LivaNova (LIVN) Q4 2016 earnings summary

Executive summary

• FY16 net sales were $1,213.9M; operating loss was $93.6M and net loss was $194.6M, including $148.8M of exceptional items and $37.5M of 3T Heater-Cooler remediation expense.

• Operational priorities included post-merger integration, restructuring, new product launches, inventory optimization and investment focused on higher-growth areas.

• Adjusted earnings reached the high end of guidance; management emphasized future revenue, earnings-per-share and operating-margin growth.

Financial highlights

• FY16 revenue was $1,213.9M; gross profit was $695.6M, operating profit before exceptional items was $55.2M, and operating loss was $93.6M.

• Net loss attributable to owners was $194.6M; basic and diluted loss per share were both $3.98.

• Exceptional items totaled $148.8M: $55.9M restructuring, $20.5M merger and integration, and $72.3M CRM impairment.

• A separate $37.5M product-remediation expense related to 3T Heater-Cooler devices was recorded in cost of sales.

• FY16 results include Sorin for the full year, unlike the 25 Apr–31 Dec 2015 transitional period; the periods are not comparable.

Outlook and guidance

• Management planned to expand operating margins and grow revenue and EPS, supported by product innovation, organic investment and selective external investments.

• Existing cash, cash equivalents and expected operating cash generation were considered sufficient for operating needs, working capital, R&D, capital expenditure and debt service over the next 12 months.

• Costa Rica manufacturing exit was expected to finish in H1 2017; the broader 2015–16 reorganization plans were expected to conclude in H1 2018.

• After year-end, plans were announced to sell the Suzhou facility; the remaining Caisson acquisition was completed in May 2017 for up to $72M, net of $6M debt forgiveness.