LivaNova PLC (NASDAQ:LIVN) is a leading global medical technology company that designs, develops, manufactures, and markets innovative medical devices and therapies. The company's portfolio spans two core business segments - Cardiopulmonary and Neuromodulation - addressing significant unmet needs in cardiac and neurological health.
Financials
In the first quarter of 2024, LivaNova delivered strong financial results, with revenue of $294.9 million, up 12% year-over-year. Excluding the impact of the wind-down of the Advanced Circulatory Support (ACS) segment, revenue increased 14% compared to the prior year period. The company's Cardiopulmonary segment revenue grew 14.8% to $155.9 million, driven by robust demand for the Essenz heart-lung machine and consumables. The Neuromodulation segment also performed well, with revenue increasing 10.9% to $133.9 million, led by double-digit growth in the U.S. and Rest of World regions.
LivaNova's full-year 2024 revenue is now expected to grow between 6% and 7% on a constant currency basis, or 8% to 9% excluding the ACS business. The company anticipates Cardiopulmonary revenue to grow 8% to 9% for the full year, while the Neuromodulation segment is expected to deliver 6% to 7% global revenue growth. This revised guidance reflects the company's confidence in its ability to execute on its core business strengths while navigating the macroeconomic environment.
Adjusted gross margin in the first quarter expanded to 71% of net revenue, compared to 69% in the prior year period. This improvement was driven by favorable product mix and pricing. Adjusted operating income increased to $53 million, or 18% of net revenue, up from $27 million, or 10% of net revenue, in the first quarter of 2023. The company's disciplined cost management and operating leverage, particularly related to the wind-down of the Heart Failure program and ACS segment, contributed to the strong profitability.
Business Overview
Looking ahead, LivaNova is focused on three key areas to drive long-term success: execution, innovation, and talent. On the execution front, the company is committed to achieving sustainable above-market growth while improving profitability and cash flow. In the first quarter, LivaNova delivered its fifth consecutive quarter of double-digit revenue growth, demonstrating the strength of its commercial execution.
Innovation remains a top priority for the company. LivaNova recently announced the appointment of Ahmet Tezel as its new Chief Innovation Officer, underscoring the importance of driving the next generation of medical technologies. Tezel brings extensive experience leading innovation teams and developing market-leading products. Under his leadership, LivaNova will focus on reinvigorating its innovation cadence to address customers' most pressing unmet needs.
The company's talent strategy is also a key area of focus. CEO Vladimir Makatsaria, who joined LivaNova in March 2024, has been impressed by the deep expertise and patient-first mindset of the organization. Makatsaria is committed to continuing to attract top talent to the company, further strengthening LivaNova's capabilities.
Cardiopulmonary Segment
In the Cardiopulmonary segment, LivaNova is capitalizing on the strong momentum of the Essenz heart-lung machine, which has driven more than 20% revenue growth in the first quarter. The company is also expanding its oxygenator production capacity to meet the high demand for these critical consumables. Looking ahead, LivaNova expects Cardiopulmonary revenue to grow 8% to 9% for the full year 2024.
Neuromodulation Segment
The Neuromodulation segment, led by the VNS Therapy System for the treatment of drug-resistant epilepsy, also delivered impressive results in the first quarter, with revenue increasing 10.9% year-over-year. The company continues to see strong demand for both new patient implants and replacements in the U.S., as well as high single-digit growth in international markets. For the full year 2024, LivaNova expects global Neuromodulation revenue to grow 6% to 7%.
Recent Developments
In the company's pipeline, the OSPREY clinical study for the treatment of obstructive sleep apnea (OSA) achieved a positive predictive outcome, signaling a high probability of success in the primary endpoint. LivaNova anticipates completing the final analysis of the OSPREY study by the end of 2024, which could pave the way for a potential regulatory approval and commercialization in 2025.
The RECOVER study for the treatment of difficult-to-treat depression (DTD) is also progressing, with the unipolar cohort data expected in the second quarter of 2024. LivaNova will work closely with the Centers for Medicare & Medicaid Services (CMS) to determine the path forward for this program based on the clinical results.
Liquidity
Financially, LivaNova remains well-positioned to execute on its strategic priorities. The company ended the first quarter of 2024 with $309.2 million in cash and cash equivalents and $225 million in available borrowing capacity under its revolving credit facility. Adjusted free cash flow for the quarter was $11 million, with the company maintaining its full-year guidance of $95 million to $115 million.
Conclusion
In summary, LivaNova's strong first-quarter performance, coupled with its strategic focus on execution, innovation, and talent, positions the company well to deliver sustainable growth and create long-term value for shareholders. The company's core Cardiopulmonary and Neuromodulation businesses continue to demonstrate resilience and competitive advantages, while the pipeline of innovative therapies holds significant promise for the future.