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LivaNova PLC (LIVN)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue rose to $321.8M (+3.8% reported, +4.7% cc; +6.8% organic), driven by cardiopulmonary strength; GAAP diluted EPS was $1.02 and adjusted EPS was $0.81, with the adjusted EPS decline vs prior year primarily due to a higher effective tax rate .
  • Cardiopulmonary grew 9.9% reported (+11.2% cc) on consumables demand and Essenz placements; Neuromodulation was +0.5% reported (+1.0% cc), with U.S. growth offset by Europe/ROW declines .
  • 2025 guidance initiated: revenue +5–6% cc (+6–7% organic), adjusted EPS $3.65–$3.75, adjusted FCF $135–$155M, FX headwind 1.5–2.0%, adjusted tax rate ~24% and capex ~$90M; segment outlooks: CP +7–8%, epilepsy +4–5% .
  • OSPREY randomized OSA study met primary endpoints; median AHI fell 66% and ODI fell 63% at 6 months; PMA submission targeted 1H25, with a limited launch ahead of full launch (MRI compatibility planned) .
  • Watch catalysts: OSPREY 12‑month outcomes (Q2 2025), PMA submission (1H25), SNIA litigation ruling (H1 2025; potential ~$0.11 quarterly EPS impact if adverse), and continued Essenz penetration/pricing leverage .

What Went Well and What Went Wrong

What Went Well

  • Cardiopulmonary delivered double-digit growth; management highlighted sequential HLM (Essenz) strength and oxygenator demand with price/mix tailwinds: “We were pleased to see a sequential increase in Essenz revenue… Oxygenator revenue grew in the mid-teens, driven by customer demand and price” .
  • Non-GAAP operating leverage improved; adjusted operating income margin rose to 17% (from 16% in Q4’23) on revenue growth and wind-down of ACS and heart failure programs .
  • OSPREY met efficacy and safety endpoints, with strong 6‑month reductions in AHI (−66%) and ODI (−63%); management reiterated PMA submission in 1H25 .

What Went Wrong

  • Neuromodulation (epilepsy) outside the U.S. declined a combined 9% YoY; management cited isolated personnel/execution issues, though actions were taken and growth is expected to return in 2025 .
  • Adjusted EPS fell YoY to $0.81 (vs $0.87) largely due to a higher adjusted effective tax rate (~20% vs negative 3% prior year), reducing EPS by ~$0.19 .
  • “Other Revenue” (residual ACS and site services) declined 67.8% YoY in Q4, reflecting ACS wind-down; organic net revenue excludes ACS .

Financial Results

Quarterly performance (oldest → newest):

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$318.6 $318.1 $321.8
GAAP Diluted EPS ($)$0.30 $0.60 $1.02
Adjusted Diluted EPS ($)$0.93 $0.90 $0.81
GAAP Gross Margin %68.7% 70.8% 68.2%
Adjusted Gross Margin %69.3% 71.2% 69.3%
GAAP Operating Margin %12.6% 11.2% 11.5%
Adjusted Operating Margin %21.0% 20.0% 17.3%
GAAP Net Income Margin %5.1% 10.4% 17.4%
Adjusted Net Income Margin %15.9% 15.5% 13.7%

Year-over-year Q4 comparison:

MetricQ4 2023Q4 2024
Revenue ($USD Millions)$310.1 $321.8 (+3.8%)
GAAP Diluted EPS ($)$0.30 $1.02
Adjusted Diluted EPS ($)$0.87 $0.81
GAAP Gross Margin %61.3% 68.2%
Adjusted Gross Margin %67.7% 69.3%
GAAP Operating Margin %−28.4% 11.5%
Adjusted Operating Margin %15.5% 17.3%

Segment breakdown (Q4 2024):

SegmentQ4 2023 ($M)Q4 2024 ($M)Reported YoY %Constant-Currency YoY %
Cardiopulmonary$165.3 $181.7 9.9% 11.2%
Neuromodulation$136.9 $137.6 0.5% 1.0%
Other Revenue$7.9 $2.5 −67.8% −67.2%
Total$310.1 $321.8 3.8% 4.7%

Selected KPIs (oldest → newest):

KPIQ2 2024Q3 2024Q4 2024
Adjusted Operating Income ($M)$66.9 $63.6 $55.6
Adjusted SG&A ($M)$112.7 $116.1 $127.0
Adjusted R&D ($M)$41.3 $46.8 $40.3
Adjusted Free Cash Flow ($M)$42 $47 $62

Balance sheet trend (oldest → newest):

MetricQ2 2024Q3 2024Q4 2024
Cash and Cash Equivalents ($M)$329.2 $346.4 $428.9
Current Debt Obligations ($M)$19.7 $22.0 $78.0
Long-term Debt Obligations ($M)$605.4 $604.3 $549.6

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue Growth (cc)FY 2025N/A+5.0% to +6.0% Initiated
Organic Revenue GrowthFY 2025N/A+6.0% to +7.0% Initiated
Adjusted Diluted EPSFY 2025N/A$3.65 to $3.75 (≈55M shares) Initiated
Adjusted Free Cash Flow ($M)FY 2025N/A$135 to $155 Initiated
Adjusted Effective Tax RateFY 2025N/A~24% Initiated
FX ImpactFY 2025N/A−1.5% to −2.0% headwind Initiated
Capital Expenditure ($M)FY 2025N/A~$90 Initiated
Segment Growth – CardiopulmonaryFY 2025N/A+7% to +8% Initiated
Segment Growth – EpilepsyFY 2025N/A+4% to +5% Initiated

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
OSA (OSPREY) & PMAQ2: OSPREY positive predictive outcome; PMA targeted 1H25 . Q3: 7‑month data imminent; 12‑month in early 2025 .OSPREY met endpoints; AHI −66%, ODI −63% at 6 months; PMA submission 1H25; limited then full launch; MRI compatibility; +$8M 2025 incremental investment .Positive execution; accelerating product development.
Cardiopulmonary (Essenz & Consumables)Q3: CP +15.6%; Essenz ~40% of 2024 HLM units; oxygenators ~15% growth; capacity expansion; demand > supply .Q4: sequential Essenz increase; oxygenators mid‑teens; exit capacity +10%; 2025 plan +10–15% capacity; targeting 60% Essenz penetration in 2025 and further gains thereafter .Sustained strength; share gains likely with capacity uptick.
Epilepsy (OUS execution)Q3: ROW double‑digit growth offset by Europe decline .Q4: OUS −9% YoY; remediation underway; expect return to high‑single/low‑double-digit growth in 2025 .Near-term weakness; improvement expected in 2025.
Pricing contributionQ3: Pricing contributed ~300 bps YTD .2024 price (ex equipment) contributed ~250–300 bps; upside via consumables share and Essenz premium .Durable lever.
Tariffs/macro & FXQ2: Italian payback provision recognized .Guidance excludes tariff impacts; expected immaterial; FX headwind 1.5–2.0% .Manageable headwinds.
SNIA litigationQ2: ECJ judgment; timing pushed to 2025 .Public hearing Feb 26, 2025; ruling H1 2025; potential quarterly EPS impact ~$0.11 if adverse .Legal overhang; watch H1 2025.
R&D & capital allocationQ2: Reduce DTD spend; ≥$0.30 EPS accretion in 2025 . Q3: margin growth > revenue; DTD $20M pretax drop-through .2025 adjusted tax ~24%; capex ~$90M to support IT, innovation, capacity; OSA spend shift to product dev .Focused reinvestment in core and OSA; lowering R&D % of sales over time.

Management Commentary

  • “In 2024, LivaNova delivered strong revenue growth, expanded operating margin, and significantly improved cash generation… We look forward to building on this momentum in 2025 with a continued focus on talent, innovation, growth, and operational excellence” (CEO) .
  • “Adjusted diluted earnings per share was $0.81… The decrease was primarily driven by the higher effective tax rate, which was a $0.19 unfavorable impact to EPS” (CFO) .
  • “We expect Essenz to represent approximately 60% of our annual HLM units placed in 2025, while maintaining a price premium… we have a path to 15% [capacity increase] if our suppliers execute” (CEO) .
  • “In OSA… we are going to submit the PMA first half of this year… usually new PMAs [take] about 9 to 12 months with FDA… limited commercial launch followed by full commercial launch” (Innovation leadership) .
  • “Our 2025 guidance is balanced, and we are well positioned to achieve another successful year” (CFO) .

Q&A Highlights

  • Cardiopulmonary performance and capacity: Sequential HLM growth despite tough comp; backorders persist; exit capacity +10%; 2025 targeted +10–15% capacity increase .
  • OSA spend and timing: 2024 OSA investment $27M; +$8M in 2025 shifting from clinical to product development; PMA submission 1H25; limited then full launch; MRI compatibility planned .
  • Epilepsy OUS execution: Personnel issues in select markets; remediation actions in Q4; growth expected to return to high‑single/low‑double digits in 2025 .
  • SNIA litigation: Hearing Feb 26, 2025; ruling H1 2025; adverse ruling could be ~$0.11 quarterly EPS impact (updated for rates/FX) .
  • Pricing & mix: 2024 price contribution ~250–300 bps (ex equipment); additional upside via consumables share and Essenz premium .

Estimates Context

  • We attempted to retrieve S&P Global consensus for Q4 2024, but it was unavailable due to a daily limit; therefore, formal beat/miss vs consensus cannot be determined at this time. S&P Global consensus data was unavailable during retrieval.
  • Qualitatively, one analyst observed the quarter “came in overall a little less than we had looked for,” while management emphasized strong CP and reiterated balanced 2025 guidance; the higher tax rate was the primary headwind to adjusted EPS .

Key Takeaways for Investors

  • Cardiopulmonary remains the engine: expect sustained growth on Essenz upgrades (60% of HLM placements in 2025) and consumables share gains; capacity expansion is a catalyst to relieve backorders and capture incremental demand .
  • OSA is a medium-term optionality: OSPREY’s RCT success plus PMA submission (1H25) and MRI compatibility underpin a 2026 commercial ramp; incremental 2025 OSA investment is modest (+$8M) .
  • Epilepsy recovery path: U.S. steady; OUS remediation underway with expectation for high‑single/low‑double-digit region growth in 2025; watch execution improvements through mid‑year .
  • 2025 P&L mix: FX headwind (1.5–2.0%) and a step-up in the adjusted tax rate (~24%) temper EPS, but margins and cash generation remain solid, with capex ~$90M to support IT/innovation/capacity .
  • Legal overhang: SNIA ruling (H1 2025) is a binary near-term risk; management quantified a ~$0.11 quarterly EPS impact if adverse, and has liquidity to address outcomes (cash and revolver) .
  • Price/mix lever is durable: pricing contributed ~250–300 bps in 2024 (ex equipment); further upside via consumables share and Essenz premium .
  • Trading setup: Near-term narrative hinges on cardio capacity gains, OSA PMA timing/data, and SNIA ruling; medium-term thesis centers on Essenz penetration, consumables share, and OSA/DTR pipeline optionality .
Note: All figures are company-reported GAAP and non-GAAP metrics. Non-GAAP definitions and reconciliations provided by LivaNova in its Q4 2024 press release/8-K **[1639691_0001639691-25-000008_a4q24earningspressrelease.htm:3]** **[1639691_0001639691-25-000008_a4q24earningspressrelease.htm:11]** **[1639691_0001639691-25-000008_a4q24earningspressrelease.htm:14]** **[1639691_0001639691-25-000008_a4q24earningspressrelease.htm:17]**.