LivaNova Plc Q4 FY2024 earnings call

• 2024 was marked by 11% organic revenue growth, expanded operating margins, and increased free cash flow. - Clinical milestones achieved in OSA (OSPREY study met primary endpoints), DTD (five critical publications supporting CMS coverage), and CORE-VNS (three-year results). - Transformed talent and culture, with ~30% of director-level and above positions filled by new hires or internal promotions. - In Q4 2024, achieved 5% revenue growth and 7% organic growth; full-year 2024 had 9% revenue growth and 11% organic growth. - Commercial launches include ProtekDuo Plus in CP and progress in epilepsy's next-generation system with cloud connectivity.

For the cardiopulmonary segment, in the fourth quarter of 2024, revenue was $182 million, an increase of 11% versus Q4 2023. Heart-lung machine grew in the mid-single digits. Full-year 2024 cardiopulmonary revenue was $684 million, growing 14%. For the epilepsy segment, Q4 2024 revenue increased 1% versus Q4 2023. Full-year 2024 epilepsy revenue grew 7%. Cardiopulmonary is expected to grow 7%-8% in 2025, with Essenz representing ~60% of annual HLM units placed. Epilepsy is expected to grow 4%-5% in 2025, with U.S. new patient implants growing mid-single digits and rest of world/Europe regions aiming for high-single-digit growth.

• Full-year 2025 organic revenue growth guided between 6% and 7%. - Adjusted diluted EPS expected in the range of $3.65 to $3.75 with ~55 million adjusted diluted weighted-average shares outstanding. - Adjusted free cash flow expected in the range of $135 million to $155 million. - Adjusted effective tax rate forecasted at ~24%, an increase of 300 basis points vs 2024. - Capital spending expected to be $90 million in 2025, a $43 million increase from prior year.

• SNIA litigation: Italian Supreme Court to hold public hearing on Feb 26, 2025; if ruling goes against LivaNova, could impact EPS with an estimated quarterly impact of around $0.11 based on lower court quantum of EUR454 million.

Q: Rick Wise asked about cardiopulmonary performance in Q4 2024, specifically U.S. and EU performance and confidence in 2025 outlook.

A: Alex Shvartsburg said they had a challenging comp with HLM but saw sequential growth in HLM placements, strong demand for consumables, and expect continued growth with capacity building.

Q: Rick Wise asked about innovation pipeline, including new ECMO product and incremental revenue from new products.

A: Vladimir Makatsaria and Ahmet Tezel mentioned focus on delivering milestones in epilepsy and cardiopulmonary, FDA submission for OSA cloud-connected VNS Therapy, and launches like ProtekDuo Plus with Specialty Cannulae expected to grow ~10%.

Q: Michael Polark asked about OSA spend and timing of launch.

A: Alex Shvartsburg said $27 million invested in 2024 for OSA, expecting $8 million more in 2025 shifting to product development, and Ahmet Tezel mentioned PMA submission in first-half 2025 with limited commercial launch then full launch.

Q: Michael Polark asked about epilepsy OUS execution issues and 2025 growth confidence.

A: Alex Shvartsburg said there were personnel issues isolated across markets, actions taken to remediate, and confidence in returning to high-single to low-double-digit growth.

Q: David Rescott asked about SNIA litigation timing and impact on EPS.

A: Alex Shvartsburg said Italian Supreme Court hearing in Feb 2025, no decision expected then, and estimated quarterly impact of ~$0.11 if ruling goes against them.

Q: David Rescott asked about epilepsy replacement cycle impact.

A: Vladimir Makatsaria and Alex Shvartsburg said 2019-2020 down years in implants are factored into 2025 replacement cycle being flat, with expectations for recovery in 2026 and beyond.

Q: Matt Miksic asked about epilepsy 2025 growth guidance and cardiopulmonary growth sustainability.

A: Vladimir Makatsaria said epilepsy growth expected to be well-balanced with return to high-single-digit growth, and cardiopulmonary growth sustainable due to market health, pricing strategies, Essenz penetration, and market share gains.

Q: David Roman asked about capital allocation and investment in core vs new initiatives.

A: Vladimir Makatsaria and Alex Shvartsburg said core businesses are foundation for growth, OSA and DTD are growth opportunities with derisked confidence, and R&D spend as % of revenue will decrease to align with industry benchmark.

Q: Adam Maeder asked about 2025 top-line guidance pricing and OSA product development.

A: Vladimir Makatsaria said price contributed 250-300 bps to 2024 growth, and Ahmet Tezel said OSA development includes MRI compatibility, personalized therapy with six electrodes, and work on future set improvements.