LivaNova Q1 Earnings Call Highlights

Key Points

• LivaNova reported Q1 revenue of $362 million, up 11% on a constant‑currency basis, and raised 2026 guidance to 7%–8% revenue growth (CC) with adjusted diluted EPS of $4.20–$4.30 while maintaining $160–$180 million in adjusted free cash flow guidance.
• Cardiopulmonary was a standout with revenue up 14%; management now expects 2026 cardiopulmonary growth of 8.5%–9.5% driven by increased Essenz heart–lung machine penetration, consumables share gains, and planned oxygenator capacity expansion.
• The company received FDA premarket approval for the aura6000 HGNS system (without a concentric collapse contraindication) and is preparing an MRI‑compatible PMA supplement with a limited H1 2027 release and broader commercial launch in H2 2027, backed by positive OSPREY and early PolySync data that could boost responder rates.

LivaNova NASDAQ: LIVN reported first-quarter 2026 results that management said reflected “durable performance” across its cardiopulmonary and epilepsy businesses, while also highlighting recent regulatory and clinical milestones that it believes position the company for entry into the obstructive sleep apnea (OSA) market next year.

Revenue for the quarter was $362 million, up 11% on a constant-currency basis versus the prior year, according to Chief Financial Officer Alex Shvartsburg. Foreign exchange provided a favorable year-over-year revenue impact of approximately $10 million, or 3%.

Chief Executive Officer Vladimir Makatsaria said the company’s core businesses are supporting both current performance and investment in innovation, which he expects to support long-term durability and potential expansion into “high-growth, high-margin markets,” including OSA.

Cardiopulmonary growth and raised segment outlook

In cardiopulmonary, revenue was $209 million, an increase of 14% versus the first quarter of 2025. Makatsaria said heart-lung machine (HLM) revenue grew in the “high teens,” driven by increased Essenz placements sequentially and year over year, along with “sustained favorable price premiums.” He added that first-quarter results included a “modest benefit” from recapturing Essenz placements and tenders that had been deferred from the fourth quarter of 2025, with the remaining performance driven by underlying demand and price/mix.

Cardiopulmonary consumables revenue grew in the “mid-teens,” which Makatsaria attributed to market share gains, procedure growth, and price. He noted that oxygenator demand continues to outpace industry supply, though improvements in third-party component availability have enabled LivaNova to increase manufacturing output.

For full-year 2026, Makatsaria said LivaNova now expects cardiopulmonary revenue to grow 8.5% to 9.5%, up from prior guidance of 7% to 8%. The outlook assumes continued HLM growth as the company drives Essenz penetration globally, with Essenz expected to represent approximately 80% of annual HLM unit placements in 2026, up from 55% in 2025. The forecast also assumes continued consumables share gains supported by manufacturing expansion plans, including a new manufacturing line scheduled to go live in the second half of the year.

During Q&A, Makatsaria said oxygenator capacity expansion remains a “critical priority,” reiterating guidance for a “low double-digit increase” in oxygenator production output for 2026. He also pointed to LivaNova’s longer-term plan discussed at Investor Day to increase oxygenator capacity by 60% by 2030 and improve market share by 800 basis points.

Asked about competitors’ capacity investments, Makatsaria said the company has observed Getinge continuing to exit the space, citing Getinge’s recent comments that it expects sales to decline from $27 million in 2025 to approximately $5 million in 2026. Makatsaria added that LivaNova does not currently see “capacity expansion or investment and innovation” by other competitors, and said LivaNova is focused both on expanding current oxygenator output and on innovation, including its next-generation oxygenator program.

Epilepsy performance supported by reimbursement and clinical data

Epilepsy revenue increased 8% versus the prior year, with growth across all regions. Makatsaria said Europe and rest-of-world epilepsy revenue increased a combined 12%, while U.S. epilepsy revenue rose 7% year over year. He attributed the performance to implant growth and favorable realized price supported by clinical evidence, improved reimbursements, and commercial execution.

Makatsaria highlighted the reception to the company’s CORE-VNS study results, saying the data has been well-received by key opinion leaders and has become an important part of commercial engagement and education efforts. He said that at LivaNova’s inaugural VNS Forum, which brought together approximately 150 clinicians, participants indicated the data is reshaping perceptions of VNS Therapy effectiveness and supports broader adoption, with “over 50 leading experts” requesting permission to independently present the data.

The CEO also emphasized changes to U.S. Medicare reimbursement effective Jan. 1, 2026, stating that hospital outpatient payments rose approximately 48% for new patient implants and 47% for end-of-service procedures compared with 2025 levels. He said the updated rates reduce a known barrier because historic Medicare rates did not fully cover procedure costs, and that LivaNova saw improved realized pricing in the first quarter driven by less volume discounting and its annual list price increase.

For full-year 2026, LivaNova raised expected epilepsy revenue growth to 6% to 7%, up from 5.5% to 6.5%, citing improved growth rates in the U.S., Europe, and rest of world, supported by global acceptance of CORE-VNS and strengthening of the U.S. patient funnel due to improved reimbursement.

In analyst discussion, Makatsaria said reimbursement and clinical data are expected to drive two effects: a short-term price improvement from reduced volume discounts and a longer-term opportunity for increased procedure volume as clinicians adjust treatment algorithms and potentially open new centers. Shvartsburg added that many account pricing terms for 2026 were established due to the timing of the reimbursement update in 2025, and said the team will identify a “new tranche of customers for 2027.” He said volume-driven assumptions, including “new, expanded, and reopened accounts,” are expected to materialize in the second half of the year.

On a question about the Wisr program, Shvartsburg said early indications suggest “no material impact” so far in the subset LivaNova tracks, and said the company has managed several Wisr submissions that secured approval within a 48-hour window. He also noted that the majority of Medicare patients receiving VNS Therapy are enrolled in Medicare Advantage plans, where prior authorization processes are already common.

OSA milestones and launch preparation

LivaNova devoted significant attention on the call to OSA, where Makatsaria described the market as attractive and said current challenges and reimbursement ambiguity in hypoglossal nerve stimulation (HGNS) are “temporary.” He also said the company views the long-term effect of GLP-1s on the market as “net positive.”

Makatsaria said LivaNova received U.S. FDA premarket approval in March for the aura6000 System for the treatment of adult patients with moderate to severe OSA, describing it as the first and only HGNS device approved by the FDA “without a complete concentric collapse contraindication or warning.”

Chief Innovation Officer Ahmet Tezel said FDA approval enables broader compliant engagement with clinicians through promotion, training, and education. He said LivaNova continues to expect to submit a PMA supplement for a commercial MRI-compatible device in the second half of 2026, supporting a limited market release in the first half of 2027 and a broader commercial launch in the second half of 2027, consistent with Investor Day timelines.

Tezel also discussed the OSPREY randomized controlled trial, with 12-month results recently published in the Annals of Internal Medicine. He said the study demonstrated “clinically significant responses and sustained improvements over time,” and characterized OSPREY as the first and only randomized controlled trial in the HGNS space. Tezel said the trial included patient-reported outcomes, including improvements in the Epworth Sleepiness Scale and the Functional Outcomes of Sleep Questionnaire.

Tezel said OSPREY did not exclude patients with complete concentric collapse, and approximately 45% of participants were considered high risk. He added the trial enrolled patients with higher baseline AHI and BMI than other pivotal U.S. trials but achieved comparable responder rates.

Tezel also previewed ongoing work on PolySync, an advanced titration algorithm using the system’s six-electrode architecture. He said early findings indicate PolySync will convert “over 50%” of OSPREY non-responders into responders, and that the approach led to a cumulative responder rate “surpassing 80%” across the entire OSPREY population. The company plans to share complete PolySync results at the SLEEP Conference in June, and Tezel said PolySync will be available at launch.

Asked about reimbursement headwinds in HGNS, Makatsaria said the company is monitoring coding and reimbursement dynamics while preparing for launch. Tezel said LivaNova plans to use prevailing codes at the time of launch and will continue working with the AMA and other societies. He also said reimbursement is a strength for LivaNova, pointing to its experience with VNS.

Profitability, cash flow, and updated 2026 guidance

Shvartsburg said adjusted gross margin was 68% versus 69% in the prior year, with higher volumes and improved pricing offset by unfavorable currency and product mix. Adjusted operating income was $71 million compared to $65 million, and adjusted operating margin was 20%, which he said was generally in line with the prior year as operating leverage and revenue growth were partially offset by increased OSA R&D investment and unfavorable foreign exchange impacts.

Adjusted SG&A expense was $129 million versus $116 million, while SG&A as a percentage of revenue improved to 36% from 37% due to fixed cost leverage. Adjusted R&D was $47 million versus $38 million, with Shvartsburg saying the increase primarily reflected planned OSA investments.

Adjusted diluted EPS was $0.98 versus $0.88 a year earlier, driven primarily by higher revenue. The adjusted effective tax rate was 23% versus 24%.

On the balance sheet, cash was $540 million at March 31 compared with $636 million at year-end 2025, and total debt was $288 million compared with $377 million. Shvartsburg said both declined due to early repayment of $98 million in outstanding term facilities, including accrued interest.

Adjusted free cash flow was $4 million versus $20 million a year earlier, driven by increased capital spending and higher working capital aligned with revenue growth. Shvartsburg noted first-quarter results are “disproportionately low” versus guidance due to payout of 2025 accrued short-term incentive bonuses. Capital spending was $14 million versus $11 million, reflecting cardiopulmonary capacity expansion, next-generation oxygenator manufacturing scale-up, and IT investments.

For 2026, management raised guidance for revenue growth and adjusted EPS while maintaining adjusted free cash flow guidance. Key updates included:

• Revenue: now expected to grow 7% to 8% on a constant-currency basis (up from 6% to 7%), with foreign exchange expected to be a ~1% tailwind based on current rates.
• Adjusted operating income margin: still expected to be 20% to 21%.
• Adjusted diluted EPS: now expected to be $4.20 to $4.30, representing about 9% growth at the midpoint, according to Shvartsburg.
• Adjusted free cash flow: still expected to be $160 million to $180 million, including $120 million in capital spending (a $40 million increase versus the prior year).

Shvartsburg said the company continues to estimate a net tariff impact of less than $5 million on adjusted operating income for the year and is not assuming a tariff refund benefit. He also said guidance incorporates an estimated $5 million impact on adjusted operating income related to higher shipping, logistics, and fuel costs tied to the Middle East conflict.

In Q&A, Shvartsburg said the Middle East represents approximately 4% of total revenue. He also quantified the operating income impact assumption as about $5 million, or roughly $0.07 of EPS, driven by anticipated increases in freight, logistics, and energy costs.

Makatsaria closed by saying the company’s operating model is generating growth while supporting investment in innovation, and reiterated that recent OSA milestones have strengthened the foundation for planned entry into the OSA market.

About LivaNova NASDAQ: LIVN

LivaNova plc is a global medical technology company that develops and manufactures products and therapies for the cardiac surgery and neuromodulation markets. Headquartered in London, United Kingdom, and Houston, Texas, LivaNova serves hospitals, clinics and healthcare providers in more than 100 countries. The company's primary focus lies in advancing patient care through innovations in heart–lung bypass, cardiac preservation, circulatory support and neurostimulation therapies.

The Cardiac Surgery business unit offers a comprehensive portfolio of products used in cardiopulmonary bypass procedures, including oxygenators, heart–lung machines, arterial filters, cannulae and sutureless heart valves.

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