LivaNova Q2 Earnings Call Highlights

Key Points

• Record Q2 performance: Revenue rose 9.8% year over year on a constant-currency basis to $391 million, while adjusted EPS increased to $1.26 from $1.05, supported by double-digit growth in Cardiopulmonary and Epilepsy.
• 2026 outlook raised: LivaNova increased its full-year revenue-growth guidance to 8%–9% and adjusted EPS guidance to $4.30–$4.40, citing stronger Cardiopulmonary demand, pricing and reimbursement momentum in Epilepsy, and improved execution.
• Investment weighs on cash flow: The company raised capital-spending guidance to $135 million and cut adjusted free-cash-flow guidance to $140 million–$160 million as it invests in manufacturing capacity, innovation and IT infrastructure; a new oxygenator line is expected to materially increase output in 2027.

LivaNova NASDAQ: LIVN reported record quarterly revenue and adjusted earnings per share for the second quarter of 2026, citing double-digit reported growth across its Cardiopulmonary and Epilepsy businesses. The company raised its full-year revenue and adjusted EPS outlook while reducing its adjusted free-cash-flow forecast to account for increased investment in manufacturing capacity, innovation and IT infrastructure.

Second-quarter revenue totaled $391 million, up 9.8% on a constant-currency basis from a year earlier. Foreign exchange provided an approximately $3 million, or 1%, year-over-year benefit. Adjusted diluted EPS rose to $1.26 from $1.05 in the second quarter of 2025, aided by higher revenue and a one-time tariff refund.

“We delivered a strong quarter of double-digit reported revenue growth with strength across all regions, driven by robust performance in our Cardiopulmonary and Epilepsy businesses,” CEO Vladimir Makatsaria said.

Cardiopulmonary Growth and Oxygenator Supply Plans

Cardiopulmonary revenue was $222 million, an increase of 10% from the prior-year quarter, led by growth in Europe. Heart-lung machine revenue grew in the mid-teens, driven by increased placements of the company’s Essenz system and continued price premiums, according to Makatsaria.

Cardiopulmonary consumables revenue, excluding heart-lung machine consumables, increased in the high single digits. Oxygenators and perfusion tubing kits each posted low-double-digit growth, partly offset by lower growth in autotransfusion systems and cannula products.

The company said manufacturing improvements and better availability of third-party components increased oxygenator output year over year. LivaNova also entered a long-term agreement with Thermo Fisher Scientific to secure a critical oxygenator component. Management said the agreement is intended to ease a supply constraint over the medium to long term and support additional market-share gains.

Makatsaria said LivaNova’s oxygenator market share has increased from about 30% several years ago to about 40% currently. A new production line is expected to begin operating in the second half of 2026, with a material impact on output anticipated in 2027. The company is also developing a next-generation oxygenator, which it continues to expect to launch in 2028.

For 2026, LivaNova raised its Cardiopulmonary revenue-growth forecast to 9.5% to 10.5%, from 8.5% to 9.5% previously. Essenz is still expected to account for about 80% of annual heart-lung machine placements this year, compared with 55% in 2025. Management said it expects Essenz to reach 100% of placements in 2027, though upgrades of the installed base of older systems will take several years.

Epilepsy Momentum Supports Higher Outlook

Epilepsy revenue rose 10% from a year earlier. Revenue in Europe and the rest of world increased a combined 15%, while U.S. epilepsy revenue rose 8%.

Management attributed the performance to improved realized pricing and volume growth, supported by clinical evidence, reimbursement improvements and commercial execution. The company said reduced volume discounting, in addition to its annual list-price increases, drove improved realized pricing during the quarter.

Makatsaria said U.S. Medicare reimbursement for both new-patient implants and end-of-service procedures increased by nearly 50% in 2026 versus 2025 rates. LivaNova also cited CMS’s preliminary recommendation to keep VNS Therapy new-patient implants in the new-technology ambulatory payment classification, along with a proposed increase in end-of-service reimbursement for 2027.

The company said data from its Core VNS study are contributing to higher referral activity, greater clinician confidence and earlier use of VNS Therapy in the treatment pathway. During the question-and-answer session, Makatsaria said the company’s new-patient funnel was at its strongest level to date, reflecting increased procedures at existing accounts and new-account openings.

LivaNova raised its 2026 epilepsy revenue-growth outlook to 7% to 8%, compared with prior guidance of 6% to 7%. CFO Alex Shvartsburg said realized pricing growth in the first half was nearly twice the company’s historical annual inflationary increase of 1% to 2%, and management expects contract renegotiations to provide a tailwind through the remainder of 2026 and into 2027.

Profitability, Cash Flow and Updated Guidance

Adjusted gross margin was 71%, up from 69% a year earlier. The quarter included a $6 million net benefit from refunds of previously paid IEEPA tariffs, which added about 150 basis points to gross margin. LivaNova does not expect that refund benefit to recur in future periods.

• Adjusted operating income was $91 million, compared with $77 million a year earlier.
• Adjusted operating margin was 23%, compared with 22% in the prior-year quarter.
• Adjusted SG&A expense rose to $137 million from $121 million, primarily reflecting planned IT infrastructure spending.
• Adjusted R&D expense increased to $50 million from $44 million, reflecting planned investment in the company’s obstructive sleep apnea program.
• Adjusted free cash flow was $46 million, compared with $48 million a year earlier.

Cash stood at $517 million at June 30, down from $636 million at year-end 2025, while total debt fell to $293 million from $377 million. The company said both balances declined following early repayment of $98 million of outstanding term facilities, including accrued interest.

LivaNova increased its full-year constant-currency revenue-growth forecast to 8% to 9%, from 7% to 8%, and now expects foreign exchange to add about 1% to reported revenue based on current exchange rates. The company maintained its adjusted operating margin outlook of 20% to 21% and its adjusted tax-rate estimate of about 23%.

Adjusted diluted EPS guidance was raised to $4.30 to $4.40, representing approximately 11.5% growth at the midpoint. However, capital-spending guidance increased to $135 million from $120 million, and adjusted free-cash-flow guidance was lowered to $140 million to $160 million from $160 million to $180 million.

Pipeline Updates Include OSA, Digital Health and Depression

Chief Innovation Officer Ahmet Tezel said LivaNova’s cloud-based clinician portal and application for epilepsy remain in a limited market release, with a broader launch planned after further account adoption. The platform is expected to support remote titration alongside a next-generation implantable pulse generator expected to launch in 2027.

For obstructive sleep apnea, the company now expects to submit a PMA supplement for its next-generation MRI-compatible system between the second half of 2026 and the first half of 2027. Tezel said the revised timing reflects final design verification and validation work, rather than device safety or efficacy issues. LivaNova maintained its target of $200 million to $400 million in OSA revenue by 2030.

The company also said it submitted 36-month data from its RECOVER trial in difficult-to-treat depression to medRxiv ahead of peer-reviewed publication. Management said CMS is aware of the data but will not formally consider it until publication. The data showed sustained improvements among patients receiving active VNS Therapy, according to Tezel.

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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