Q2 2024 LivaNova PLC Earnings Call
Good day ladies and gentlemen and welcome to the LivaNova PLC second quarter 2024 earnings conference call.
Operator: The second quarter, 2024 earnings conference call.
Emily: My name is Emily, and I'll be moderating your call today. After the presentation, you will have the opportunity to ask any questions, which you can do so by pressing start followed by the number one on your telephone keypad. As a reminder, this conference call is being recorded.
Emily: My name is Emily and I'll be moderating your call today. After the presentation you will have the opportunity to ask any questions which you can do so by pressing start followed by the number one on your telephone keypad. As a reminder, this conference call is being recorded.
Matthew Dodds: I would now like to introduce your host for today's conference, Mr. Matthew Dodds, LivaNova Senior Vice President of Corporate Development and IT. Please go ahead, sir.
Matthew Joseph Dodds: I would now like to introduce your host for today's conference, Mr. Matthew Dodds, LivaNova's Senior Vice President of Corporate Development and IT. Please go ahead, sir.
Matthew Dodds: Thank you, Emily.
Vladimir Makatsaria: Emily, and welcome to our conference call and webcast discussing LivaNova's financial results for the second quarter of 2024. Joining me on today's call are Vladimir Makatsaria, Archive Executive Officer and member of the Board of Directors. Alex Shvartsburg, Archive Financial Officer; Ahmet Tezel, Archive Innovation Officer; and Zach Lazier, Manager of Investor Relations.
Speaker Change: Thank you, Emily, and welcome to our conference call and webcast discussing LivaNova's financial results for the second quarter of 2024.
Matthew Joseph Dodds: Joining me on today's call are Vladimir Makatsaria, our Chief Executive Officer and member of the Board of Directors, Alex Shvartsburg, our Chief Financial Officer, Amit Tizel, our Chief Innovation Officer, and Zach Glazier, Manager of Investor Relations.
Vladimir Makatsaria: Before we begin, I would like to remind you that the discussion is starting. This call will include forward-looking statements. Factors that could cause actual results to differ materially are discussing the company's most recent filings and documents furnished to the FAC, including today's press release that is available on our website. We do not undertake to update any forward-looking statement.
Operator: Before we begin, I would like to remind you that the discussions during this call will include forward-looking statements. Factors that could cause actual results to differ materially are discussed in the company's most recent filings and documents furnished to the SEC, including today's press release that is available on our website. We do not undertake to update any forward-looking statements.
Matthew Joseph Dodds: Before we begin, I would like to remind you that the discussions during this call will include forward-looking statements.
Matthew Joseph Dodds: Factors that could cause actual results to differ materially are discussed in the company's most recent filings and documents furnished to the SEC, including today's press release that is available on our website. We do not undertake to update any forward-looking statements.
Vladimir Makatsaria: Also, the discussions will include certain non-GAAP financial measures with respect to our performance, including but not limited to revenue results, which will all be updated on a constant currency basis. Reconciliation to the most directly comparable GAAP financial measures can be found in today's press release, which is available on our website.
Matthew Joseph Dodds: Also, the discussions will include certain non-GAAP financial measures with respect to our performance, including but not limited to revenue results, which will all be stated on a constant currency basis.
Matthew Joseph Dodds: Reconciliations to the Most Directly Comparable GAAP financial Measures can be found in today's press release which is available on our website.
Vladimir Makatsaria: We have also posted a presentation to our website that summarizes the points of today's call. This presentation is complimentary to the other called Materials and should be used as an enhanced communication tool. You can find the presentation and press release in the Investor section of our website under News, Events, and Presentations at investor.lebanova.com.
Matthew Joseph Dodds: We have also posted a presentation to our website that summarizes the points of today's call. This presentation is complementary to the other call materials and should be used as an enhanced communication tool.
Matthew Joseph Dodds: You can find the presentation and press release in the Investor section of our website under News, Events, and Presentations at Investor.LivaNova.com. With that, I will now turn the call over to Vlad.
Vladimir Makatsaria: With that, I will now turn the call over to Vlad. Thank you, Matt, and thank you everyone for joining us. Welcome to live and know this conference call for the second quarter of 2024.
Vlad: Thank you, Matt, and thank you, everyone, for joining us.
Vlad: Welcome to LivaNova's conference call for the second quarter of 2024. Let me start by addressing the judgment by the European Court of Justice that came out on Monday in connection with the Sneer litigation.
Vladimir A. Makatsaria: Let me start by addressing the judgment by the European Court of Justice that came out on Monday in connection with the SNEA litigation. The ECJ responded to a question raised by the Italian Supreme Court on European demerger law. While this is a complex matter, and there are a lot more nuanced here, the ECJ ruling effectively says that a company spun off in a demerger can still be responsible for liabilities prior to the spin-off.
Vladimir Makatsaria: Let me start by addressing the judgment by the European Court of Justice that came out on Monday in connection with a sneer litigation. The ECGA responded to a question raised by the Italian Supreme Court on European demurge law. While this is a complex matter, and there are a lot more nuance here, the ECGA ruling effectively says that a company spun off in a demurge can still be responsible for liabilities prior to the spin-off. The ECGA also says it is up to national law to decide if a company can be held responsible for liabilities that arise after the spin-off.
Vlad: The ECJ responded to a question raised by the Italian Supreme Court on European demerger law.
Vlad: While this is a complex matter, and there are a lot more nuance here, the ECJ ruling effectively says that a company spun-off and a demerger can still be responsible for liabilities prior to the spin-off.
Vlad: The ECJ also says it is up to national law to decide if a company can be held responsible for liabilities that arise after the spinoff.
Vladimir Makatsaria: While we're disappointed with the ECGA decision, the case now goes back to the Italian Supreme Court for it to decide on all the appeals. While the timing of the decision by the Italian Supreme Court is uncertain, we do not expect a decision until at least 2025.
Vladimir A. Makatsaria: The ECJ also says it is up to national law to decide if a company can be held responsible for liabilities that arise after the spin-off. While we're disappointed with the ECJ decision, the case now goes back to the Italian Supreme Court for it to decide on all the appeals. Now, before turning to the results for the quarter, I'd like to provide an update on the three strategic imperatives we previously highlighted. First, maximizing the strength of our cardiopulmonary and epilepsy business.
Speaker Change: While we're disappointed with the ECJ decision, the case now goes back to the Italian Supreme Court for it to decide on all the appeals.
Speaker Change: While the timing of the decision by the Italian Supreme Court is uncertain, we do not expect a decision until at least 2025.
Vladimir Makatsaria: Now, if we're turning to the results for the quarter, I'd like to provide an update on the three strategic imperatives, we'd previously highlighted. First, maximizing the strength of our cardiopulmonary and epilepsy businesses. This quarter marks the sixth consecutive quarter of double-digit revenue growth. Capitalizing on this momentum to achieve sustainable above-market growth for both businesses remains a key priority. We also remain committed to margin expansion and improvement cash generation. Second, setting the direction for the difficult-to-treat depression and obstructive sleep apnea programs. In difficult-to-treat depression, we announced the preliminary results for the unipolar patient cohort of the recovered clinical study in June.
Speaker Change: Now, before turning to the results for the quarter, I'd like to provide an update on the three strategic imperatives we previously highlighted.
Speaker Change: First, maximizing the strength of our cardiopulmonary and epilepsy businesses.
Speaker Change: This quarter marks the sixth consecutive quarter of double-digit revenue growth. Capitalizing on this momentum to achieve sustainable, above-market growth for both businesses remains a key priority.
Speaker Change: We also remain committed to margin expansion and improving cash generation.
Speaker Change: Second, setting the direction for the difficult-to-treat depression and obstructive sleep apnea programs.
Speaker Change: In Difficult-to-Treat Depression, we announced the preliminary results for the Unipolar Patient Cohort of the Recover Clinical Study in June .
Vladimir Makatsaria: Following additional in-depth analysis of the data and input from leading independent clinical, scientific, and reimbursement experts, we decided to continue to pursue CMS coverage. As we move forward, this decision includes the deployment of a new operating model that allows us to reduce investment in the program until a CMS coverage decision is made. This direction will improve, believe I know, a financial profile in 2025 and allow us to continue pursuing coverage for a patient population with a significant unmet need. Alex will provide more detail on the financial impact of the decision later in the call. In obstructive sleep apnea, the OSPRE clinical study achieved positive, predictive outcome and concluded enrollment in March.
Speaker Change: Following additional in-depth analysis of the data and input from leading independent clinical, scientific, and reimbursement experts, we decided to continue to pursue CMS coverage.
Speaker Change: As we move forward, this decision includes the deployment of a new operating model that allows us to reduce investment in the program until a CMS coverage decision is made.
Vladimir A. Makatsaria: This direction will improve LivaNova's financial profile in 2025 and allow us to continue pursuing coverage for patient populations with a significant unmet need. Alex will provide more detail on the financial impact of this decision later in the call and set the direction for the obstructive sleep apnea program in the second quarter of 2025. There are basically three key takeaways from our financial performance. We achieve this while spending more. Second, we're increasing our 2024 full-year revenue and adjusted earnings per share guidance.
Speaker Change: This direction will improve LivaNova's financial profile in 2025 and allow us to continue pursuing coverage for patient population with a significant unmet need.
Speaker Change: Alex will provide more detail on the financial impact of this decision later in the call.
Alex Shvartsburg: In obstructive sleep apnea, the Osprey clinical study achieved positive predictive outcome and concluded enrollment in March.
Vladimir Makatsaria: We plan to review the entirety of the OSPRE clinical data and set the direction for the obstructive sleep apnea program in the second quarter of 2025. Third, we continue to explore areas of high unmet clinical need in markets with high growth potential and align with our strengths and capabilities. Overall, we're pleased with our progress in this strategic imperative, and to enable our success, we will continue to focus on execution, innovation, and people.
Alex Shvartsburg: We plan to review the entirety of the Osprey clinical data.
Alex Shvartsburg: and set the direction for the obstructive sleep apnea program in the second quarter of 2025.
Alex Shvartsburg: Third, we continue to explore areas of high unmet clinical need in markets with high growth potential and align with our strengths and capabilities.
Alex Shvartsburg: Overall, we're pleased with our progress in this strategic imperative, and to enable our success, we will continue to focus on execution, innovation, and people.
Vladimir Makatsaria: For the remainder of the call, I will discuss our second quarter results and opportunities in cardiopulmonary and epilepsy businesses. After my comments, Alex will provide additional details on our results and update 2024 guidance.
Speaker Change: For the remainder of the call, I will discuss our second quarter results and opportunities in cardiopulmonary and epilepsy businesses.
Speaker Change: After my comments, Alex will provide additional details on our results and update 2024 guidance.
Vladimir Makatsaria: I will wrap up with closing remarks before moving to Q&A.
Alex Shvartsburg: I will wrap up with closing remarks before moving to Q&A.
Vladimir Makatsaria: There are basically three key takeaways from our financial performance. First, we are marking our six consecutive quarters of double-digit growth. In the quarter which achieved 10% revenue growth versus prior year, excluding the impact of the ACS segment one down, revenue increased 11% versus 2023. We achieved this while expanding margins. Second, we're increasing our 2024 full-year revenue and adjusted earnings per share guidance. Third, we expect our decision to difficult to treat depression to result in at least 30 cents of incremental adjusted EPS in 2025.
Alex Shvartsburg: There are basically three key takeaways from our financial performance.
Alex Shvartsburg: First, we're marking our sixth consecutive quarter of double-digit growth. In the quarter, we achieved 10% revenue growth versus prior year.
Alex Shvartsburg: Excluding the impact of the ACS segment wind-down, revenue increased 11% versus 2023.
Alex Shvartsburg: We achieve this while extending margins.
Alex Shvartsburg: Second, we're increasing our 2024 full-year revenue and adjusted earnings per share guidance.
Alex Shvartsburg: Third, we expect our decision to difficult-to-treat depression to result in at least 30 cents of incremental adjusted EPS in 2025.
Vladimir Makatsaria: Now turning to segment results. For the cardio pulmonary segment, revenue was $174 million in the quarter, an increase of 14% versus the second quarter of 2023. Hard long machine revenue increased over 25% driven by Essence. We are pleased to see a sequential ramp and essence placements and continuous strong price mix in the quarter. Oxygenator revenue grew more than 15% driven by customer demand and price. The oxygenated business continues to see strong demand, and our efforts to continuously increase manufacturing capacity remain on track. We now expect cardio pulmonary revenue to grow 12 to 13% for the full year 2024.
Alex Shvartsburg: Now turning to segment results.
Alex Shvartsburg: For the cardiopulmonary segment, revenue was $174 million in the quarter.
Alex Shvartsburg: An increase of 14% versus the second quarter of 2023.
Alex Shvartsburg: Shardlong machine revenue increased over 25%.
Alex Shvartsburg: Driven by Essence
Alex Shvartsburg: We are pleased to see a sequential ramp in essence placements and continuing strong price mix in the quarter.
Alex Shvartsburg: Oxygenator revenue grew more than 15% driven by customer demand and price.
Alex Shvartsburg: The oxygenated business continues to see strong demand, and our efforts to continuously increase manufacturing capacity remain on track.
Alex Shvartsburg: We now expect cardiopulmonary revenue to grow 12-13% for the full year 2024.
Vladimir Makatsaria: Our revised forecast in corporate continued HLM growth and demand for consumers.
Vladimir A. Makatsaria: Our revised forecast incorporates continued HLM growth and demand for consumer. Second, expanding our recurring revenue capture rate, including servicing our equipment and software. Franco has spent the majority of his career with LivaNova, serving in various geographies and functions.
Alex Shvartsburg: Our revised forecast incorporates continued HLM growth and demand for consumables.
Vladimir Makatsaria: We see three key opportunities to drive long-term growth in cardio pulmonary business. First, HLM upgrades. We estimate our global installed base of HLM is roughly 3000, and we have opportunity to upgrade them to essence. While we do not provide unit sales numbers, as the point of reference, we expect that Essence will represent approximately 40% of our annual placement in 2024 and what are getting 75% in 2025. Second, expanding our recurrent driving your capture rate, including servicing our equipment and software upgrades. As the essence of the base continues to grow, we will look to drive additional revenue growth through these opportunities.
Alex Shvartsburg: We see three key opportunities to drive long-term growth in cardiopulmonary business.
Alex Shvartsburg: First, HLM upgrades.
Alex Shvartsburg: We estimate our global installed base of HLMs is roughly 3,000.
Alex Shvartsburg: and we have opportunity to upgrade them to essence.
Alex Shvartsburg: While we do not provide unit sales numbers, as a point of reference, we expect that Essence will represent approximately 40% of our annual placements in 2024, and we're targeting 75% in 2025.
Alex Shvartsburg: Second, expanding our recurring revenue capture rate, including servicing our equipment and software upgrades.
Alex Shvartsburg: As the Essence Install Base continues to grow,
Alex Shvartsburg: We will look to drive additional revenue growth through these opportunities.
Vladimir Makatsaria: Third, consumables market share. We have a leading global market position in HLM, and we have the opportunity to gain share in oxygenators and other disposables. We are already gaining share in disposables behind our commercial execution and ability to supply.
Alex Shvartsburg: Third, consumables market share.
Alex Shvartsburg: We have a leading global market position in HLMs, and we have the opportunity to gain share in oxygenators and other disposables.
Alex Shvartsburg: We're already gaining share and disposables behind our commercial execution and ability to supply.
Vladimir Makatsaria: Any great organization starts with great talent, and on that note, I'm very pleased to announce that Franco Paletti has been appointed president of cardio pulmonary business. Franco has spent the majority of his career with Livanova, standing from various geographies and functions. He has most recently led the cardio pulmonary business on an interim basis. Under his leadership, the team has consistently delivered strong results by always putting patience and customers first.
Franco Paletti: Any great organization starts with great talent. And on that note, I'm very pleased to announce that Franco Paletti has been appointed President of Cardiopulmonary Business.
Speaker Change: Franco has spent the majority of his career with LivaNova.
Vladimir A. Makatsaria: He most recently led the cardiopulmonary business on an interim basis, and epilepsy revenue in Europe and the rest of the world grew 8% versus the prior year. I'll forecast, continues to incorporate mid-single-digit growth of the U.S. new patient. Today, we're the market leader in drug-resistant epilepsy surgeries.
Speaker Change: spanning from various geographies and functions.
Speaker Change: He most recently led the cardiopulmonary business on an interim basis.
Speaker Change: Under his leadership, the team has consistently delivered strong results while always putting patients and customers first.
Vladimir Makatsaria: Turning to epilepsy. Revenue increased 7% versus the second quarter of 2023. US epilepsy revenue increased 6% year over year, with growth in both new and replacement implants. We achieved 886 new patient implants in the quarter, representing 6% growth versus the prior year. We realized 2,066 replacement implants in the quarter, also representing 6% growth versus the prior year. year, epilepsy revenue in Europe and the rest of the world grew 8% versus right year. For the full year 2024, we continue to expect global epilepsy revenue to grow 6 to 7%. Our forecast continues to incorporate mid-single-digit growth for the U.S.
Speaker Change: Turning to epilepsy.
Speaker Change: Revenue increased 7% versus the second quarter of 2023.
Speaker Change: U.S. epilepsy revenue increased 6% year-over-year, with growth in both new and replacement implants.
Speaker Change: We achieved 886 new patient implants in the quarter, representing 6% growth versus the prior year.
Speaker Change: We realized 2,066 replacement implants in the quarter, also representing 6% growth versus the prior year.
Speaker Change: Epilepsy revenue in Europe and the rest of the world grew 8% versus prior year.
Speaker Change: For the full year 2024, we continue to expect global epilepsy revenue to grow 6 to 7 percent.
Speaker Change: Our forecast continues to incorporate mid-single-digit growth for the U.S. new patients.
Vladimir Makatsaria: New patients. We now expect mixing mid-single-digit growth for international revenue and will move to mid-single-digit growth for the U.S. replacements.
Speaker Change: We now expect mid-single-digit growth for international revenue and low-to-mid-single-digit growth for the U.S. replacements.
Vladimir Makatsaria: Today, where the market leader in drug-resistant epilepsy surgery, we see two key growth opportunities for the epilepsy business. First, we continue to drive increased procedure penetration from market access and clinical evidence initiatives. Second, we see growth opportunity driven by innovation.
Speaker Change: Today we're the market leader in drug-resistant epilepsy surgery. We see two key growth opportunities for the epilepsy business. First, we continue to drive increased procedure penetration through market access and clinical evidence initiatives.
Vladimir A. Makatsaria: We see two key growth opportunities for the epilepsy business. First, we continue to drive increased procedure penetration through market access and clinical evidence initiatives. Second, fully has a proven track record of leading high-performance teams and is an accomplished R&D executive with more than 25 years of experience. With that, foreign exchange in the quarter had an unfavorable year-over-year impact of approximately $3 million, or approximately 1% of revenue.
Speaker Change: Second, we see growth opportunity driven by innovation, and to this end, we're pleased to welcome Holly Grammar as our Vice President of Research and Development for Neuromodulation.
Vladimir Makatsaria: And to this end, we're pleased to welcome Holy Grammar, the Vice President of Research and Development for Neuromodulation. Holy has a proven track record of leading high-performing teams and has an accomplished R&D executive with more than 25 years of experience. We're excited that Holy has joined LivaNova to lead the acceleration of our innovation pipeline in neuromodulation.
Speaker Change: has a proven track record of leading high-performing teams and is an accomplished R&D executive with more than 25 years of experience.
Speaker Change: We're excited that HOLI has joined LivaNova to lead the acceleration of our innovation pipeline in neuromodulation.
Alex Shvartsburg: With that, I'll turn the goal over to Alex. Thanks, lad. During my portion of the call, I'll share a brief recap of the second quarter results. Provide commentary on 2024 guidance and comment on the financial impact of the difficult-to-treat depression decision. During the recent, turning to results, revenue in the quarter was $319 million, an increase of 10% versus 2023. Excluding the impact of AACS segment wind down, revenue increased 11% versus 2023. Far and exchange in the quarter had an unfavorable year-over-year impact of approximately $3 million, or approximately 1% of revenue. A adjusted gross margin as a percent of net revenue was 69%, compared to 72% in the second quarter of 2023.
Speaker Change: With that.
Speaker Change: I'll turn the call over to Alex. Thanks, Vlad. During my portion of the call, I'll share a brief recap of the second quarter results, provide commentary on 2024 guidance, and comment on the financial impact of the difficult-to-treat depression decision.
Speaker Change: During the returning to results,
Speaker Change: Revenue in the quarter was $319 million, an increase of 10% versus 2023.
Speaker Change: Excluding the impact of the ACS segment wind-down, revenue increased 11% versus 2023.
Speaker Change: Foreign exchange in the quarter had an unfavorable year-over-year impact of approximately three million dollars or approximately 1% of revenue.
Speaker Change: Adjusted gross margin as a percent of net revenue was 69%, compared to 72% in the second quarter of 2023.
Alex Shvartsburg: A year-over-year decrease was primarily driven by the provision taken for the Italian payback measure, as described in our press release. Adjusted R&D expense in the second quarter was $41 million, compared to $48 million in the second quarter of 2023. R&D as a percent of net revenue was 13%, down from 16% in the second quarter of 2023. The year-over-year decrease was largely driven by the close-out of the hard failure trial. Excluding the costs related to the hard failure program, our R&D investments increased 4% versus the prior year. A adjusted S-GNA expense for the second quarter was $113 million, compared to $113 million in the second quarter of 2023.
Vladimir A. Makatsaria: A year-over-year decrease was primarily driven by the provision taken for the Italian payback measure as described in our press release. Excluding the costs related to the hard failure program, our R&D investments increased 4% versus the prior year. Adjusted SG&A expense for the second quarter was $113 million, compared to $113 million in the second quarter of 2023, on the $230 million of convertible senior notes.
Speaker Change: A year-over-year decrease was primarily driven by the provision taken for the Italian payback measure as described in our press release.
Speaker Change: Adjusted R&D expense in the second quarter was $41 million, compared to $48 million in the second quarter of 2023.
Speaker Change: R&D as a percent of net revenue was 13%, down from 16% in the second quarter of 2023.
Speaker Change: The year-over-year decrease was largely driven by the closeout of the heart failure trial.
Speaker Change: Excluding the costs related to the hard failure program, our R&D investments increased 4% versus the prior year.
Speaker Change: Adjusted SG&A expense for the second quarter was $113 million, compared to $113 million in the second quarter of 2023.
Alex Shvartsburg: A S-GNA as a percent of net revenue was 35%, as compared to 38% in the second quarter of 2023. The year-over-year decrease was driven by improved operating leverage and was favorably impacted by the wind-down of the ACF-6. I just did operating income with $67 million compared to $49 million in the second quarter of 2023. Adjusted operating income margin was 21%, compared to 17% in the second quarter of 2023. This increase was primarily driven by higher revenue, improved operating leverage, and the wind downs of the hard failure program and the ACF segment. Adjusted effective tax rate in the quarter was 21%, compared to 10% in the second quarter of 2023.
Speaker Change: SG&A as a percent of net revenue was 35%, as compared to 38% in the second quarter of 2023.
Speaker Change: The year-over-year decrease was driven by improved operating leverage and was favorably impacted by the wind-down of the ACF segment.
Speaker Change: Adjusted operating income was $67 million compared to $49 million in the second quarter of 2023.
Speaker Change: Adjusted operating income margin was 21% compared to 17% in the second quarter of 2023.
Speaker Change: This increase was primarily driven by higher revenue, improved operating leverage,
Speaker Change: and the wind-downs of the Heart Failure Program and the ACF segment.
Speaker Change: Adjusted effective tax rate in the quarter was 21%, compared to 10% in the second quarter of 2023.
Alex Shvartsburg: The year-over-year increase is related to developments in the global tax landscape and is in line with our expectations. Adjusted diluted earnings per share was 93 cents compared to 78 cents in the second quarter of 2023. Our cash balance at June 30 was $329 million, up from $267 million at year-end 2023. Total debt at June 30 was $625 million, up from $587 million at year-end 2023. This increase in total debt was driven by the closing of the $345 million private offering of convertible senior notes, maturing in 2029, and repurchase of the $230 million of convertible senior notes.
Speaker Change: The year-over-year increase is related to developments in the global tax landscape and is in line with our expectations.
Speaker Change: Adjusted diluted earnings per share was $0.93 compared to $0.78 in the second quarter of 2023.
Speaker Change: Our cash balance at June 30th was $329 million, up from $267 million at year-end 2023.
Speaker Change: Total debt at June 30th was $625 million, up from $587 million at year-end 2023.
Speaker Change: This increase in total debt was driven by the closing of the $345 million private offering of convertible senior notes, maturing in 2029, and repurchase of the $230 million of convertible senior notes.
Alex Shvartsburg: Net debt including restrictive cash at June 30 was $99 million. Adjusted free cash flow for the quarter was $42 million, up from negative $10 million in the prior year period. The year-over-year increase was primarily driven by stronger operating results and working capital improvements. Capital spend in the first half of 2024 was $19 million, compared to $13 million in the prior year period. The year-over-year increase was driven by cardiopulmonary capacity expansion initiatives and IT investments.
Speaker Change: Net debt, including restricted cash, at June 30th was $99 million.
Speaker Change: Adjusted free cash flow for the quarter was $42 million, up from negative $10 million in the prior year period.
Speaker Change: The year-over-year increase was primarily driven by stronger operating results and working capital improvements.
Vladimir A. Makatsaria: Capital spend in the first half of 2024 was $19 million. Now, turning to our revised 2024 guidance. Our forecast contemplates higher operating expenses in the second half of 2024 compared to the first half of the year, as we invest to maintain above-market growth in the epilepsy and cardiopulmonary business. This includes higher R&D investment based on our plans to accelerate innovation, which we forecast to be approximately $60 million. By optimizing program investments
Speaker Change: Capital spend in the first half of 2024 was $19 million.
Speaker Change: compared to $13 million in the prior year period. The year-over-year increase was driven by cardiopulmonary capacity expansion initiatives and IT investments.
Alex Shvartsburg: Now, turning to our revised 2024 guidance. As Lad mentioned, based on our performance in the second quarter, we're increasing our full year 2024 revenue and adjusted diluted earnings per share guidance, while maintaining the range on adjusted free cash flow. We now expect 2024 revenue growth on a constant currency basis between 7 and 8% and between 9 and 10% when excluding the portion of the ACS business that we are exiting. In the first half of the year, we observed favorable comparisons, which are not expected to continue for the remainder of the year. We expect revenue growth to be lower in the second half of 2024 compared to the first half of the year.
Speaker Change: Now, turning to our revised 2024 guidance. As Ladd mentioned, based on our performance in the second quarter, we're increasing our full year 2024 revenue and adjusted diluted earnings per share guidance.
Speaker Change: while maintaining the range on adjusted free cash flow.
Speaker Change: We now expect 2024 revenue growth on a constant currency basis between 7% and 8% and between 9% and 10% when excluding the portion of the ACS business that we are exiting.
Speaker Change: In the first half of the year, we observed favorable comparisons, which are not expected to continue for the remainder of the year.
Speaker Change: We expect revenue growth to be lower in the second half of 2024 compared to the first half of the year.
Alex Shvartsburg: We continue to expect foreign currency to be a 1% headwind based on current exchange rates. We continue to expect a full year adjusted effective tax rate of approximately 21%. We now project adjusted diluted earnings per share in the range of $3.10 to $3.20. with adjusted diluted weighted average shares outstanding to be approximately $55 million for the full year. Our forecast contemplates higher operating expenses in the second half of 2024 compared to the first half of the year as we invest to maintain above-market growth in epilepsy and cardiopulmonary businesses. This includes a higher R&D investment based on our plans to accelerate innovations.
Speaker Change: We continue to expect foreign currency to be a 1% headwind based on current exchange rates.
Speaker Change: We continue to expect a full-year adjusted effective tax rate of approximately 21 percent.
Speaker Change: We now project adjusted diluted earnings per share in the range of $3.10 to $3.20.
Speaker Change: with adjusted diluted weighted average shares outstanding to be approximately 55 million for the full year.
Speaker Change: Our forecast contemplates higher operating expenses in the second half of 2024 compared to the first half of the year as we invest to maintain above market growth in epilepsy and cardiopulmonary businesses.
Speaker Change: This includes a higher R&D investment based on our plans to accelerate innovations.
Alex Shvartsburg: Additionally, we expect SGNA as a percent of that revenue in the second half of 2024 to be more consistent with what we saw in the first quarter of 2024. Adjusted pre-casual is still expected to be in the range of $95 to $115 million, and an increase of approximately 9% at midpoint versus the prior year. This range includes a meaningful step up in capital spending versus the prior year, which we forecast to be approximately $60 million. As a reminder, our cash flow projections include costs associated with the ACS wind down in the range of approximately $15 to $20 million, the majority of which occurs in 2024.
Speaker Change: Additionally, we expect SG&A as a percent of net revenue in the second half of 2024 to be more consistent with what we saw in the first quarter of 2024.
Speaker Change: Adjusted free cash flow is still expected to be in the range of $95-$115 million, an increase of approximately 9% at midpoint versus the prior year.
Speaker Change: This range includes a meaningful step up in capital spending versus the prior year, which we forecast to be approximately $60 million.
Speaker Change: As a reminder, our cash flow projections include costs associated with the ACS wind down in the range of approximately $15 to $20 million, the majority of which occurs in 2024.
Alex Shvartsburg: Now turning to the financial impact of the difficult-to-treat depression decision. In our 2024 guidance, we forecasted investing in net $40 million in DTD. We will maintain that level of investment this year as we optimize the program. The DTD investment will be reduced in 2025 while we continue to pursue CMS coverage. By optimizing program investments, we expected to deliver at least $20 million in pre-tax savings in 2025, which is equivalent to 30 cents in earnings per share accretion. We also expect additional savings that will be allocated towards select high value initiatives in our cardiopulmonary epilepsy businesses to sustain their growth and long term value creation.
Speaker Change: Now turning to the financial impact of the difficult-to-treat depression decision.
Speaker Change: In our 2024 guidance, we forecasted investing a net $40 million in DTD.
Speaker Change: We will maintain that level of investment this year as we optimize the program.
Speaker Change: The DTD investment will be reduced in 2025 while we continue to pursue CMS coverage.
Speaker Change: By optimizing program investments,
Speaker Change: We expect to deliver at least $20 million in pre-tax savings in 2025, which is equivalent to $0.30 in earnings per share accretion.
Speaker Change: We also expect additional savings that will be allocated towards select high-value initiatives in our cardiopulmonary and epilepsy businesses to sustain their growth and long-term value creation.
Alex Shvartsburg: These investments include new product development, manufacturing capacity, and IT systems infrastructure.
Vladimir A. Makatsaria: These investments include new product development, manufacturing capacity, and IT systems infrastructure. We remain well positioned to deliver our financial commitments in 2024, including roughly 350 basis points of operating leverage, over 30% growth in adjusted operating income, and approximately 12% growth in adjusted diluted earnings per share. So moving forward, we continue to execute on our three strategic imperatives. This quarter marks our sixth consecutive quarter of double-digit revenue growth, driven by strength in our cardiopulmonary and epilepsy business.
Speaker Change: These investments include new product development, manufacturing capacity, and IT systems infrastructure.
Alex Shvartsburg: In summary, I'm pleased with our team's continued execution, which has led to consistent growth and margin expansion. We remained well positioned to deliver our financial commitments in 2024, including roughly 350 basis points of operating leverage. Over 30% growth in adjusted operating income, and approximately 12% growth in adjusted diluted earnings per share, despite the significant step up in our effective tax rate.
Speaker Change: In summary, I'm pleased with our team's continued execution, which has led to consistent growth and margin expansion.
Speaker Change: We remain well positioned to deliver our financial commitments in 2024, including roughly 350 basis points of operating leverage,
Speaker Change: Over 30% growth in adjusted operating income and approximately 12% growth in adjusted diluted earnings per share, despite the significant step up in our effective tax rate.
Vladimir Makatsaria: With that, I'll turn the call back over to Vlad. Thank you, Alex.
Speaker Change: And with that, I'll turn the call back over to Vlad.
Vladimir Makatsaria: Just one correction to what I said earlier: our installed base of HLM is $8,000, of course, not $3,000, which represents a significant opportunity for us. So, moving forward, we continue to execute on our three strategic imperatives. This quarter marks our six consecutive quarters of double-digit revenue growth, driven by strengths in our cardiopulmonary and epilepsy businesses. Maximizing the strengths remains our key priority.
Vlad: Thank you, Alex. Just one correction to what I said earlier. Our installed base of HLMs is 8,000, of course, not 3,000, what I said, which represents a significant opportunity for upgrades for us.
Vlad: So moving forward, we continue to execute on our three strategic imperatives.
Speaker Change: This quarter marks our sixth consecutive quarter of double-digit revenue growth, driven by strength in our cardiopulmonary and epilepsy businesses. Maximizing the strength remains our key priority.
Vladimir Makatsaria: Deciding the path forward for the Difficult to Treat Depression Program represents a key step in the evolution of our company. As we continue to plan for the future, we're exploring areas of high and mathematical need in markets with high growth potential and aligned with our strengths and capabilities. Our success will continue to be enabled by the quality of our execution, innovation, and people.
Vladimir A. Makatsaria: Deciding the path forward for the Difficult-to-Treat Depression Program represents a key step in the evolution of our community. With that, Operator, we're ready to open the call for questions. Hey, Rick, thanks for the question. So the first half of 2024 had favorable comparisons. If you recall, we really started to ramp up.
Speaker Change: Deciding the path forward for the difficult-to-treat depression program represents a key step in the evolution of our company.
Speaker Change: As we continue to plan for the future, we're exploring areas of high unmet clinical need in markets with high growth potential and aligned with our strengths and capabilities.
Speaker Change: Our success will continue to be enabled by the quality of our execution, innovation, and people.
Vladimir Makatsaria: And in closing, I would like to reiterate my gratitude for my colleagues around the world for their unwavering commitment to patients and customers.
Speaker Change: And in closing, I would like to reiterate my gratitude.
Speaker Change: for my colleagues around the world for their unwavering commitment to patients and customers.
Operator: With that operator, we're ready to open the call for questions. Thank you. If you have a question at this time, please press the star, then the number one key on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press star and then two.
Speaker Change: With that, Operator, we're ready to open the call for questions.
Speaker Change: Thank you. If you have a question at this time, please press the star then the number one key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press star and then two.
Operator: As we enter the Q&A session, please limit yourself to one question and one follow-up question, and then return to the queue if you have additional follow-ups.
Speaker Change: As we enter the Q&A session, please limit yourself to one question and one follow-up question and then return to the queue if you have additional follow-ups.
Rick Wise: Our first question comes from Rick Wise with Steve Full. Please go ahead. Good morning to you all. Good to see the quarter. Let me start off with guidance. You gave us a lot of detail, a lot of commentary. But after, as you emphasize several times, a strong solid double-digit first half growth outlook. You said that yourself guide your guide for the second half implies a slowdown to more mid single digits, and Alex highlighted as well. It sounded like, and I don't want to put words, the wrong words in your mouth, Alex.
Speaker Change: Our first question comes from Rick Wise with Stiefel. Please go ahead.
Rick Wise: Good morning to you all. Good to see the quarter. Let me start off with guidance. You gave us a lot of detail, a lot of commentary.
Speaker Change: But after, as you emphasized several times, a strong, solid, double-digit, first-half growth outlook,
Speaker Change: You said it yourself, your guide for the second half implies a slowdown to more...
Speaker Change: Mid-single digits and Alex highlighted as well
Speaker Change: It sounded like, and I don't want to put the wrong words in your mouth, Alex, it sounded like sort of maybe more aggressive spending on investment on the SG&A side.
Vladimir Makatsaria: It sounded like sort of maybe more aggressive spending on investment on the, on the S&A said, just to help us better understand your thinking and setting is up at the second half. And the degree to which we should view this as potentially or possibly conservative. Thank you. Eric, thanks for the question. So first half of 2024 had favorable comparisons. If you recall, we really started to ramp our essence revenues in the second half of the year. So we do expect we had a significant step up in the second half of 2023. And so we expect slower sales growth in the back half of the year.
Speaker Change: Just to help us better understand your thinking in setting us up for the second half, and the degree to which we should view this as potentially or possibly conservative. Thank you.
Rick Wise: Hey, Rick. Thanks for the question. So, first half of 2024 had favorable comparisons. If you recall,
Rick Wise: we really started to ramp
Rick Wise: our essence revenues in the second half of the year.
Rick Wise: So we do expect, we had a significant step up in the second half of 2023 and so we expect slower sales growth in the back half of the year.
Alex Shvartsburg: As it relates to investments, we're really putting those investments towards critical capabilities to support innovation growth and infrastructure. And the related spend will be higher in the remainder of the year. Our goal is to continue to drive sustainable above-market growth. And while we spend our margin in both businesses. So we're targeting, we're targeting the spend to help us achieve. Gotcha.
Rick Wise: As it relates to investments, we're really putting those investments towards critical capabilities.
Rick Wise: to support innovation, growth, and infrastructure.
Rick Wise: And the related spend will be higher in the remainder of the year. Our goal is to continue to drive sustainable, above-market growth.
Rick Wise: and while we expand our margin in both businesses. So we're targeting the spend to help us achieve that.
Operator: Gotcha. And there's so much to ask this quarter, but I guess I'll focus on the DTD decision. It's good to see that. And thank you for being so clear about the decision.
Rick Wise: And there's so much to ask this quarter, but I guess I'll focus on the DTD decision. It's good to see that. And thank you for being so clear about the decision. But maybe help us better understand the decision. Are you, and I'm going to ask this sort of expansively. Are you now negative? On the DT outlook or potential? How does the bipolar clinical trial arm figure into all this decision? And, and just, I left with a sense from Alex's comments that you that there actually might be more upside to EPS. If you weren't choosing to invest, help us maybe better understand that this whole package on, on of decisions.
Speaker Change: And there's so much to ask this quarter, but I guess I'll focus on the DTD decision. It's good to see that, and thank you for being so clear about the decision. But maybe help us.
Rick Wise: But maybe help us better understand the decision. Are you, and I'm going to ask this sort of expansively, now negative on the DT outlook or potential? How does the bipolar clinical trial arm figure into all this decision?
Speaker Change: better understand the decision, are you, and I'm going to ask
Speaker Change: this sort of expansively, are you now negative on the DTE outlook or potential? How does the bipolar clinical trial arm figure into all this decision?
Rick Wise: And just, I left with a sense from Alex's comment that there actually might be more upside to EPS if you weren't choosing to invest. Help us maybe better understand this whole package of decisions on DTD. Thank you again.
Speaker Change: I left with a sense from Alex's comment that
Speaker Change: that there actually might be more upside to EPS if you weren't choosing to invest. Help us maybe better understand this whole package of decisions on DTD. Thank you again.
Ahmet Tezel: On DTD, thank you again.
Amit: Hi Rick, this is Amit. I'll kind of summarize... We looked at things like, are there certain subgroups that perform better? We investigated the high response rate in the control arm. And Rick, with regard to the savings. Hey Rick, this is Ahmed again.
Ahmet Tezel: Hi Rick, this is Ahmet. I'll kind of summarize. What we have done since June when we first communicated our preliminary results. So, as we communicated back then, we demonstrated through the pivotal trial that there's a statistically significant and clinically meaningful patient benefit in certain. Select the inputs. Despite us not being able to show the primary importance of being successful. So since then what we have done is that we conducted the additional analysis. We looked at things like, are there certain subgroups that perform better. We investigated the high response rate in the control arm. While we did our internal analysis, we also worked with a consortium of external experts in clinical medicine and reimbursement.
Speaker Change: Hi, Rick. This is Amit. I'll kind of summarize.
Speaker Change: what we have done since June , when we first communicated our preliminary results.
Rick Wise: As we communicated back then, we demonstrated through the pivotal trial that
Rick Wise: There's a statistically significant and clinically meaningful patient benefit in certain select endpoints, despite us not being able to show the primary endpoints being successful.
Rick Wise: So, since then, what we have done is that we conducted additional analysis. We looked at things like, are there certain subgroups that perform better? We investigated the high response rate in the control arm.
Rick Wise: While we did our internal analysis, we also...
Rick Wise: who worked with a consortium of external experts in clinical, medical, and reimbursement.
Ahmet Tezel: And we had them also do an independent assessment of the data, and it's important to emphasize that it was independently done.
Rick Wise: And we had them also do an independent assessment of the data. And it's important to emphasize that it was independently done. We fired all that group from the internal group. So we had an internal assessment and an external assessment of the comprehensive data.
Ahmet Tezel: We fired all that group from the internal group. So we had an internal assessment and an external assessment of the comprehensive data. And what we saw from both the internal and external assessment was that there is a strong positive benefit for difficult street patients with being a therapy. And because of the internal and external assessment and the strong on medical need, we decided to continue to pursue CMS coverage. And with regard to the savings, as I said, it's at least $20 million on the pre-tax basis. As we look, it's still early in the year. We're looking at, you know, we're doing our planning for 2025 and our long-range planning.
Rick Wise: And what we saw from both the internal and external assessment was that there is a strong positive benefit for difficult to treat patients with BNS therapy.
Rick Wise: And because of this internal and external assessment and the strong unmet medical need, we decided to continue to pursue CMS coverage.
Rick Wise: And Rick, with regard to the savings...
Rick Wise: as
Rick Wise: As I said, it's at least $20 million on the pre-tax basis.
Rick Wise: As we look, it's still early in the year. We're looking at, you know, we're doing our planning for 2025 and our long-range planning.
Ahmet Tezel: So Azamid settles in, coming in as our Chief Innovation Officer. You know, we're looking at opportunities to invest behind our cardiopulmonary and epilepsy innovation programs. So, you know, we are at this point allocating some portion of the DTG savings into kind of the core CP and epilepsy businesses.
Rick Wise: As Ahmed settles in, coming in as our Chief Innovation Officer, you know, we're looking at opportunities to invest behind our cardiopulmonary and epilepsy innovation programs.
Rick Wise: So...
Rick Wise: You know, we are, at this point, allocating some portion of the DTG savings into kind of the core CP and epilepsy businesses.
Ahmed: I forgot to mention the bipolar since you asked. We had an independent third-party look at the data. As you know, because the study is still enrolling, it will be inappropriate for LivaNova internally to look at the data carefully. But an external assessment had no reason to stop the trial.
David Rescott: Hey, Rick, this is David. Again, I forgot to mention about the bipolar since you asked. We had an independent third party look at the data, as you know, because the study is still enrolling.
Rick Wise: Hey Rick, this is Ahmed again. I forgot to mention about the bipolar since you asked.
Speaker Change: We had an independent third-party look at the data. As you know, because the study is still enrolling, it will be inappropriate for LivaNova internally to look at the data carefully.
David Rescott: It will be inappropriate for Lebanova internally to look out the data carefully. But the external assessment had no reason to stop the trial. Therefore, we're continuing to enroll into that study, despite a different operating model at a lower expense rate in terms of our recruitment.
Matthew Charles Taylor: Therefore, we're continuing to enroll patients into that study despite a different operating model at a lower expense rate in terms of our recruitment. Thank you. Our next question comes from Matt Taylor with Jeffreys. Just a quick follow-up on the, Yeah, so a good portion of our spend this year is focused on getting us to a publication phase. So, we're obviously still recruiting the bipolar cohort, but the unipolar recruitment is completed now
Speaker Change: but external assessment had no reason to stop the trial. Therefore, we're continuing to enroll into that study despite a different operating model at a lower expense rate in terms of our recruitment.
Matt Taylor: Thank you. Our next question comes from Matt Taylor with Jefferies. Please go ahead.
Speaker Change: Thank you.
Speaker Change: and many more.
Matthew Charles Taylor: So, there's savings in that portion. We're also scaling back sort of preparation investments for commercialization, which we expected towards the second half of this year. So, in large, it's really just getting us to a final CMS decision, which is what our primary focus in terms of our 2025 investments is currently targeted at. Sure, Matt. It's Matt.
Speaker Change: Our next question comes from Matt Taylor with Jeffreys. Please go ahead.
Mike Sarconon: Hi, this is Mike Sarconon from Matt. Thanks for taking the question. Just a quick follow-up around the these expensive, could you elaborate a little more on kind of where specifically you're pulling back for next year? Yeah, so the good portion of our spend this year is focused on getting us to a publication phase. So we're obviously still recruiting the bipolar cohort, but the unipolar recruitment will be completed now. So there's savings in that portion where we're also scaling back sort of preparation investments for commercialization, which we expected towards the second half of this year. So, in large, it's really just getting us to a final CMS decision, which is what our primary focus in terms of our 2025 investments are currently targeted for.
Speaker Change: Hi, this is Mike Sarkonan for MADD. Thanks for taking the question.
Michael D. Hutchinson: Just a quick follow-up around the DTC.
Dave: Dave, could you elaborate a little more on kind of where specifically you're pulling back for next year?
Dave: Yeah, so the
Dave: A good portion of our spend this year is focused on
Dave: getting us to a publication phase. So we, you know, we're obviously still
Speaker Change: recruiting the the bipolar cohort but the unipolar recruitment will will be is completed now so there's there's savings and in that
Speaker Change: portion. We're also scaling back sort of preparation investments.
Speaker Change: for commercialization, which we expected towards the second half of this year. So, in large, it's really, you know, just getting us to a final CMS decision, which is
Speaker Change: What our primary focus in terms of our 2025 investments are currently targeted for.
Mike Sarconon: Thank you.
Matt Taylor: Another question on OSA, I guess, how are you thinking about that strategically? And if it does come to the point where you're getting to commercialization, what kind of investments then do you have to have there, you know, to build out a commercial organization or just help us think about what that all looks like, you know, on the piano as you get ready to maybe commercialize?
Speaker Change: Got it, thank you. And then just, you know...
Speaker Change: Another question on...
Speaker Change: OSA
Speaker Change: I guess, how are you thinking about that, uh, strategically?
Speaker Change: And, you know, if it does come to the point where you, you're getting to commercialization, you know, what kind of investment span do you have to have there, you know, to build out a commercial organization or just help us think about what that all looks like, you know, on the P&L as you get ready to maybe commercialize?
Matt Taylor: Sure, Matt, it's Matt. So for OSA, you know, nothing's changed on the timelines. We're still in the follow-up phase, the seven-month data again, one month plus six months of actual follow-up. We'll get that late in the year. That'll help, I think, directionally tell us where we are. That's our primary endpoint. And that's what we will submit to the FDA. We also have to submit 12-month safety data, which is more around April 2025. And then also, April 2025, we'll have the 12-month results. And that's really what I think will be the most likely comparator to the other two companies that have similar clinical trials in terms of length.
Matthew Charles Taylor: So, for OSA, you know, nothing's changed on the timelines. We're still in the follow-up phase. The 7-month data, again, 1 month plus 6 months of actual follow-up, we'll get that late in the year. That'll help, I think, directionally tell us where we are because that's our primary endpoint.
Speaker Change: Paramedics met. So for OSA, you know, nothing's changed on the timelines. We're still...
Speaker Change: In the follow-up phase, the seven-month data, again, one month plus six months of actual follow-up.
Matthew Charles Taylor: And that's what we will submit to the FDA. We also have to submit 12-month safety data, which is more around April 2025. And then also in April 2025, we'll have the 12-month results.
Speaker Change: We'll get that late in the year. That'll help, I think, directionally tell us where we are, because that's our primary endpoint, and that's what we will submit to the FDA. We also have to submit 12-month safety data, which is more around April 2025, and then also April 2025, we'll have the 12-month results.
Speaker Change: And that's really what I think will be the most likely comparator to the other two companies that have similar clinical trials in terms of length.
Matt Taylor: So, you know, our decision is likely to come in the beginning of '25 when we get that 12-month data, just to understand where we sit competitively. That'll have a big impact on where we expect to spend on the commercial side. So expect to see the more firm decision on that program in early 2025.
Speaker Change: So, you know, our decision is likely to come in the beginning of 25 when we get that 12-month data, just to understand where we sit competitively. That'll have a big impact.
Speaker Change: on where we expect to spend on the commercial side. So expect to see the more firm decision on that program in early 2025.
Matthew Charles Taylor: And that's really what I think will be the most likely comparator to the other two companies that have similar clinical trials in terms of length. So, you know, our decision is likely to come at the beginning of 2025 when we get that 12-month data. Just to understand where we sit competitively, that'll have a big impact on where we expect to spend on the commercial side. So, expect to see a more firm decision on that program in early 2025. All right, thank you, Matt. Good morning.
Speaker Change: All right. Thank you, Matt.
Michael Polark: Our next question comes from Michael Polak with Wall Free Search. Please go ahead. Good morning, thank you.
Speaker Change: Our next question comes from Michael Polark with Wolf Research. Please go ahead.
Operator: Thank you. I have a three part follow up on depression. So I'll just ask this one question and then get back in queue. So on the unipolar data, when might we expect, or when should we expect to see more of this data publicly? Top question one. Two, on the path of CMS coverage, like timing, milestones, and as part of this decision to pursue coverage. Have you had any preliminary engagement with CMS? If so, what did that sound like or look like?
Michael Polark: I have a three-part follow-up on depression, so I'll just ask this one topic and then get back into. So on the uni poll or data, when might we expect or when should we expect to see more of this data publicly that's. Top question one, two on the path to CMS covered like timing milestones and as part of this decision to pursue. To coverage, have you had any preliminary engagement with CMS? If so, what does that sound like or look like? And then three on the 40 million of net depression spend. So if I'm doing all the math correct for 2025, 20 million comes down to the bottom line or that loud and clear, which leaves another 20 million. Would it be fair to assume that.
Michael K. Polark: Good morning. Thank you. I have a three-part follow-up on depression, so I'll just ask this one topic and then get back in queue. So on the unipolar data, when might we expect or when should we expect to see more of this data publicly?
Speaker Change: Top question one. Two, on the path of CMS coverage, timing, milestones, and as part of this decision to pursue coverage
Operator: And then three, on, the 40 million dollars of net depression spend. So if I'm doing it, the gating item are those publications.
Speaker Change: The 40 million of net depression spend so if I'm doing
Speaker Change: All the math correct for 2025, 20 million.
Speaker Change: comes down to the bottom line, heard that loud and clear.
Michael Polark: 10 million of that is reallocated to epilepsy and cardiopulmonary innovation, and then 10 million is still needed to fund by polar. Any color on that bridge would be great. Thank you so much.
Speaker Change: which leaves another $20 million. Would it be fair to assume that $10 million of that is reallocated to epilepsy and cardiopulmonary innovation and then $10 million is still needed to fund bipolar? Any color on that bridge would be great. Thank you so much.
Ahmet Tezel: So this is Ahmet again. I'll try to answer your first two questions. First question was when will you be able to see the data. So what we are planning to do is that the pivotal trial data would be published in Q4 of this year.
Speaker Change: So this is Ahmed again. I'll try to answer your first two questions. First question was when will you be able to see the data?
Ahmet Tezel: So we will do the submissions, and at that point you will have full access to the actual data from the primary and secondary endpoint. And our secondary analysis that we've done since June enabled us to produce really interesting results, and we will submit them into for publication. I can't speculate when they will be available to be public, but our submission plans are to be.
Speaker Change: And our secondary analysis that we've done since June enabled us to produce really interesting results, and we will submit them in Q4 for publication. I can't speculate when they will be available to the public, but our submission plans are to be
Ahmet Tezel: To have them submitted in Q4, this additional analysis that I talked about, those are two data sets. The primary data would be available in Q4 because the publications will be available, and the secondary analysis we have done, we will submit them in Q4.
Speaker Change: to have them submitted in Q4, this additional analysis that I talked about. So those are the two data sets. The primary data would be available in Q4 because the publications will be available, and the secondary analysis we have done, we will submit them in Q4.
Ahmet Tezel: Now, in terms of CMS, the gating item is those publications we do need to have those publications peer reviewed so that will be the scientific validation of the data. Once they're peer reviewed and published, we will compile that data and submit to CMS. And in terms of timing, it will be appropriate for me to speculate CMS's timing.
Speaker Change: Now, in terms of CMS,
Operator: We do need to have those publications peer-reviewed, so that will be the scientific validation of the data. Once they're peer-reviewed and published, we will compile that data and submit it to CMS.
Speaker Change: The gating items are those publications. We do need to have those publications.
Speaker Change: peer-reviewed. So that will be the scientific validation of the data. Once they're peer-reviewed and published, we will compile that data and submit to CMS. And in terms of timing, it'll be inappropriate for me to speculate CMS' timing.
Operator: And in terms of timing, it will be inappropriate for me to speculate on CMS's timing. And Mike, in terms of the capital allocation for DTD, you're right. We're targeting about $10 million of investment in DTD for 2025, and the $10 million balance will be reallocated to cardiopulmonary and epilepsy. The next question comes from Adam Maeder with Piper Sandler.
Ahmet Tezel: And Mike, in terms of the capital allocation for DTD, you're right; we're targeting about $10 million of investment in DTD for 2025, and the $10 million balance reallocated to cardiopulmonary epilepsy. Thank you so much.
Speaker Change: And Mike, in terms of the capital allocation for DTD, you're right, we're targeting about $10 million of...
Michael D. Hutchinson: investment in DTD for 2025 and the 10 million dollar balance reallocated to cardiopulmonary and epilepsy.
Adam Mayder: The next question comes from Adam Mayder with Pipe Sandler. Please go ahead. Hi, good morning. Thank you for taking the questions, and congrats on the next quarter. I wanted to ask the first one on guidance and was just hoping to get some incremental caller on quarterly cadence as we look to the back half of the year, both to the top line. and an EPS, and I show Q3 consensus revenue, I think of 297 million consensus EPS is 71 cents for Q3, you know, just any reaction to those figures and then at a follow-up. Thanks.
Adam Carl Maeder: Please go ahead, and EPS and I show Q3 consensus revenue of 297 million. The consensus EPS is 71 cents for Q3. Adam, thanks for your question. Look, I think, you know, the street consensus looks reasonable for Q3. We don't guide quarters, but
Speaker Change: The next question comes from Adam Maeder with Piper Sandler. Please go ahead.
Adam Carl Maeder: and EPS. And I show Q3 consensus revenue, I think of $297 million, consensus EPS is $0.71 for Q3. You know, just any reaction to those figures and then add a follow-up. Thanks.
Alex Shvartsburg: Adam, thanks for your question. I think, you know, this district consensus looks reasonable for Q3. We don't guide quarters, but, you know, you know, from my vantage point, Q3 looks very reasonable.
Speaker Change: Adam, thanks for your question. Look, I think, you know, this district consensus looks reasonable for Q3. We don't guide quarters, but, you know, you know, from my vantage point, Q3 looks very reasonable.
Adam Carl Maeder: Um, you know, you know, from my vantage point, Q3 looks very reasonable. Maybe just to add one, Adam, thank you for the question and to add a little bit of color to what Alex said and also kind of go back to Rick's question on, And one of the assumptions that we've made in our view for the rest of the year is that those competitors will come back on the market with a healthier supply.
Vladimir Makatsaria: Maybe just to add one, so Adam, thank you for the question, and add a little bit color to what Alex said and also kind of go back to Rick's question on, I think he said the work and survey that, you know, we also made an assumption over the past few quarters; the industry witnessed a disruption from supply from the various competitors. And one of the assumptions that we've made in our view for the rest of the year is those competitors will come back on the market in a healthier, with a healthier supply. And obviously, that is maybe the element of conservatism in our view.
Speaker Change: I think you said the word conservative. You know, we also made an assumption over the past few quarters, the industry witnessed a disruption from supply from the various competitors.
Speaker Change: And one of the assumptions that we've made in our view for the rest of the year is those competitors will come back.
Adam Mayder: That's helpful, color guys. Thank you for that.
Adam Mayder: And then, and then maybe just to the follow-up, wanted to ask on the innovation front and, you know, curious if you can just give some more details in terms of, you know, what you're looking to improve upon in the, you know, the epilepsy technology as well as cardiopulmonary. You know, we found a couple of new trademarks for epilepsy that, you know, look interesting. You know, maybe just, yeah, anything you can share on kind of the plans to accelerate innovation there and what you're looking to achieve in the pipeline.
Color Guys: That's helpful, Color Guys. Thank you for that. And then.
Speaker Change: And then maybe just for the follow-up, I wanted to ask on the innovation front and, you know, curious if you can just give some more details in terms of...
Speaker Change: you know, what you're looking to.
Speaker Change: improve upon in the epilepsy technology as well as cardiopulmonary. We found a couple of new trademarks for epilepsy that look interesting.
Vladimir Makatsaria: Thanks.
Vladimir Makatsaria: Yeah, Adam, this is Vlad, and thank you for the question.
Adam Carl Maeder: And obviously, that is maybe the element of conservatism in our view. And then maybe just for the follow-up, wanted to ask on the innovation front and, you know, curious if you could just give some more details in terms of Adam, this is Vlad, and thank you for the question. I'll start and then turn it over to Ahmed.
Vladimir Makatsaria: I'll start and then turn it over to Ahmed. But, you know, as I said in my opening, innovation is, you know, one of the top three key priorities for us, which will enable us for our success. And for me, any great organization starts with great people. And so that has been a big focus of our leadership team is to bring in really top experts, top leaders on the innovation front. So we're very pleased that Ahmed made the decision to join us as Chief Innovation Officer. As I mentioned, Holy Grammar has joined us as VP of R&D for epilepsy.
Speaker Change: Yeah.
Speaker Change: Adam, this is Vlad, and thank you for the question. I'll start and then turn it over to Ahmed.
Vlad: You know, as I said in my opening innovation, and for me, any great organization starts with great people. And so that has been a big focus of our leadership team, to bring in really top experts, top leaders on the innovation front. So we're very pleased that Amet made the decision to join us. And most recently, we announced that Phil Kowalczyk is joining LivaNova in August.
Ahmed: You know, as I said in my opening, innovation is...
Speaker Change: you know, one of the top three key priorities for us to enable us to have success.
Speaker Change: as Chief Innovation Officer. As I mentioned, Holy Grammar has joined us as VP of R&D for Epilepsy. We have
Ahmet Tezel: We have two really stellar leaders in global strategic marketing that joined us, you know, from with experience in really leading Medtech companies prior to joining Livanova. And most recently, we announced that Phil Kawalczyk is joining LivaNova in August. And Phil is joining us as head of strategy and business development and, again, incredible experience over many years in some of the prominent players in the Medtech industry. So for me the key focus was kind of complement our exceptional capabilities and scientists that we have at LivaNova today with new leaders that can really accelerate the innovation agenda.
Speaker Change: Two really stellar leaders in global strategic marketing that joined us with experience in really leading medtech companies prior to joining LivaNova.
Speaker Change: And most recently, we announced that...
Speaker Change: Phil Kowalczyk is joining LivaNova in August .
Vlad: And Phil is joining us as head of strategy and business development, and again, incredible experience over many years with some of the eminent players in the tech industry. So, for me, the key focus was kind of
Speaker Change: And Phil is joining us as head of strategy and business development, and again, incredible experience over many years in some of the eminent players in the tech industry.
Speaker Change: For me, the key focus was kind of complement our exceptional capabilities and scientists that we have at Livanova today with new leaders that can really accelerate the innovation agenda.
Ahmet Tezel: So this is on it again, as we are thinking about innovation in the NS therapy. Just like any medical device, there's kind of three areas you can focus on, and this is general for medical devices: the safety of the device, the effectiveness of this device, and the convenience for both the patients and the physician in terms of how that device works. So the NS therapy safety is well established. So where we're focusing on it, are there things we can do to improve effectiveness? We have some ideas around improving the effectiveness; obviously, they need to be tried, but where we have a real opportunity, opportunities, a convenience factor for both the patients and the physician.
Speaker Change: So this is Ahmed again. As we are thinking about innovation in
Speaker Change: VNS therapy, just like any medical device, there's kind of three areas you can focus on, and this is general for medical devices, the safety of the device, the effectiveness of the device.
Speaker Change: and the convenience for both the patient and the physician in terms of how that device works.
Speaker Change: So VNS therapy safety is well-established. So where we're focusing on is are there things we can do to improve effectiveness? We have some ideas around improving the effectiveness. Obviously, they need to be tried.
Vlad: But where we have a real opportunity is the convenience factor for both the patient and the physician. And what I mean by that is that we are investing in accelerating our digitization of the therapy. We do want to work on things like remote patient programming, for example, that will have a significant improvement for both the patient and the physician as they use VNS therapy. So that will be on the neuromodulation side. On the CP business. Very similar.
Speaker Change: But where we have a real opportunity is the convenience factor for both the patient and the physician. And what I mean by that is that we are investing in accelerating our digitization of the therapy.
Ahmet Tezel: And what I mean by that is that we are investing in accelerating our digitization of the therapy. We do want to work on things like remote patient programming, for example, that will have a significant improvement for both the patients and the physician as they use the NS therapy.
Speaker Change: We do want to work on things like remote patient programming, for example, that will have a significant improvement for both the patient and the physician as they use VNS therapy. So that will be on the neuromodulation side. On the CP business...
Ahmet Tezel: So that will be on the neuromodulation side on the CP business, very similar. There's a lot more we can do with the HLM system in terms of providing additional guidance, additional data to the profusionists to achieve better outcomes. For that, we need to continue to accelerate our digitization of the HLM system as well. And we do see this as part of our ongoing innovation, where we continuously upgrade essence in terms of its performance. So essence, as we move throughout the years, will have more and more benefits than teacher sets as we digitize the technology.
Vlad: There is a lot more we can do with the HLM system in terms of providing additional guidance and additional data to the profusionist to achieve better outcomes. For that, we need to continue to accelerate our digitization of the HLM system as well. And we do see this as part of our ongoing innovation where we continuously upgrade Essence in terms of its performance. So Essence, as we move through the years, will have more and more benefits than teacher sets as we digitize the technology, and Bipolar is still ongoing. Is there variability in timing as to when a decision is going to be made from a commercial standpoint as to whether or not the company is going to pursue this as a next indication in DNS?
Speaker Change: Very similar. There's a lot more we can do with the HLM.
Speaker Change: system in terms of providing additional guidance, additional...
Speaker Change: to achieve better outcomes. For that, we need to continue to accelerate our digitization of the HLM system as well. And we do see this as part of our ongoing innovation, where we continuously upgrade Essence in terms of its performance. So Essence, as we move throughout the years, will have more and more benefits and feature sets.
Speaker Change: as we digitize the technology.
Anthony Petroni: On the next question comes from Anthony Petroni with Missy Her Group. Please go ahead. Thank you and congrats here on the quarter. Maybe I'll stick with a couple on guidance, one on CP, maybe when we think about just some of the cost savings you laid out here in terms of the depression path forward.
Speaker Change: and many more.
Speaker Change: Our next question comes from Anthony Petrone with Mizuho Group. Please go ahead.
Anthony Petrone: Thank you and congrats here on the quarter. Maybe I'll stick with...
Speaker Change: Maybe when we think about just some of the cost savings...
Speaker Change: you laid out here.
Vladimir Makatsaria: Maybe just to clarify as you engage in CMS and bipolar are still ongoing, is there variability in timing as to when a decision is going to be made from a commercial standpoint as to whether or not the company is going to pursue this as a next indication in DNS. So that would be one. In other words, what would be the variability going forward also from a bottom line perspective, whether costs are going up or down when the final decision is made on depression.
Speaker Change: in terms of just the depression path forward. Maybe just to clarify, as you engage in CMS,
Speaker Change: and Bipolar are still ongoing. Is there variability in timing as when a decision is going to be made from a commercial standpoint as to whether or not the company is going to pursue this as a next indication in DNS?
Vlad: So that would be one. In other words, what would be the variability going forward from a bottom line perspective, whether costs are going up or down when the final decision is made on depression? And then on the CP business, maybe just a little bit in the second half guidance as it relates to the competitive landscape, maybe just an update there. It seems like the feedback from competitors is still that it's a little bit porous out there in terms of when they'll fully be back on the market. So to what extent was the competitive landscape baked into the guidance for the second half of the year for CP? Thanks.
Speaker Change: So that would be one. In other words, what would be the variability going forward, also from a bottom line perspective, whether costs are going up or down when the final decision is made on depression?
Vladimir Makatsaria: And then on the CP business, maybe just a little bit in the second half guidance as it relates to the competitive landscape, maybe just an update there. It seems like the feedback from competitors is still that it's a little bit porous out there in terms of when they'll fully be back on to the market. So to what extent was the competitive landscape baked into the guidance for the second half for CP? Thanks. Yeah, I'll thank you.
Speaker Change: And then on the CP business, maybe just a little bit in the second half guidance as it relates to the competitive landscape.
Speaker Change: The feedback from competitors is still that it's a little bit porous out there in terms of when they'll fully be back on to the market. So, to what extent was the competitive landscape baked into the guidance for the second half for CP? Thanks.
Vlad: Yeah, okay. So, why don't I start, you know, with the first one on the on the CMS and the GDD decision? So right now, our full energy is focused on partnering with CMS to get the reimbursement passed forward. You know, and our commercial plans or our decision to build up the commercial arm depends on that decision. So we will not ramp up any commercial activity until we get the CMS decision. So that's number one. On the second one.
Vladimir Makatsaria: So why don't let me start, you know, with the first one on this on the CMS and the GDD decision. So right now, our full energy is focused on partnering with CMS to get the reimbursement path forward. You know, and our commercial plans or our decision to build up, you know, the commercial arm depends on that decision. So we will not ramp up any commercial activity until we get the CMS decision. So that's number one. On the second one, I think, you know, we've dialed in the return of the competitors. I think we don't want to make assumptions for our competitors.
Speaker Change: Yeah, okay, so why don't let me start, you know, with the first one on the CMS and the GDD decision. So right now our full energy is focused on partnering with CMS.
Speaker Change: to get the reimbursement path forward.
Speaker Change: and our commercial plans or our decision to build up the commercial arm.
Speaker Change: depends on the decision, so we will not ramp up any commercial activity until we get the CMS decision.
Speaker Change: So that's number one. On the second one...
Vlad: I think we've dialed in on the return of the competitors. I think it's healthy for the market if the market has a healthy supply of products. And so we made an assumption that competitors are in full supply. If that doesn't happen and we have to step up, there are two sides to that.
Speaker Change: I think, you know, we've dialed in the return of the competitors. I think we don't want to make assumptions for our competitors, and I think it's healthy for the market if the market has a healthy supply of products. And so we made an assumption that...
Vladimir Makatsaria: And I think it's healthy for the market. If the market has a healthy supply of products. And so we made an assumption that competitors are in full supply. If that doesn't happen, and we have to step up, you know, the two sides to that one, obviously, an opportunity for us to grow faster. But the second one is also an opportunity, kind of a need for us to manufacture more. And at this point, like we said in the previous goals, it's a two-step approach for us to improve our capacity. The first step is to take a current network and do better in terms of productivity with what we have today.
Speaker Change: competitors are in full supply. If that doesn't happen and we have to step up.
Vlad: One, obviously, is an opportunity for us to grow faster. But the second one is also kind of a need for us to manufacture more. And at this point, Like we've said in the previous goals, it's a two-step approach for us to improve our capacity. The first step is to take our current network and do better in terms of productivity with what we have today.
Speaker Change: You know, there are two sides to that. One, obviously, an opportunity for us to grow faster, but the second one is also kind of a need for us to manufacture more. And at this point,
Speaker Change: like we've said in the previous goals.
Speaker Change: It's a two-step approach for us to improve our capacity. The first step is to take a current network.
Speaker Change: and do better in terms of productivity with what we have today.
Vlad: And the original target for us was to go, you know, from the end of last year to the end of this year, a gradual improvement that would lead to a year-on-year improvement of 10% in terms of capacity and output. We're slightly ahead of that target right now, and that allows us to, you know, A, deliver life-saving products to the market, but B, also accelerate our growth. The second step, which is more mid and long term, is we're looking at our manufacturing strategy and network strategy that will allow us to build significant yet flexible capacity moving forward so that even if there are disruptions in the market, our customers are receiving products. So that, I think, is more about 25 and beyond. Our next question comes from Mike Matson with Medium & Company. Please go ahead.
Vladimir Makatsaria: And the original target for us was to go, you know, from the end of last year to the end of this year, a gradual improvement that would lead year-on-year improvement of 10% in terms of capacity in terms of output. We're slightly ahead of that target right now, and that allows us to, you know, a deliver life-saving products to the market, but b also accelerate our growth. The second step, which is more mid and long term, is we're looking at our manufacturing strategy and network strategy that will allow us to build. Significant, yes, flexible capacity moving forward so that the even if there are disruptions in the market that, you know, our customers are receiving products.
Speaker Change: And the original target for us was to go, you know, from the end of last year to the end of this year, a gradual improvement that would lead year-on-year improvement of 10% in terms of capacity, in terms of output.
Speaker Change: We're slightly ahead of the target right now, and that allows us to, you know, A, deliver life-saving products to the market, but B, also accelerate our growth.
Speaker Change: They're the second step.
Speaker Change: which is more mid- and long-term, is we're looking at
Speaker Change: our manufacturing strategy and network strategy that will allow us
Speaker Change: to build significant, yes, flexible capacity moving forward so that even if there are disruptions in the market that, you know, our customers are receiving products. So, that I think is more 25 and beyond.
Vladimir Makatsaria: So that I think is more 25 and beyond. Thank you all second.
Speaker Change: I'll hop back in.
Mike Matson: Our next question comes from Mike Matson with Need Among Company. Please go ahead. Yeah, thanks. You know, just given the European Court Justice decision, I know it's going to be moving to the tide spring quarter. That'll be the next and final step, but can you just remind us on your balance sheet? I think you have cash to completely fund this. But, you know, what I think you've also been excluding is the interest expense, so it can maybe quantify what that would be either in terms of dollars or EPS, if you did have to start stop excluding it from your, from your justice earnings.
Speaker Change: Our next question comes from Mike Matson with Medium & Company. Please go ahead.
Michael Stephen Matson: Yeah, thanks. You know, just given the European Court of Justice decision, I know it's going to be moving to the Italian Supreme Court, or that'll be the next and final step. But can you just remind us, on your balance sheet, I think you have cash to completely fund this. But you know what? I think you've also been excluding the interest expense. So can you maybe quantify what that would be, either in terms of dollars or EPS, if you did have to start or stop excluding it from your adjusted earnings?
Michael Stephen Matson: Yeah, thanks. You know, just given the European Court of Justice decision, I know it's going to be moving to the Italian Supreme Court, or that'll be the next...
Michael Stephen Matson: and final step. But can you just remind us on your balance sheet, I think you have cash to completely fund this.
Speaker Change: I think you've also been excluding the interest expense, so can you maybe quantify what that would be either in terms of dollars or EPS if you did have to stop excluding it from your adjusted earnings?
Michael Stephen Matson: And then, you know, I just want to see if you're comfortable with the cash balance you'd have, you know, once that is paid out, or would you want to maybe raise additional capital at that point? Yeah, thanks for your question, Mike.
Mike Matson: And then, you know, just want to see if you're comfortable with the cash balance you have, you know, once that is paid out, or would you want to maybe raise additional capital at that.
Speaker Change: And then, you know, I just want to see if you're comfortable with the cash balance you'd have, you know, once that is paid out, or would you want to maybe raise additional capital at that point?
Mike Matson: And then, you know, if you're comfortable with the cash balance you have, you know, if you're comfortable with the cash balance you have, you know, if you're comfortable with the cash balance you have, you know, if you're comfortable with the cash balance you have, you know, if you're comfortable with the cash balance you have, you know, if you're comfortable with the cash balance you have, you know.
Alex Shvartsburg: Yeah, thanks for your question, Mike. So, let me just make sure that we're clear on sort of the background of the ECJ decision. So in 2022, the Italian Supreme Court referred a question related to the European, the merger laws to the ECJ. So, you know, the ECJ decision is focused on the EU, the merger laws. It is not a ruling on LivaNova, right? So it's up to the Italian Supreme Court to apply the ECJ decision to LivaNova's decision as it works, you know, on the appeal process from us. Right? So, as Vlad said, we were disappointed by the decision, but the judgment really now goes back to the Italian Supreme Court to decide.
Speaker Change: Yeah, thanks for your question Mike. So let me just...
Vladimir A. Makatsaria: So, Let me just... make sure that we're clear on sort of the background of the ECJ decision. So, in 2022, the Italian Supreme Court referred a question related to the European demerger laws to the ECJ. You know, the ECJ decision is focused on the EU, the merger laws. It is not a ruling on LivaNova.
Speaker Change #100: make sure that we're clear on sort of the background of the ECJ decision. So in 2022, the Italian Supreme Court referred a question
Speaker Change: related to the European demerger laws.
Speaker Change: to the ECJ.
Speaker Change: So, you know, the ECJ decision is focused on the EU, the merger laws. It is not a ruling on LivaNova.
Vladimir A. Makatsaria: Right, so it's up to the Italian Supreme Court to apply the ECJ decision to LivaNova's decision, as it works, you know, on the appeal process from us. All right, so... As Vlad said, we were disappointed by the decision, but the judgment really now goes back to the Italian Supreme Court to decide, as we've said. The timing of the decision from the Italian Supreme Court is uncertain, but we don't expect that until 2025.
Speaker Change: Right, so it's up to the Italian Supreme Court to apply the ECJ decision to LivaNova's decision as it works, you know, on the appeal process from us.
Ladd: Right, so as Ladd said, we were disappointed by the decision but the judgment really now goes back to the Italian Supreme Court to decide. As we've said...
Alex Shvartsburg: As we've said, the timing on the decision from the Italian Supreme Court is uncertain, but we don't expect that until 2025. Now, as it relates to our capital that we've set aside for a potential negative ruling, we have 270 million euros or 300 million dollars that's sitting in our restricted cash balance. We also have operating cash of roughly 330 million dollars, and then we have access to 225 million dollars in a revolver, which remains undrawn. So we have plenty of capital to deal with a, you know, potential demand for payment if it goes against us.
Ladd: The timing on the decision from the Italian Supreme Court is uncertain, but we don't expect that until 2025.
Vladimir A. Makatsaria: Now, as it relates to our capital that we've set aside for a potential negative ruling, we have 270 million euros or $300 million that's sitting in our restricted cash balance. We also have operating cash of roughly $330 million, and then we have access to $225 million in a revolver, which remains undrawn. So we have plenty of capital to deal with a potential demand for payment if it goes against us.
Speaker Change: We have 270 million euros or 300 million dollars that that's sitting in our restricted cash balance.
Speaker Change: We also have operating cash of roughly $330 million.
Speaker Change: And then we have access to $225 million in a revolver, which remains undrawn. So we have plenty of capital to deal with a, you know, potential demand for payment if it goes against us.
Alex Shvartsburg: Now, your final question was related to the interest expense. So the interest expense, kind of on a gross basis, is roughly 27 to 30 million dollars on an annual basis. Now, today we actually generate interest income that's related to the bank security, this guarantee that's sitting in restricted cash. So that's roughly called 16 to 19 million dollars. So the net range impact today is around 10 to 12 million dollars. And that's, you know, that if the ruling won against us, we would obviously be dealing with the interest expense as part of our, as part of the EPA operating EPS, and we wouldn't be able to generate the interest income that I just described.
Vladimir A. Makatsaria: Now, your final question was related to the interest expense. So, the interest expense, kind of on a gross basis, is roughly $27 to $30 million on an annual basis. Now, today, we actually generate interest income that's related to the bank surety, this guarantee that's sitting in restricted cash. So, that's roughly, call it $16 to $19 million.
Speaker Change: Now, your final question was related to the interest expense.
Speaker Change: So the interest expense kind of on a gross basis is roughly 27 to 30 million dollars on an annual basis.
Speaker Change: Now, today, we actually generate interest income that's related to the bank surety, this guarantee that's sitting in restricted cash. That's roughly, call it $16 to $19 million.
Vladimir A. Makatsaria: So the net range impact today is around 10 to $12 million. And that's, you know, if the ruling went against us and we'd obviously be dealing with the interest expense as part of the operating EPS, and we wouldn't be able to generate the interest income that I just described. Does that make sense? Okay, got it. Yeah, yeah.
Speaker Change: So the net range impact today is around 10 to 12 million dollars.
Speaker Change: And that's, you know, if the ruling went against us, and we'd obviously be dealing with the interest expense as part of our...
Speaker Change: as part of the operating EPS, and we wouldn't be able to generate the interest income that I just described.
Alex Shvartsburg: That makes sense. Okay, got it. Yeah, yes, so the change would essentially be the 10 to 12 million annually, roughly. If the net change, if you have to pay it in terms of what's hitting your EPS. The interest impact would be $27 to $30 million on the pre-tax basis, right? We wouldn't be getting the benefit of the interest income that we generate today on the bank guarantee. Okay, all right, got it.
Vladimir A. Makatsaria: So the change would essentially be the 10 to 12 million annually, roughly, the net change if you have to pay it in terms of what's hitting your EPS. The net interest impact would be $27 to $30 million on the pre-tax base. Right, we wouldn't be getting the benefit of the interest income that we generate today on the bank guarantee. Okay, all right, got it, terms of how the products are sold and whatnot, but are there any additional, you know, strategic changes that you could potentially make there to drive even faster growth in FOPC? Yeah, no, it's a great question.
Speaker Change: Does that make sense? Okay, got it. Yeah, yeah, so the change would essentially be the 10 to 12 million annually roughly.
Speaker Change: The net change, if you have to pay it, in terms of what's hitting your EPS.
Speaker Change: The net interest impact would be $27 to $30 million on the pre-tax basis, right? We wouldn't be getting the benefit of the interest income that we generate today on the bank guarantee.
Michael Matson: And then just in the epilepsy business, I mean it's good to see that the business has kind of recovered into the high single digits. But that market is really under penetrated. There's a lot of folks out there where the drugs just aren't working well. And I've always wondered why that business can't grow even faster. So I guess question for Vlad just, you know, I know that the business is headed in the right direction and there's been some changes made in the past in terms of how the products are sold and whatnot. But are there any additional, you know, strategic changes that you could potentially make there to try to even massacre in epilepsy?
Speaker Change: Okay. All right. Got it.
Speaker Change: And then.
Speaker Change: In the epilepsy business, I mean, it's good to see that the business has kind of recovered into the high single digits.
Speaker Change: But, you know, that market is really under-penetrated. You know, there's a lot of folks out there where the drugs just aren't working well. And, you know, I've always wondered why that...
Speaker Change: business can't grow even faster. So I guess question for Vlad, just, you know, I know that the business is headed in the right direction and there's been some changes made in the past.
Speaker Change: in terms of how the products are sold and whatnot, but are there any additional, you know, strategic changes that you could potentially make there to drive even faster growth in FOPC?
Vladimir Makatsaria: Yeah, no, it's a great question. So, and again, I'll maybe take it in two steps. You know, one step is what can we do better today with a current portfolio and accelerate our growth. And then really comes down to two things, which you said correctly. You know, one is penetration procedure penetration today. Procedure penetration is below five percent. And there obviously, there are other analogs in Medtech that are similar to this. And really, you know, education, patient awareness, clinical evidence, real life evidence. You know, there are various market access activities around the world. They will help to continue to drive this procedure penetration up.
Vladimir A. Makatsaria: So, And again, I'll maybe take it in two steps. You know, one step is, "What can we do better today with the current portfolio?" and accelerate our growth, and that really comes down to two things, which you said correctly. One is procedure penetration. Today, procedure penetration is below 5%, and really, you know, education, patient awareness, clinical evidence, real-life evidence, you know, various market access activities around the world will help to continue to drive this procedure penetration up. So, you know, there's a playbook on how to do that, and we're very much focused on that. That is our number one driver.
Vlad: Yeah, no, it's a great question. So,
Vlad: And again, I'll maybe take it in two steps, you know, one step is what can we do better today with the current portfolio and accelerate our growth. And that really comes down to two things, which you said correctly, you know, one is penetration, procedure penetration. Today.
Vlad: Procedure penetration is is below 5%.
Vlad: And obviously there are other analogs in MedTech that are similar to this. And really, you know, education, patient awareness.
Speaker Change: clinical evidence.
Speaker Change: real-life evidence, you know, various market access activities around the world. They will help to continue to drive this procedure penetration up.
Vladimir Makatsaria: So, you know, there's a playbook on how to do that. And we're very much focused on that. That is our number one driver. The second one is, and I'm at alluded to some to that is once we make product, once we bring new innovation to our current platform that will make the adaption of the procedure even easier. You know, that, that goal, that, that is a second gold drive. And then the third one for me is then looking at the second step beyond our current portfolio. And, and this work is ongoing right now is other, other ways for us to expand our portfolio in epilepsy or in your modulation.
Speaker Change: So, you know, there's a playbook on how to do that, and we're very much focused on that. That is our number one driver.
Vladimir A. Makatsaria: The second one, and Ahmed alluded to some of that, is, once we make the product, once we bring new innovation to our current platform, that will make the adaptation of the procedure even easier. That is the second goal driver. And then the third one for me is then looking at the second step beyond our current portfolio, and this work is ongoing right now, other ways for us to expand our portfolio, in epilepsy or in neuromodulation, and that is when I refer to our work in terms of what's next in terms of areas of high unmet clinical need and high growth markets. So we intend to finish that work by the end of this year. Okay, great. Thank you. Please give me a hand.
Speaker Change: The second one is, and Ahmed alluded some to that, is
Ahmed: Once we make product, once we bring new innovation to our current platform that will make the adaption of the procedure even easier, you know, that is the second goal driver.
Speaker Change: And then the third one for me is then looking at the second step beyond our current portfolio, and this work is ongoing right now, is are there other ways for us to expand our portfolio?
Vladimir Makatsaria: And that is when I refer to kind of our work in terms of what's next in terms of areas of high on medical need and the high growth market.
Speaker Change: in epilepsy or in neuromodulation. And that is when I refer to kind of our work in terms of what's next in terms of areas of high unmet clinical need and the high growth markets. So, we intend to finish that work by the end of this year.
Vladimir Makatsaria: So we intend to finish that work by the end of this year.
Vladimir Makatsaria: Okay. Great.
David Rescott: Thank you. Our next question comes from David. Rescott with bears. Please do ahead. Oh, great. Thanks for taking the questions.
Speaker Change: Okay, great, thank you.
Speaker Change: Our next question comes from David Rescott with Baird. Please go ahead.
Operator: Oh, great. Thanks for taking the questions. I just wanted to clarify that prior comment just on the difference between the total kind of net interest income versus the net interest income, specifically toward that restricted cash. But my first question was going to be generally about Italy and the Italian litigation and that $6.6 million number that was in their pullout of net revenue. Just curious if that's something that should be repetitive, meaning is that a net amount that should come out on a quarterly basis going forward?
David Rescott: I just wanted to clarify that that prior comment just done the difference between what the total kind of net interest income is versus the net interest income specifically toward that restricted cash, but my, my first question was going to be generally on on on Italy and the Italian litigation and that $6.6 million. Number that was in there pull out of net revenue. Just curious. If that's something that should be repetitive, means is that another amount that should come out on a quarterly basis going forward. And then the second part to that entire kind of questions here, you know, is on this 453, I think, was the euro number.
David Kenneth Rescott: Oh, great. Thanks for taking the questions. I just wanted to clarify that prior comment just on the difference between what the total kind of net interest income is versus the net interest income specifically toward that restricted cash, but my first question was going to be generally on Italy and
David Kenneth Rescott: the Italian litigation, and that $6.6 million number that was in their pullout of net revenue. Just curious...
David Kenneth Rescott: If that's something that should be repetitive, meaning, is that a net amount that should come out on a quarterly basis going forward? And then the second part to that entire kind of question here, you know, is on this 453, I think was the Euro number. Is that kind of the cap or max amount, or is there potential for higher?
Operator: And then the second part to that entire kind of question here is on this 453, which I think was the euro number. Is that kind of the cap or max amount, or is there potential for higher liability associated with the Italian terms of debt? Yeah, so let me just take this in parts, David, by the Italian Constitutional Court. So this is a medtech industry issue that goes all the way back to 2015. It's been litigated in Italian courts.
David Rescott: Is that kind of the cap or max amount, or is there potential for higher liabilities associated with the. Italian kind of.
Speaker Change: liability associated with Italian kind of judgment.
Alex Shvartsburg: Yeah, so let me just take this in part, David. Let's start off with this Italian payback measure. So, we took a provision in the quarter. It's related to a recent ruling that was issued by the Italian Constitutional Court. So this is a, this is a Med tech. industry issue goes all the way back to 2015. It's been litigated in Italian courts. Basically, what it is, is the law that requires companies selling medical devices in Italy to repay a percentage of healthcare expenditures exceeding regional maximum caps for medical devices. So this translates to any one any med tech company that participates in the Italian market.
Speaker Change: Yeah, so let me just take this in parts, David.
Speaker Change: Let's start off with this Italian payback measure. So we took a provision in the quarter. It's related to a recent ruling that was issued.
Speaker Change: by the Italian Constitutional Court. So this is a this is a medtech
Speaker Change: industry issues goes all the way back to 2015. It's been litigated in Italian courts.
Speaker Change: Basically, what it is, is the law that requires companies selling medical devices in Italy
Speaker Change: to repay a percentage of health care expenditures exceeding regional maximum caps for medical devices.
Operator: So, this translates to anyone, any medtech company that participates in the Italian market. So, we took a true-up provision of $6 million in the quarter. As I said, this is a true-up going back to 2015.
Speaker Change: So, this translates to anyone, any medtech company that participates in the Italian market.
Alex Shvartsburg: So we took a true-up provision of $6 million in the quarter. As I said, this, this is a true up going back to 2015. So we have been accruing sort of, you know, on an ongoing basis, but this, this ruling sort of clarifies what, you know, what sort of level of provision that's required. So it's, it's going to continue, but it's going to be a much lower rate on an incremental basis as we move forward.
Speaker Change: So, we took a true-up provision of $6 million in...
Speaker Change: in the quarter. As I said, this is a true-up going back to 2015.
Operator: So, we have been accruing sort of on an ongoing basis, but this ruling sort of clarifies what, So that's on the Italian payback measure. Now, going back to your clarifying question regarding the capital and the interest expense related to the SNIA litigation. So if you look at our balance sheet today, we have capital reserves sitting in restricted cash, uh, that's related to the bank guarantee, which was related to this uh the appeal that we filed several years ago.
Speaker Change: So, we have been accruing sort of, you know, on an ongoing basis, but this ruling sort of clarifies what...
Speaker Change: You know what what sort of level of provision that's that's required so it's it's going to continue but it's it's it's going to be a much lower rate on an incremental basis as we move forward.
Alex Shvartsburg: So that's on the, that's on the Italian payback measure.
Speaker Change: So that's on the Italian payback measure. Now going back to your clarifying question regarding the capital and the interest expense related to the SMEA.
Alex Shvartsburg: Now, going back to your clarifying question regarding the capital and the interest expense related to the Snia litigation. So if you look at our, if you, if you look at our balance sheet today, we have capital reserved sitting in restricted cash. That's related to the bank guarantee, which was related to the appeal that we filed several years ago. And so that's, that's the portion that is currently earning interest income, right. So if we were to pay this out, if, if there was a payment amount that was similar to what the lower court or the court of appeals ruling was, which was 453 million euros.
Speaker Change: litigation. So if you look at our if you if you look at our balance sheet today
Speaker Change: We have capital reserved sitting in in restricted cash that's related to the bank guarantee which was related to this the
Operator: And so that's the portion that is currently earning interest income, right? So if we were to pay this out, if there was a payment amount that was similar to what the lower courts or the Court of Appeals ruling was, which was 453 million euros, that portion of cash would go towards that payment, and we wouldn't be earning that interest income.
Speaker Change: the appeal that we filed.
Speaker Change: several years ago. And so that's the portion that is currently earning interest income, right? So if we were to pay this out
Speaker Change: If there was a payment amount that was similar to what the lower courts or the Court of Appeals ruling was, which was 453 million euros several years ago, obviously that
Alex Shvartsburg: That goes several years ago. Obviously, that, that portion of cash would, would, would go towards that payment; we wouldn't be earning that interest income. So what we would be left with is interest expense, with an annual interest expense of 27 to 30 million dollars, which would be impacting. We would then include that as part of our operating earnings. as we move forward because it would be part of our permanent capital structure. Does that make sense?
Speaker Change: that portion of cash would go towards that payment, we wouldn't be earning that interest income. So what we would be left with is interest expense with an annual interest expense of $27 to $30 million.
Operator: So what we would be left with is an interest expense with an annual interest expense of $27 to $30 million as we move forward because it would be part of our permanent capital structure. Does that make sense? Yes, that's helpful.
Speaker Change: which would be impacting, we would then include that as part of our operating earnings as we move forward because it would be part of our permanent capital structure.
Alex Shvartsburg: Yes, that's helpful. And then just on the, the four, the four 53, is that based on your understanding that a capital or maximum, or is there additional pieces that really suggest that could go higher? Thank you. Yeah, I'm not going to speculate on the amounts and the caps. I mean, that's a number that's, you know, that we know the Court of Appeals ruled against us back in 2021. So, you know, that's really the number that we're sort of zeroed in on, but I'm not going to speculate on whether this is a, you know, a cap on the liability.
Speaker Change: Does that make sense?
Speaker Change #102: Yes, that's helpful.
Speaker Change: And then just on the 453, is that, based on your understanding, a capped or max amount, or is there additional pieces to that ruling that suggest that could go higher? Thank you.
Operator: Yeah, I'm not going to speculate on the amounts and the caps that I mean. That's a number that's, you know, that we know the Court of Appeals ruled against us back in 2021. So, you know, that's really the number that we're sort of zeroed in on, but, maybe as you exit this year and into next year, the kinds of investments, the kinds of actions you can take, you mentioned innovation and optimizing performance, particularly in the epilepsy business.
Speaker Change #104: Yeah, I'm not going to speculate on the amounts and the caps that, I mean, that's a number that's...
Speaker Change: that we know. The Court of Appeals ruled against us back in 2021. So, that's really the number that we're sort of...
Speaker Change: Zeroed in on, but I'm not going to speculate on whether this is a, you know, a cap on the liability.
Matt McSick: Our next question comes from Matt McSick with Barclays. Please go ahead.
Speaker Change: Our next question comes from Matt Miksic with Barclays. Please go ahead.
Matt McSick: Hey Matt, we're going to see you tomorrow. You're on now. Can we hear me now, Vlad? Oh, terrific. Thanks so much. Sorry about that. It just juggling calls here. Wanted to get a sense of on the core businesses. Maybe as we exit this year and into next year, the kinds of investments, the kinds of actions you can take, you mentioned innovation and optimizing performance, particularly in the epilepsy business. And you know, one quick follow-up if I could. Yeah, I mean, I go back to kind of the first imperative, and that is to maximize our performance in cardiopulmonary and epilepsy businesses.
Speaker Change: Hey. Matt, we cannot hear you. Good morning. You're on now. Can you hear me now, Vlad? Oh, terrific. Yes. Thanks so much. Sorry about that.
Matthew Charles Taylor: I'm just juggling calls here. Wanted to get a sense of, um, on the core businesses.
Speaker Change #101: Maybe as we exit this year and into next year, the kinds of investments, the kinds of actions you can take. You mentioned innovation and optimizing performance, particularly in the epilepsy business. One quick follow-up, if I could.
Operator: One quick follow-up, if I could. The first imperative is to maximize our performance in cardiopulmonary and epilepsy businesses. And success for me in those two businesses would mean growing faster than the market in both of those businesses. Uh, look, and then I think the levers are pretty straightforward, you know, for. It's to bring our service and our software upgrades quality to benchmark. And then finally, you know, we have a significant opportunity to gain share in disposables and, you know, lead with oxygenated. And, you know, the...
Speaker Change #105: I mean I go back to kind of the first imperative and that is to maximize our performance in cardiopulmonary and epilepsy businesses.
Vladimir Makatsaria: And success for me in those two businesses would mean to, in a sustainable way, grow faster than the market in both of those businesses. Look, and then I think the levers are pretty straightforward, you know, for cardiopulmonary. It's to continue to accelerate upgrade to essence. It's to bring our service and our software upgrades quality to benchmark. And then finally, you know, we have a significant opportunity to gain share in disposables and, you know, leading with oxygenators. And, you know, if you ask me where the key investments are going, I would say one is in commercial excellence across the world.
Speaker Change: And success for me in those two businesses would mean to, in a sustainable way, grow faster than the market in both of those businesses.
Speaker Change: And then I think the levers are pretty straightforward, you know, for cardiopulmonary, it's to continue to accelerate upgrade to essence.
Speaker Change: It's to bring our service and our software upgrades quality to benchmark.
Speaker Change: And then finally, you know, we have a significant opportunity to gain share in disposables and, you know, leading with oxygenators.
Vladimir A. Makatsaria: If you ask me where the key investments are going, I would say one is in commercial excellence across the world. Number two is our ability to manufacture more products and supply the market in an uninterrupted manner. And number three, Ahmed talked about innovation. So I think those three levers will enable the cardiopulmonary business to continue to grow faster than the market. And, you know, we're starting from a position of strength, which really makes me confident about our future there. [inaudible] epilepsy business
Speaker Change: And, you know, the...
Speaker Change: If you ask me where the key investments are going, I would say one is in commercial excellence across the world. Number two is in our ability to manufacture more products and supply the market in an uninterrupted manner. And number three, Ahmed talked about innovation.
Vladimir Makatsaria: And number two is in our ability to manufacture more products and supply the market in an under trucker manner. And number three, I'm going to talk about innovation. So I think those three levers will enable cardiopulmonary business to continue growth faster than the market. And you know, we're starting from the position of strength, which really makes me confident on our future then.
Ahmed: So I think those three levers will enable cardiopulmonary business to continue to grow faster than the market. And you know we're starting from the position of strength, which really makes me confident on our future there.
Vladimir Makatsaria: On the. and Appalachie business. And again, our investments are heavily going into driving procedure penetration. So we're really focused on market access, on clinical evidence, on education, on one hand. And on the other hand, again, I'm going to talk about our innovation pipeline and with fully Grandma now on board. You know, she has a tremendous track record. As an R&D leader in various businesses and technologies, we count on her to come in and really help the team to accelerate our innovation. And so those are really the, that's kind of the areas of our key investments on both CP and your model.
Vladimir A. Makatsaria: And again, our investments are heavily going into driving procedure penetration. So we're really focused on market access, on clinical evidence, on education, on the one hand. And on the other hand, again, Amit talked about our innovation pipeline. And with Holly Graham on our board, she has a tremendous track record as an R&D leader in various businesses and technologies. And we count on her to come in and really help the team to accelerate our innovation.
Ahmed: epilepsy business and again our investments are heavily going into driving procedure penetration
Speaker Change: So we're really focused on market access, on
Speaker Change: clinical evidence on education on one hand and on the other hand again Ahmed talked about our innovation pipeline and with Holy Grammar now on board
Holy Grammar: You know, she has a tremendous track record as an R&D leader in various businesses and technologies and, you know, we count on her to come in and really help the team to accelerate our innovation.
Vladimir A. Makatsaria: And so those are really the areas of our key investments in both CP and neuromodels. Now, thanks so much, Vlad. And then just one follow-up, if I could, on some of the decisions you're making around investments. You talked a lot about that on the call.
Matt Taylor: No, thanks so much, glad. And then just one follow up, if I could add on some of the decisions you're making around, but if you talk a bunch of that on the call, it sounds like, you know, as you subscribe, that the sleep apnea decision will come with you a little further than originally, at least we had helped. So from this latest year and early next year. Is it, you know, I can see help us understand the metrics of that decision, just if you're about to open the 12-month safety data and try to make a decision, what are the key aspects of your program that you're looking for to decide whether you're going to move forward with that or reallocate.
Vladimir A. Makatsaria: It sounds like, you know, as you described, that the sleep apnea decision will come maybe a little further than originally, at least we had hoped, so from this late this year into early next year. [inaudible] is is um you know just maybe help us understand the metrics of that decision uh just uh you you're about to open the 12-month safety data and try to make a decision what are the key aspects of your program that you're looking for uh to decide whether you're going to move forward with that or reallocate that spend to something else uh in the portfolio and thanks again for [inaudible] Thank you, thank you for asking the question, and I'll start and then I'll turn it over to Matt to build on this, but, Obstructive sleep apnea is a massive unmet need, and this is the population that's growing and then the market that's growing.
Speaker Change #108: Thanks so much Vlad. And then just one follow-up, if I could, on some of the decisions you're making around investments. You talked a bunch about it on the call. It sounds like, you know, as you've described.
Speaker Change #103: Make a decision. What are the key aspects of your program that you're looking for? to decide whether you're going to move forward with that or Reallocate that spend to something else in the portfolio and thanks again for taking the questions.
Vladimir Makatsaria: That's been to something else and portfolio, and thanks again for taking the question. Thank you. Then they'll thank you for asking the question, and I'll start, and then I'll turn it over to Matt to build on this. But first of all, let me start it. I'm strongly speaking about me is a massive on that needs, and this is the population that's growing and then the market that's going. There's obviously, as you know, is a one big player in the market today, and I think there's a massive opportunity for a number of companies to come in with innovative technologies and participate in that market.
Speaker Change #103: Thank you. Thank you for asking the question, Matt, and I'll start and then I'll turn it over to Matt to build on this. But first of all, let me start at
Vladimir A. Makatsaria: There's obviously, as you know, one big player in the market today, and I think there's a, you know, massive opportunity for a number of companies to come in with innovative technologies and participate in that market. So, I think the market is attractive, the space is attractive, and if you like the fact that there's one competitor there, it makes it even more attractive to be in that market, with an equivalent or better clinical outcome to the current standard. And the degree of that difference will determine our commercial strength. We have no further questions, and so I will turn the call back to Vladimir Makatsaria for closing remarks.
Matt: There's obviously, as you know, the one big player in the market today.
Matt: And I think there are some...
Matt: you know, massive opportunity for a number of companies to come in.
Matt Taylor: So I think the market is attractive, the space is attractive, and if you like the fact that there's one competitor there, it makes it even more attractive to be in that market. Ultimately, our decision on how to enter this market is going to depend on the clinical results. And what we're counting on is equivalent or better clinical outcome to the current standard. And the degree of that difference will determine our commercial strategy. So I'll turn it to Matt, maybe on some of the comments of maybe bring a little bit of color to my comment. Sure.
Matt: Ultimately, our decision on how to enter this market is going to depend on the clinical results.
Matt: And what we count on is equivalent or better clinical outcome to the current standard.
Matt: And the degree of that difference will determine our commercial strategy.
Matt: So I'll turn it to Matt maybe on some of the comments, maybe bring a little bit of color to my comments.
Matt Taylor: And Matt, nothing's changed on the timeline. Remember, our trial is randomized. The other two trials, competitor trials, were not. That's the data we're going to get: a year and six months' randomized data. But if you truly want to look head to head. And in OSA, it's much more simple than GTD. It's really age. I reductionist to focus. We're going to have the 12-month data of the therapy arm in April 25. And that will really tell us how competitive our data is versus the competition. And there's a meaningful swing; there is to terms of superior, in line, inferior.
Matt: Remember, our trial is randomized. The other two trials, confederate trials, were not. That's the data we're going to get a year end, six months, randomized data. But if you truly want to look head-to-head, and in OSA, it's much more simple than DTD. It's really a HI reductionist focus.
Matt: We're going to have the 12-month data of therapy arm in April 25, and that'll really tell us how competitive our data is versus the competition. And, you know, there's a meaningful sling there in terms of superior, in-line, inferior.
Matt Taylor: And we'll also look at some of the subsets, including complete concentric collapse, which only our trial looks at those patients. So it's going to be two sets of data. I think the original day will be very informative. But in terms of the ultimate competitive profile, again, April 25 is when we'll have a lot more information. And then also, you know, we're building out our technology roadmap there as well. In terms of how we become more competitive and ultimately, ultimately pass the competition on the actual technology side.
Matt: which only our trial looked at those patients.
Matt: But in terms of the ultimate competitive profile, again, April 25 is when we'll have a lot more information. And then also, you know, we're building out our technology roadmap there as well.
Matt: in terms of how we become more competitive and ultimately ultimately pass the competition.
Matt: on the actual technology side.
Matt Taylor: Great. Thanks so much for the color.
Matthew Dodds: We have no further questions, and so I'll turn the call back to Vladimir Makatsaria for closing remarks. Emily, thank you. You did a great job facilitating the call, and thank you to everyone for joining today's call.
Matt: We have no further questions and so I will turn the call back to Vladimir Makatsaria for closing remarks.
Vladimir A. Makatsaria: Emily, thank you. You did a great job facilitating the call, and thank you to everyone for joining today's call. On behalf of the entire team, we really appreciate your support and interest in LivaNova. Have a great day or evening ahead.
Matthew Dodds: On behalf of the entire team, we really appreciate your support and interest in LivaNova. Have a great day or evening. Thank you for joining us today.
Matt: Bye-bye.
Operator: This concludes our call, and you may now disconnect your lines. Thank you very much.
Speaker Change #111: Good, thank you everyone for joining us today. This concludes our call and you may now disconnect your lines.