LivaNova (LIVN) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue grew 11.2% year-over-year to $318.1M, marking the seventh consecutive quarter of double-digit growth, with double-digit gains in Cardiopulmonary and high single-digit growth in Neuromodulation/Epilepsy; year-to-date organic revenue up 12%.

• Adjusted operating margin improved to 20.0% from 15.7% in Q3 2023, driven by higher revenue, operating leverage, and the wind down of Heart Failure (HF) and Advanced Circulatory Support (ACS) segments.

• Key growth drivers included market share gains, pricing strategies, and the successful Essenz launch, with innovation pipeline progress in difficult-to-treat depression (DTD) and obstructive sleep apnea (OSA).

• The company completed a major restructuring, winding down the ACS segment and focusing on core businesses.

• LivaNova maintains strong liquidity, with $346.4M in cash and $225M in undrawn credit as of September 30, 2024.

Financial highlights

• Q3 2024 net revenue: $318.1M, up 11.2% year-over-year; excluding ACS wind down, revenue increased 12.3%.

• Adjusted gross margin was 71.2% (vs. 70.5% in Q3 2023); adjusted operating income rose to $63.6M (20.0% margin) from $45.0M (15.7% margin) in Q3 2023.

• Adjusted diluted EPS was $0.90, up from $0.73 in Q3 2023; GAAP diluted EPS was $0.60.

• Adjusted free cash flow for Q3 2024 was $47.3M, up from $26M a year ago; last twelve months: $161.3M with an 86% conversion ratio.

• Net income for Q3 2024 was $33.0M, compared to a net loss of $7.3M in Q3 2023.

Outlook and guidance

• Full-year 2024 revenue growth expected at 8.5%-9.5% (constant currency), or 10%-11% excluding ACS exit; adjusted diluted EPS forecast raised to $3.30-$3.40; adjusted free cash flow expected at $110-$130M.

• Cardiopulmonary revenue expected to grow 13%-14% and Neuromodulation/Epilepsy 7%-8% for 2024.

• Adjusted operating income margin to increase by over 400bps and adjusted operating income growth of over 40%.

• Full-year adjusted effective tax rate projected at 21%-22% for 2024, rising to 24%-25% in 2025.

• ACS wind down expected to be complete by end of 2024, with restructuring charges of $15–20M.