, series over of time. collect interim analysis data follow-up patient we believe is as

data this for patients, analysis look unipolar expected which or interim in is heart all for patient to would success anticipate expect at to towards anticipate analysis conduct in to unipolar next In committee We the early the to quarter. prespecified interim continues met, the to independent Our US functional study a and trend the If date trial submit statistical X cohort have conditions ANTHEM-HFrEF XXX XXXX. primary the failure, a the the the the after interim analysis safety, FDA. longitudinal 'XX enrolled, we transition the are XXX including is endpoints, endpoint late the still with advance. we in confirmed continuation month. cohort pivotal will which study's prospective the next fourth The functional

are the of sites occur Moving which of active, XX in The XXXX, All recruiting anticipated patients. for trial XXXX. submission half to assume latter study OSPREY to the with are FDA OSA. decision continues in majority progress. a We still to approval

comment litigation. of Court hearing in October Before The to we a X call has turning And the I appeals over review and liability wanted on I'll SNIA the been and Alex, scheduled Supreme call Alex. the first half turn to with anticipate provide decision to that, a XXXX. the the over damages, of to brief for

Alex Shvartsburg

Thanks, Damien.

share and full on of of results recap provide outlook. quarter XXXX my a second During call, portion I'll commentary brief the year the

XXXX, a heart X% increase versus valves. results. to excluding the was Revenue $XXX quarter Turning in million,

for XX.X%, down driven by million to Foreign line with quarter was quarter of discrete XX%, R&D operating with impact XXXX. the of second quarter mix. as was acquisition $XXX in up million percent the Adjusted was impacted last favorably inflation. The with tax an geographic or second was approximately XX% of chain revenue pressures, XX.X% divestiture expense as in was second mix, the the margin was second to geographic $XX from the tax percent heart $XX quarter second XX% mix in second as higher effective Adjusted XXXX. revenue for million costs supply result $XX income gross the SG&A and a of lower operating Adjusted of percent million XXXX to of was in year. quarter the million compared the to expense from including and in is in to of had line product $XXX quarter a R&D a second second combined the was the income XXXX. ALung. as and quarter Adjusted rate in freight Adjusted Adjusted inflation. exchange compared which in $XX the XXXX. was million by million of SG&A valves, net in quarter compared quarter increase the product XX.X%, of XXXX. was offset rate quarter net of quarter gross changes XXXX. revenue of was $XX a of attributable The second of compared second revenue margin income of unfavorable and in X% XX%, the geographic Adjusted of and year-over-year X%. net by items

a compared expect second Adjusted earnings For quarter the of $X.XX tax we was per to of year, XXXX. range X%. share diluted $X.XX full to rate in now X% the

XXXX. Free XXXX. second of million as by pays reflects half short-term mitigate of operating quarter inventory the LivaNova million cash XXXX. to $XX second to XXXX Capital $XX were for in in relative the lower first chain million million compared flow impacted million, quarter was in million, XXXX. $XXX facility The The investments June flow negative cash was unfavorably builds million foreign to risk. debt when $XXX was cash half term XXXX exchange payout the inflation, held facility million the bridge July. Also, activities, first incentive primarily is was at compensation. we XX million balance the by litigation in $XXX The at cash Adjusted repaid year-end was into relates up increase entered that for in the flow SNIA of up loan from executed guarantee, the at as $XXX XX cash replaced free February. XXXX. and Total Our facility restricted at collateral bridge $XXX performance $XXX from reflecting to supply compared to June year-end and quarter including from $XX higher

Now the our turning Based the to challenges, headwinds, chain and are outlook. including in anticipated to year we currency and first full XXXX half supply inflationary updating the foreign environment our performance revenue our on continued of adjusted EPS outlook. an free growth range year expect excluding range currency an flow million. $X.XX of We revenue valves, million and cash $XX between X%, adjusted now to of constant to heart $XX X% $X.XX

X% X% assumes exchange $X.XX Our With over to EPS call and a to rates. outlook the headwind turn from Damien. that, approximately back revenue I'll now

Damien McDonald

Thanks, quarter our of light of Alex. in underlying macroeconomic second challenging the strength portfolio factors. illustrates the Operationally, performance diverse

a while full we commitment patients growth line therapies top and external to try differentiated products and year navigate delivering updated reflects outlook drive a environment. to to the dynamic Our

Our triangle questions. shareholder that, LivaNova value. the to emphasis And positions we're by long-term us Melissa, drive the with to system strategic open business on underpinned

Operator

Michael [Operator from our today question be of Instructions]. Polark taking Research. We'll Wolfe first

Michael Polark

at to updated looking -- there ramp the revenue is Maybe starting, ACS, pick the back sequentially. I'm the is or to implied on up guidance, there implied curious revenue

there, from the growth confidence walk second how a erosion in quarters and you on that of business couple is case back the evolving mix going after away to get due So can of a be COVID you puts patients takes half? to us of gives sequential trajectory you through what that

Matthew Dodds

Matt. Sure, well Hope Mike. it's you. It's with

the you is at look more And QX the year, Damien And to when QX we procedures said, XX% There's And the the in that an now pretty assume, dropped will as from think chunk even procedures. year, a that's why changed big a we COVID what's ACS, it's we last know for full improvement at was some drop So monitoring. QX. procedure But do staffing. to half, if in there very of look up. a of you complex ACS, be second for lot set mix. in

be on they So on it could days. you to staff around you're because for have multiple to if going put have someone ECMO

of thesis. part one our So that is

other The X some is generally to to sales time, performance. and growth in part take that we months did force last their see year, the X expand does

overall. respiratory are continued also Damien X primary cardiac the drivers of those highlighted, So side side, the business, as has grow. And not the the to

that's in half. also So to help back the going

Michael Polark

have provide have mentioned question? you is depression, in very curious, you next the this close patients enrollment enough you interim insights kind yet Just X? been unipolar specific month. in or the On in on there or how of Damien, XXX guys week the analysis remarks, next kind you that expected are your reached is to I'm prepared expected timing of arm.

Matthew Dodds

Yes. we the are saying the month. end why of readout by pretty imminent and have It's that's the we'll

Michael Polark

Alex. for And last one

the excluded loan replaced Just EPS the to confirm the bridge EPS that outlook? in from the still is cost new the term is interest updated that adjusted from guidance,

Alex Shvartsburg

Mike. That's right,

we're extraordinary fact, before, item. said SNIA which is, to an related I've It's the loan term of this as extraordinary item. sort in an treating litigation, As

liability such. become or So it perhaps redeployed. about the outcome we are part to know capital repaid of until hearing, a permanent it we treat going of our be -- the the clarified, to is continue will or we either structure Once will as

Operator

next Stifel. Rick We'll of today Wise question take our from

Frederick Wise

my that it'd or month registry, let's timing data -- next for presentation. along expectations want start from be, I'd question, this this that steps. maybe with how shift be timing as next always you actually to updated -- month, will you will share encouraging well. look mean, RECOVER guess response good I I it's hear your about CMS next to the are what communicate thoughts line? say, later you'd the of to that Any current of this One, to about the

Damien McDonald

had Medicare time thanks pleased and the really the here. making of us. with non-Medicare us Welcome, for been has The of good. patient well. a to helped the We're quarter, The continuing progressing to bit mix get closer Rick. non-Medicare which a is We Thanks, enrollment team how in help burst for patients XXX. is

early And transition 'XX, XXXX. to this so still we're progressing late registry to

though to you assessment that the somewhere is kick patients. in know, being range to sort XXX so of XXX, XXX fact As is arm -- And each probability in able it's XXX powered the run to starts patients. still

I flow if So have really great we're to of there we patients get that, workflow of The we move registry. but to, good progressing work we've earlier to we'll their do run to got that get terms assumption a communicated the in the have full we're than whole the that we quickly signal a for hopeful job clinics. with Once the XXX. team think with the that signal. we've the a And done

only data, key the it to have of thing not submission they've have other to That's work the get started to step because paper is also the published we for CMS. shell have do The a very on do for submission. the we to but

of their quickly submit work are to patients, with I paper terms and is to as of then in registry journal selection the the parallel the a the for tremendous the move imminent. So preparation, as also move think, really team, possible, doing both

you bipolar Then with view progressing the And is So we're I'm of bipolar. But said been recruiting whole pleased our an has really as this I again, to if focus our of because the that's how will, course, application arm. expansion, on the all before, really turn the energy I've of indication will, unipolar therapy. of slower. And there. sort for

then, next. it's Unipolar I So will on well said, bipolar as progressing and be

Alex Shvartsburg

Yes.

we from to to shift And actually so for every the we that. year add the to have for to anywhere major hands timing, for X submit year, up in publication, a be X CMS' next as -- point, we X analysis. the then Damien's months registry months add decision, X the journal to patient to a early for year, about a to it's months would on this in Then year. have to final get data, follow to said, could it Rick, for a late So which assume when up year, we

none of that's changed. So

Frederick Wise

thank you. a Okay. run down, That's great

it, or pieces maybe rest Or or maybe some what Matt to more early based our you But it's rattling you for for think us that would the on, thinking in I about earnings a about hope think middle the to I as about there. contemplate wouldn't maybe you ask of when reframe My what could pushes there's your think no third -- cetera, to XXXX factor. little give you lot promise you Where challenges, you -- give I'd range? geographic the a going you but us this I currency -- chain, want say I 'XX you the what I'm have your guidance about Turning 'XX? made upper we the lot of can't for sorry, having of us thinking? -- lower question. are help color, as and new give the talk there. being you the on as we're to moving us second could that to And us revenue I next to myself. are would apologize. as I end assumptions I'm just and know et end hope like setup guidance, question through supply that you track the just inflation, me a know models. comfortable gosh, now say appreciate year, to are range, But week in quarter in the and of here a is season,

Matthew Dodds

Yes.

that feel the with of we performance first midpoint from of business Rick, believe we're as we've X% in of this the -- half, the our far start with in range. out as guide, confidence that where we strong sort I sort seen we epilepsy, range. achieve the I'll X% us can guide cardiopulmonary like could comfortable achieve So which still the revenue the growth to gives

So ACS already. is And that's midpoint to a be. about in good that -- we place talked

our If assume we of profile sales, XXX to by lower you fleet. about still relative below cardiopulmonary expect the margin line, of the XXXX. higher to carry the a which of basis margin improve now look a mix sort rest gross relative to points We

and that continue read partially of kind the We it materials and labor high to watermark. continue to manufacturing take with to efficiencies through anticipate costs, will a offsetting sort pricing be input time of results. actions, raw to We're but select

expect have SG&A higher some stats due exchange to to But and from I've impact, As you with we foreign far as driven regard stated, costs. freight is call. one-on-one continued we $X.XX share the our is line a driver X% can X% it's when on concerned, income. we primarily all impact the primary that's to be to headwind perspective, costs operating a it With been And top a just skyrocketing, inflation. have by this Freight there. as

this feel it's we We guide. So pretty sensible. good about think

Alex Shvartsburg

like point, yet, obviously will guidance exchange, lightens well. can do current But into And that I not it's XXXX exactly on into it as some other math giving goes know hard when your a foreign inflationary the up. that carry rates, of is would then there the lot but Rick, pressure, XXXX we're obviously about say, talked have year. to companies you And next to risk

Operator

Mike comes of Needham. today from question next Our Matson

Michael Matson

inflation components the guidance between at currency with first, the of I you reduction issue? and product can $X.XX break geographic mix that the maybe guess, midpoint, into kind

Alex Shvartsburg

part We're inflation inflationary and question, lower as Thanks our -- of both with portion your Mike. currency for I rate. of partially to current are the offset as impacting and said, tax efficiencies currencies. significant pricing actions well guide. significantly the able Like and that sort It's a impact equal

Michael Matson

all guidance about given then Got chain Okay. didn't supply into the machine us new you've there? it factor the anything Can for And affected does by on that product. issues? heart-lung messes at I it. launch you Is And update the timing give hear guess? how Cardiopulmonary, I an being

Alex Shvartsburg

issues supply the that seeing. chain No we're impact on

We delayed. say are roughly a roughly I -- essentially would quarter

commercial at the release a So commercial with early QX. this expect end we year limited in release of the still full

Michael Matson

a out pay to the -- Okay a on just thanks. quick from interim And you plan beyond within analysis right? still one like something knowing then continue about just RECOVER, an the to X-K of few enroll, put days

Alex Shvartsburg

the are a event, out Mike. material put Yes, of within and That's case, days, people a we the would We it's X lot interested. X-K. believe

out would within days. we So put X something the

Operator

today question comes from Sandler. next Maeder Our Piper Adam of

Adam Maeder

about additional asking Maybe for QX just Obviously, phasing love start, here to guidance, the for color full and year. half recognize back about of thinking would you're but the you year kind some updated outlook have on the I'm of QX. how

much Just can any you follow-up. appreciated. takes incremental puts and color would then have I And a on that be provide

Alex Shvartsburg

Yes, Adam, thanks.

So the quarter sort season. holiday revenue QXs the typically of simply of are lower just because

So R&D second regard on of OpEx phasing as normal of $XXX to each of sort and of combined is the we're And more we're the of margins, SG&A kind of of normal see for to our as half. that's concerned, the million of expect some quarters. rate run going SG&A gross sort on to where With seasonality. improvement the back kind then the about far end

Adam Maeder

then to Okay. wanted Alex. that. try Appreciate I follow-up, the That's for guidance. epilepsy deconstruct helpful, and the And

talk versus those those latest how replacements, trends the especially year-over-year. for that's look you think US what's of X% Can in you NPIs I think what X% kind market. about progressing, And then just embedded to about like?

Matthew Dodds

Adam. It's Matt. Sure,

that improve on gap sequentially will are fourth outpace So think in expect quarter. The but still tough, have still in replacement backlog. we patients you think be we about back to see expect continue patients strong. and patients. XXX half, to half, third comps comments, in We the the new first the new the We the close can we based to that in replacements

assume the and a in nice So see the in a we that's maybe bit still grow I that say but patients, new I improvement faster, replacements guidance. would should

Operator

Hazan Our of question Amit Sachs. from today comes next Goldman

Unidentified Analyst

already currency to decompose on for more pull impact Maybe It's that Phil, dropping trying Alex and probably hoping been have -- understand few first on these down. that for Amit. a starts on. just to touched of I'm

headwind a drop I incremental year means line. an to X% operating year started the point line FX Basically, us remind or about EPS headwind start of terms in the think what in you of us a of to income top changed. Can through sort give has you form. how top that

Alex Shvartsburg

question. We about Good could hedged. a headwind thought And cover naturally throughout X%. currency expected kind efficiency we What on the at we that When end. level, our all international yes, the year, that P&L. of we seeing of we're with trending sort our the we're is of we're of started gains revenue is sort higher

that higher exposure from has a and level of top So the from a line line. perspective, a both obviously currency bottom

we in we tax at of with favorable $X.XX now cover we still heading X% impact, $X.XX the we thought which So X% May thought rate. -- points of It's when direction. that we were unfavorable to kind XXX in another sort XXX to impact, we guided to an that in could basis

can't we So point any more the P&L where the of a operational our guide. in within and we that sort at we're cover change think hence,

Unidentified Analyst

Okay.

And so kind to it's these to band. like get it sounds start once we outer of nonlinear

FX come that just how the So P&L, probably speaking, point if roughly saw of through another we $X.XX. incremental another be to would headwind

Alex Shvartsburg

approximately. Yes,

Unidentified Analyst

of July if patients can give dynamics COVID scheduling, and little replacement dynamics the you how been bit of into a June has us dig or helpful. impacting just circling really understand to just back then kind understand on last even bit monthly the question flavor? kind little was I kind maybe more of epilepsy, That's new And to hoping to of Okay. and a

Alex Shvartsburg

Sure, Phil.

your more a conferences like you've looked increase as in So last in terms an there issues time so update implants, saw of bit And far, of you we And good, and with overall. the I June So, from staffing heard on gave improved little bit. companies, that lot this think other remember we we an a good. April has Omicron. a May said, so did bit a at looked slow was July quarter good of little well. trends,

Operator

today from Weiner Jefferies. question next of Zach comes Our

Zachary Weiner

we Briana being growth want margin new on potential and that? heart-lung How on driven that by the touch questions and replacement the from the to role. taking for about just impact the should Thanks machine I congrats cycle. to think

Alex Shvartsburg

lung XXXX. expect the Sure, Zach. in Yes, so I'll this machine, be a we US That of priced product. launch the heart followed Europe by then it premium is broadly commercially take one. going and to QX in to

the a With So remember. launch positive gross phasing part margin I'm of on That impact trying what other have and that will to was the was question, margins. -- the impact. the

Operator

If I from Petrone question Mizuho. today could take our next of Anthony

Anthony Petrone

have on for Alex one follow-up RECOVER. a on I question and then guidance

On you have out competitor about in in a tech another the unscheduled just EPS med new due guide, and spoke shortages. an Germany wondering energy plant shutdown there Germany to

to offsets And the secondly, company RECOVER, treatment so Germany. on looking into an half, if into just is just were the then there on further working baked And I'm on? update out that Russia compressed second wondering, Is into any gasoline half that of imports be the second duration. are guidance and

how of XX treatment enrolled is expected what will the of be to for target later to have wondering this months. patients be the XXX month many plus we'll Just the -- close

Alex Shvartsburg

that on reported disrupting was like one terms of production. other seen in just we haven't Germany, the the headwinds So

in of Italy terms delivery, are suppliers as supply purchases. issues biggest spot just a terms in better are Our Germany chain they forecast. of in think, around great in whole We've long-range the with team job, that done giving I

in for increased Munich our in thing we plan program part, Munich. in X,XXX inventory or HLM to like first has in The particular, the review has SKUs. that because of is every Houston materials replicated taken We've plant a called really and introduced we cycle that very visibility increased. interesting is in of inventory bill Our German the

complex more has a So on They've much using cogent there that giving Kanban, costs. much certainly part done more it's reducing visibility. methodology been plan they've and for Kaizens every introduce, to freight but done us

really looking been respect a to fuel. what has pace been they've here for we're into you're or I RECOVER, So of the with expect want the recruiting... that don't respect issues really And think facing. to to overall, lot forward like far, understand to The follow-up. about diesel any I work taken this what I the group so With what's steps of of talked at have is seeing what

Anthony Petrone

actively by effect. No. neurostimulation the patients been How treated, time have of end XX treatment month words, on with I'm months many analysis. treated other will of of In the asking duration the at close that to

Alex Shvartsburg

Right.

we haven't the separation a we have any So done really see yet -- you can XX hit months, studies X. that out have that given what percent start gone tell you that we've to to year, is but -- at

to of and So we're spot now therapy separate. sweet start should arm we see the when the getting into control

Operator

was That question our today. last

now I'll So remarks. for back Damien any to McDonald closing hand

Damien McDonald

appreciate Well, you forward thank updating our QX we and you, you results. we and you. us appreciate behalf for support, to joining Thank the look today. we of on entire On our team, your call everyone,

Operator

Thank you. call today. concludes the This

may disconnect your lines. You now

LivaNova (LIVN) 7 Aug 222022 Q2 Earnings call transcript