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spk00: Good day, ladies and gentlemen, and welcome to the Lever Nova PLC first quarter 2022 earnings conference call. If you would like to ask a question following today's presentation, please press star followed by one on your telephone keypad. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Matthew Dodds, Lever Nova's senior vice president of corporate development. Please go ahead, sir.
spk04: Thank you, Melissa, and welcome to our conference call and webcast discussing Levanova's financial results for the first quarter of 2022. Joining me on today's call are Jamie McDonald, our Chief Executive Officer, Alex Fartsberg, our Chief Financial Officer, and Lindsay Little, our Senior Director of Investor Relations. 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 statement. Also, the discussions will include certain non-GAAP financial measures with respect to our performance, including but not limited to sales results, which will all be stated on a constant currency basis. Reconciliations to the most directly comparable GAAP financial measures can be found in today's press release, which is available on our website. 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. You can find the presentation and press release in the Investors section of our website under News, Events, and Presentations at investor.livanova.com. With that, I will now turn the call over to Damian.
spk08: Thank you, Matt. And thank you to everyone for joining us. Welcome to our conference call for the first quarter of 2022. I'll start off by discussing sales results, then review our strategic portfolio initiatives, and conclude by describing a recently completed tuck-in acquisition. After my comments, Alex will provide you with additional details on our results and outlook. Then I'll wrap up with closing comments before moving on to Q&A. In the quarter, we achieved 9% sales growth, excluding heart valves. This was driven by above-market growth in cardiopulmonary and neuromodulation sales, which accelerated after experiencing COVID-related pressures early in the quarter. Advanced circulatory support sales were unfavorably impacted by hospital staffing shortages and a decline in respiratory cases, including COVID cases. Below the top line, we expanded gross profit, which was partially offset by investments in our strategic portfolio initiatives, preparations for the phase launch of our next generation heart-lung machine, Essence, and expanded commercial efforts in ACS and epilepsy. Now, turning to the segment results. For the cardiac pulmonary segment, sales were $117 million in the quarter, an increase of 12% versus the first quarter of 2021. Oxygenator sales grew over 20% globally, driven by procedure volume recovery across all regions, particularly in Europe and rest of world. Heart-lung machine sales increased in the high single digits due to growth in rest of world. We now expect cardiopulmonary sales to grow 1% to 3% for the full year 2022. This increased range takes into account the first quarter performance, the read-through of year-over-year comparisons, and the sales transition to the Essence HLM. Global epilepsy sales increased 8% versus the first quarter of 2021, with growth across all regions. This increase is attributable to procedure volumes that improved each month during the quarter. US epilepsy sales increased 6% versus first quarter 2021, with total implant growth in low single digits. Similar to recent quarterly trends, total implant growth was driven by replacements, which physicians continue to prioritize over new patient implants. The progress in US epilepsy continues to be supported by a go-to-market initiative, which currently encompasses 14 dedicated CEC teams, two of which were formed during the first quarter. These teams accounted for 21% of US sales in implants in the quarter, as compared to 18% on the same account basis during the prior year. They continue to deliver sales and implant growth that trended above the baseline business compared to the first quarter of 2021. Epilepsy sales in Europe grew 14% versus prior year, primarily led by the UK. We also achieved 14% growth in rest of world led by APAC. For full year 2022, we continue to expect global epilepsy sales to grow 5% to 7%. Our forecast includes growth in new patient implants as patients and their caregivers return to in-person physician visits and hospital capacity improves. In addition, we anticipate a continued tailwind in replacement implants related to the backlog created during the pandemic that has continued into this year. We're pleased with the progress of the go-to-market initiative and plan to add two additional dedicated teams in the US during the remainder of 2022. ACS sales were $12 million in the quarter, representing a decrease of 10% from the first quarter of 2021. Results were impacted primarily by hospital staffing shortages and less severe COVID cases. Respiratory cases, including COVID cases, declined approximately 30% year over year, as fewer hospitalized patients required ECMO therapy. Non-respiratory cases were flat year over year, as account acquisitions were offset by the impact of hospital staffing shortages. Given these headwinds, we now expect ACS growth to be in the low single digits for 2022. As a reminder, for comparative results, heart valves were divested on June 1 of last year. Heart valve sales for the first quarter of 2021 were $21 million. Turning now to our strategic portfolio initiatives, DTD sales for the first quarter were $1.4 million. For 2022, we anticipate DTD sales of approximately $10 million. Turning to the RECOVER study, during the first quarter, we achieved a key milestone of implanting our 250th unipolar patient. The randomized controlled study is designed with frequent interim analyses that will assess if predictive probability of success has been reached or if the study should continue. As stated previously, we believe a series of interim analyses is likely needed as we collect patient follow-up data over time. Our interim analyses confirm continuation of the study. We still anticipate a transition to registry to occur for the unipolar cohort in late 2022 or early 2023. In heart failure, the ANSYM HEPREP pivotal trial continues to advance. During the quarter, independent statisticians conducted the first interim analysis reviewing safety, a trend towards the primary endpoint, and success in the three functional endpoints. The review indicated that one or more of the conditions were not yet achieved and recommended continuation of the study according to the protocol. The next interim analysis will occur after the 500th patient is enrolled, which we anticipate in the fourth quarter. If the results are favorable, we may submit the functional data to the FDA. Moving to OSA, our Osprey trial continues to enroll patients with the first patient implanted in February. We now have activated approximately 15 of the 20 study sites. The Osprey trial is a randomized controlled trial to evaluate the efficacy of hyperglossal nerve stimulation for patients with moderate to severe OSA. We still assume submission for FDA approval to occur in the latter half of 2023 with a decision anticipated in 2024. Now, turning to the acquisition of Alung. On May 2nd, we acquired Alung Technologies Inc. The purchase price included $10 million paid at closing and contingent considerations payable on achievement of sales-based milestones. Alung was a privately held developer and manufacturer of an innovative lung assist device for treating respiratory failure called the Hemolung Respiratory Assist System, or RAS. This system is an alternative, or a supplement to, invasive mechanical ventilation. The Hemolung RAS is the only FDA-cleared platform designed specifically for low-flow extracorporeal carbon dioxide removal for acute respiratory failure. ALung provides a complementary technology to our ACS portfolio in the respiratory market. The business, which will be integrated into our ACS segment, and we expect to initiate commercialization of Hema Lung later this year, with nominal sales expected during 2022. The impact of the acquisition is expected to be neutral to adjusted diluted earnings per share. And with that, I'll turn it over to Alex.
spk09: Thanks, Damian. During my portion of the call, I'll share a brief recap of first quarter results and provide commentary on the full year 2022 outlook. Turning to the results. Sales in the quarter were $240 million, a 9% increase versus 2021, excluding part-vows. Foreign exchange had an unfavorable year-over-year impact of approximately $7 million, or 3%. Adjusted gross margin as a percent of net sales was 71%, which was up 290 basis points from the first quarter of 2021. Adjusted gross margin was favorably impacted by product mix and the divestiture of heart valves. Component inflationary pressure was offset by manufacturing efficiencies. Adjusted R&D expense in the first quarter was $40 million compared to $42 million in the first quarter of 2021. R&D as a percent of net sales was 16.7% in line with the first quarter of 2021. Adjusted SG&A expense in the first quarter was $102 million compared to $96 million in the first quarter of 2021. SG&A as a percent of net sales was 42.5% up from 38.9% in the first quarter of 2021. The increase was primarily driven by costs related to the acquisition of a loan. Adjusted operating income was $28 million compared to $30 million in the first quarter of last year. Adjusted operating income margin was 12%, which was in line with the first quarter of 2021. The adjusted effective tax rate in the quarter was 7% compared to 10% in the first quarter of 2021. The lower tax rate is primarily attributable to changes in the valuation allowances and geographic income mix. For the full year, we expect a tax rate range of 10 to 15 percent. Adjusted diluted earnings per share was 48 cents compared to 34 cents in the first quarter of 2021. Our cash balance at March 31st was $443 million, including $314 million of restricted cash held as collateral for the SNEA litigation guarantee up from $208 million at year end 2021. Total debt at March 31st was $461 million, up from $240 million at year end 2021. This increase primarily relates to the bridge loan facility that was entered into during February to secure the SNEA litigation guarantee. Adjusted free cash flow for the quarter was $17 million, up from negative $8 million in the prior year. Capital investments were $5 million in the first quarter compared to $8 million in the prior year quarter. Now turning to our 2022 outlook. We're maintaining the guidance ranges shared in February as we navigate evolving pressures such as supply chain challenges, foreign currency headwinds, and market conditions impacting ACS. This includes constant currency sales growth between 3% to 5%, excluding heart valves, an adjusted ETF range of $2.50 to $2.80, and then the adjusted free cash flow range of $90 million to $110 million. Our outlook now assumes a 2% to 3% sales headwind from exchange rates. With that, I'll turn the call back over to Damian.
spk08: Thanks, Alex. In summary, the first quarter was a testament to our diverse portfolio, which allowed us to weather the challenging market conditions. While several variables in our original guidance assumptions have changed, we remain confident in our four-year outlook. We continue to focus on executing on our core growth drivers, delivering on our extensive clinical and product pipeline opportunities, and further improving profitability and cash generation. This emphasis on the strategic triangle underpinned by the live and over business system positions us to increase shareholder value. And with that, Melissa, we're ready to open the call for questions.
spk00: Thank you, Damien. If you have a question at this time, please press the star and 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, then the number two. 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. We'll be taking our first question today from Rick Wise of Stiefel. Rick, over to you.
spk03: Okay, thank you. Good morning, Damien. Just to start off, you know, I think a solid start. And as you said, some parts of the business did a little better offsetting weakness elsewhere. Let me start with ACS just because that was the biggest change. The rest of the business seemed on track or maybe ahead. So one is that am I interpreting it at a high level correctly? Is that how you're seeing it? And maybe just help us dig into ACS. The the and maybe break down, if you would, the hospital staffing slowdown impact. How do we think about the COVID case decline? When do we get past that non-respiratory flat? How do we think about the progress from here? How do you get it back on track more in line with your original expectations?
spk08: Well, first of all, thanks, Rick, for joining us. Good to hear your voice. ACS disappointed us in the quarter and a lot of that had to do with this headwind we talked about and you talked about, the staff shortages. But also I think the big thing for us was this decline in patients using ECMO for COVID. There's a 30% decline in that caseload year over year. And those really were important given our expectation for those We really did anticipate also that the procedures that we saw through the quarter declining would be offset by other respiratory cases or other non-respiratory cases. I think the modest flu season had an impact. We have pretty interesting CDC data that shows a big slowdown and also almost historical lows in the mild respiratory cases. The ECMO RV market declines 15%. year on year, so I think we did slightly better than the overall market, but we were anticipating a better response in our ability to move from one segment to the other. So I think through 22, as we see the stock shortages abate, we expect this to start bouncing back. We also added a lot of our headcount in the commercial expansion late in the year of 21, so they won't start reading through until mid-year. And so, you know, the effectiveness of that team will, I hope, read through in the back half of 2022.
spk03: Thank you for that. Turning to the DTD registry, it seems like, again, correct me if I'm wrong, the timeline you've offered or suggested, basically you're reiterating the timing of a shift to registry as late this year or early next year. Can we take from that that enrollment's progressing well? And have the initial looks been encouraging? Can you give us some more color there?
spk08: Yeah, so I think you've hit the headline, which is it's continuing to progress well. We implanted our 250th patient in the quarter, the unipolar patient in the quarter, and conducted the first and second interim analysis. So we're pleased with how that's progressing. We're still expecting a transition to the registry in late 22 or early 23, and we'll continue to provide the best information we can. Again, as we've said, we don't want to outrun our communication with CMS, but we're pleased with how it's progressing.
spk04: Yeah, and Rick, it's Matt. We are completely blinded from these interim looks, so our independent statisticians review it, and all we're told is basically keep going, which again we think is good, stopped due to futility, which is not good, and then stopped because you've hit the primary endpoint. That's all we know. So, you know, the good news is, you know, as Damian said, after two looks, you know, we're not checking the box of futility, and that's continuing to enroll.
spk03: Gotcha. And just last for me on the Anthem HFREF, you indicated that the analysis confirmed continuation of the study. I don't know. I don't want to overstate this, is that slightly disappointing? How are you feeling about it? I know that the trial has an adaptive design and you could take another look, I think you said, by the end of this year. How are you feeling on that front?
spk08: Yeah, I think, again, positive the fact that, you know, the first interim analysis confirmed to keep the study going. You know, it's a fairly complex study. There are five green lights that you're looking for in the interim analysis. One is safety. I'm pleased that, you know, we're continuing to enroll. So I think that means safety puts in a pretty good spot. And I think the fact that the others, you know, working in a very complex environment, including COVID cases, you know, we're making progress. And as you say, it's an adaptive study. We got to have looks at it instead of waiting for one primary readout. And the fact that we're continuing to recruit is a good sign.
spk03: Really appreciate it. Thank you. Thanks, Rick.
spk00: Thank you, Rick. We'll take our next question from Mike Pollack of Wolf. Mike, over to you.
spk07: Hey, good morning. Follow-up on the depression commentary there. So you've looked, or your independent statisticians have looked twice, and so does that, you know, I assume there had been one look at 250 unipolar cases, implants my understanding the protocol is you get the second look at 275 so so does having had two looks mean that the enrollment now is is north of 275 is that the correct read that this is matt that's that is a correct read okay uh and so i guess um i had this question come in a few weeks ago so is the um Your plan is to continue to enroll into the trial to get the subsequent interim looks versus kind of slowing enrollment down and just letting the sample accrue time on therapy. Is that fair or is there a balance that you're striking here as you kind of enter the meat of the sample where you might slow down fresh implants and just let the... time accrued to the patients that have been implanted? Hopefully that question is clear. How are you thinking about the pace of enrollment here over the next quarter, two or three?
spk04: It's a good question. If you look at the design of the study, we do want to have more patients enrolled. To your point, once we hit statistical significance on the assumption we do, then we would want to stop enrolling in that arm because we have to follow every patient for 12 months. So the team is still very focused on enrollment. And as you noted, every 25 patients we can continue to look. So as we move forward, not only do we get more patients, the average follow-up per patient increases as well.
spk08: The other thing is there's two arms, don't forget, the unipolar and the bipolar. So we want to keep the momentum of recruiting. We've explained we're skewing unipolar both in terms of our effort and the patients we're seeing. But we want to continue the momentum at all of the sites so that we can continue to enroll the bipolar patients in that secondary arm as well.
spk07: And to put a fine point on the timing, I ask because I know I'll get asked. So you announced the 250th unipolar implant on March the 14th. I presume that's when the first look was taken by the independent statisticians. The second look was taken when? I presume within the last week, two or three. I'm just trying to get a sense for the The pace of every 25 implants, is it kind of four, six weeks? Is that how you're running at the moment?
spk08: Yeah, every four to six weeks, I think, is a good estimate if you're modeling that.
spk07: Okay. And just last one for me, and I'll hop into those series of questions. Bipolar, where is that enrollment stand at the moment?
spk08: Yeah, much slower, again, given our emphasis on the unipolar. And what we're trying to do is get that one over the line first. It's now expected, I think, with 150 implants, late 22, early 23. But I think you've got to look at this as an indication expansion opportunity. So first, maniacally focused on unipolar. If we get bipolar patients through the consenting system, great. But the real focus is on unipolar, and then we'll move on to bipolar as an idea to expand the indication later on. Okay.
spk07: Thank you. Cheers, Mike.
spk00: Thank you, Mike. Our next question comes from the line of Mike Mattson from Needham. Mike, over to you.
spk10: Yeah. Thank you. Just following up on the line of questioning around the RECOVER trial. You know, your depression revenue stepped down a meaningful amount. I think it was, you said, $1.4 million in the first quarter. I think you did about $3 million in the fourth quarter. Can we read anything into that about the pace of enrollment here and the timing of the trial?
spk04: So, Mike, it's Matt. So the enrollment did slow down a little bit in January and February. You know, similar to what you've heard with a lot of people talking about revenue, you can assume the same thing occurred on the clinical side. It did pick up in March and April, so that is the primary reason.
spk10: Okay, got it. And then as far as the litigation in Italy and the Italian Supreme Court decision, do you have any feel at all in terms of the timing of when you would expect something there?
spk08: No. I mean, a long process. They don't have statutory timelines that are published yet. So, you know, we're playing this, you know, day by day.
spk10: Okay, got it. And then finally, just on the heart-lung machine growth was, you know, surprisingly strong given you've got this Essence launch coming. So, you know, one, I guess you've launched Essence outside the U.S. or Europe maybe. So did that help at all? And conversely, you know, it didn't. seem to hurt, I guess, in the U.S., that customers are maybe waiting for the new product.
spk09: Hey, Mike. It's Alex. We were pleasantly surprised in terms of the unit placements in the quarter. We haven't launched Essence in Europe, as you described. That's scheduled for the second half of this year. We were expecting a slowdown in the S5 placements, sort of customers anticipating essence in the back half, but that has not happened, which is great for us, and we continue to do well on that front.
spk10: Okay, got it.
spk09: Thanks.
spk00: Thank you, Mike. Our next question today comes from Adam Major of Piper Sandler. Adam, please go ahead.
spk05: Hey, good morning, everyone. Thanks for taking the questions and congrats on the start. Maybe just first one from me, very dynamic procedure environment would just love Damien or Matt a little bit more color on kind of what you're seeing real time, you know, kind of exit velocity and in March, how things have trended in April, just puts and takes for some of those different segments and I had a follow up or two. Thanks.
spk08: Sure, Adam. Hey, welcome. So when we spoke in late February, I think we talked about the patient funnel improving through the quarter. That was definitely the case as March progressed and into April. We're still seeing the same physician bias to the end-of-service product. I think the two bottlenecks that remain are the surgical scheduling, where staff shortages are definitely impacting new patient implants. as the EMU capacity for new patient workups. So I think the dynamics that a lot of people are reporting definitely were what we saw. Very slow January, ramping through March, continuing into April. I think in CP, cardiac surgical volumes have returned to the pre-pandemic levels, and demand has remained strong in April. Do you want to add anything, Matt?
spk04: No, I think that's it. Again, as Damian said earlier with ACS, that was the one that went the other way because of the staff shortages and the reduction in COVID patients that use ECMO.
spk05: That's helpful to color, guys. And then next question is on the EPS guidance. Adjusted EPS, I think it's 250 to 280. So, you know, fairly big range there. Maybe just unpack some of the key assumptions in that range. You know, what's contemplated, for example, for currency and impact the EPS. And then if I saw correctly in the materials, I think you're non-gapping the interest from the bridge loan. So maybe just kind of walk through some of those items and kind of how to think about the high end versus the low end of the guidance range. And I had one quick follow-up. Thanks.
spk09: Sure. So our gross margins are expected to increase in 2022 by more than 200 basis points. The expected increase is primarily driven by the heart valve divestiture, positive product mix, and other efficiencies that are offsetting our supply chain cost challenges. As far as R&D is concerned, as a percent of sales, that's going to increase slightly versus prior year, and this is largely due to the initiation of the OSPRI trial with as well as the investments in ATS and epilepsy commercial, sorry, in epilepsy R&D programs. From an SG&A perspective, a slight increase versus 2021. Our total OPEX, I think we talked about this before, quarterly run rate is approximately 140 million. That's for both R&D and SG&A. Our kind of base interest expense is $11 to $12 million. And as you said, we're non-gapping the bridge, the interest related to the bridge facility as that's related to the SNIEM litigation. So that will be called out in our non-gap reconciliation. And our tax rates, we're projecting at 10 to 15%. as the range.
spk08: And then you raised currency. Currency is 2% to 3% headwind for the full year. And I think you asked what's guiding this range. I think there's a lot of puts and takes. If we continue to expand the US epilepsy penetration, I think that's an upside. I think if Supply chain challenges abate as we go through the year. We're playing that month by month, but the cardiopulmonary business and especially heart-lung machines swing to the upside. Depending on how people react to Essence, we continue to see heart-lung machine demand, but we're anticipating that people will wait for that launch. And we're also countermeasuring the Russia-Ukraine headwind So all of those things are the puts and takes, and that's why we have this range, and we're sticking to our original February guidance on that EPS range of 250 to 280.
spk05: Very helpful. And if I can just sneak in one last one on DTD, and this is a question that I get from clients just around communication strategy or kind of the pathway for the street looking ahead. You know, guys, what is the next update that we should be looking for? You know, it sounds like things continue to track in line with previous expectations in terms of transition to the registry, you know, late 22, early 23. But what should we be looking for? You know, what's going to hit the tape? Is it really around kind of the submission of the data package to CMS to move to the registry? Or kind of what's the next kind of milestone or marker that we should be keeping our eyes peeled for. Thanks so much.
spk08: Yeah, and you hit it there. That's our next milestone is the communication about transition to registry, which will follow our communication to CMS. Again, we don't want to end run the discussions with CMS, but that's the next milestone. Okay, very good. Thank you.
spk05: Cheers.
spk00: Thank you, Adam. We're now moving over to Amit Hassan of Goldman Sachs. Amit, over to you.
spk06: Hi, thanks. It's Phil. I'm for Amit. Most of mine have been asked in some form or fashion. I'll try and put a finer point on a couple of them. So the incremental FX headwind, I'm hoping, Alex, maybe you can speak to the drop through rate and how much of an impact you're offsetting down on the bottom line for FX and maybe asking the last question slightly differently, where that offset is coming from given the incremental supply chain challenges and the FX that's incremental as well versus the kind of guidance that you provided back at 4Q.
spk09: So the revenue impact of 2% to 3% is a pretty significant draw through in terms of EPS impact. We're obviously countermeasuring it with cost reduction productivity initiatives, and that's kind of the way we're able to offset the impact of the inflationary as well as the FX challenges that we have.
spk06: Okay, so we're going to see it in both SG&A and GM from the productivity. Is that fair to say? It's
spk09: It's the largest impact on the gross margin. We actually get a little bit of a benefit on the SG&A side from FX. R&D is largely neutral from that perspective, so that's why it's a significant drop from a gross profit perspective. We have approximately 20-25% EPS exposure, but again, we're countermeasuring it with productivity and cost reduction.
spk06: Okay. That's really helpful context. Thanks. And the other one, just mentioned the RU conflict. I was hoping maybe a finer point on your rest-of-world exposures. Maybe talk to China exposure. Obviously, rest-of-world was actually quite strong in the quarter. I'm wondering, exposure to RU and the impact you've seen, China impact seen, kind of where we are today, and any other markets you'd call out that have been incrementally hit?
spk09: Yeah, we saw a limited impact from China, really, hardly any. Obviously, the lockdowns have, you know, had an impact in the market, but we haven't really seen it on, you know, read through from a performance perspective.
spk06: Okay. Can you remind us exposures for China and for Russia in relation to that 20% rest of world business?
spk09: Yeah. So Russia, Ukraine is about 1% of revenue in 2021, and China is about 3% to 4%. Okay.
spk06: That's really helpful. If I could just think one more and definitely understand the inflationary supply chain issues Is there any concern about ability to kind of fulfill demand, especially with the increased interest and demand for oxygenators? Anything that you're worried about on the component side that might limit your ability to satisfy this increased demand that's coming through the pipeline now?
spk08: I think that's one of our big things that we've really focused the team on with the whole supply chain logistics. microelectronics availability, epoxy availability, transportation logistics, and lead times, all the things that we're focused on with that team. What they're really doing is working very aggressively to give our suppliers more visibility to our long-range plans. We're working very hard on the critical supply reviews with them. We've increased inventory several areas, and our guidance contemplates that. So our process so far has been increasing communication with suppliers, looking for alternative suppliers where there's a need, or as I said, building inventory ahead of this demand. But so far, the team have progressed well, but like everyone, we continue to face those headwinds.
spk06: That's great, Damien. Thanks. Very helpful across all fronts. Thanks, guys.
spk08: Cheers. Thank you. Thanks, Simon.
spk00: Thank you, Amit. We'll take our next question from Zach Weiner of Jefferies. Zach, please proceed with your question.
spk01: Hey, good morning, everyone. Thanks for taking the questions. Just one on FOSD. Can you just remind us where backlog currently stands? If my memory serves, it was roughly 800 procedures at the beginning of this quarter. So just curious how much of that backlog you worked through and then how much you expect to work through through the course of the year. Thanks.
spk08: Yeah, so we're expecting death backlog to continue through the rest of this year and into next year. Right now, we think the number's around about 700, so we've gone through about 100 in the quarter. And again, I think people continue to put this at the top of the stack versus new patient implants. It's an easier process to put patients through that cycle and ensure that they have continued therapy. The workup for new patient implants is quite considerable. They're definitely skewing, physicians are definitely skewing these end-of-service patients, and we're gradually working our way through that backlog.
spk01: That's helpful. Thank you.
spk00: Thank you, Zach. Our last question today will be a follow-up from Mike Pollack of Wolf Research. Mike, over to you. Okay.
spk07: Thanks for taking the follow-up. CFO question, just with the inclusion of the bridge facility now to backstop the Italian surety. Alex, I'm hoping you could bridge the adjusted free cash flow guidance for the full year of 90 to 110 million. If you were to unadjust that and frame traditional free cash flow inclusive of the bridge costs, the 3T, the other items that you're What's the sum total of those adjustments just to level set here for the full year?
spk09: Yeah, so the bridge facility is kind of a temporary vehicle, and so we're looking to refinance that in probably the next quarter or so. you know, if we're modeling based on what we're seeing, you know, we're kind of leaning towards sort of public debt as a refi facility, so modeling kind of the current interest rates, we're looking at, you know, $15 to $20 million potential impact on an annual basis.
spk07: Okay, I have a follow-up on that. So will that then come into your adjusted earnings as it transitions from bridge facility to public debt or since it's kind of this limbo moment where you're backstopping an escrow for a case that you're pursuing remedy for that you would continue to exclude it. What's the treatment of that transition from bridge to public debt as it relates to your adjusted earnings guidance if and when that happens?
spk09: That's right. So we're going to continue to adjust it from operating earnings until there's a ruling on the case. If we end up winning, it's obviously not an issue. If we lose and have to pay for the damages, then we would – it essentially becomes a a permanent part of our capital structure, and that's when we'll move it into operating earnings.
spk07: Okay, very clear. Thank you. Thanks, Mike.
spk00: Thank you, Mike. As that was our final question today, I would like to hand back to Damian McDonald for any closing remarks.
spk08: Well, thanks, Melissa, and thank you to everyone for joining our call. And on behalf of the entire team, I just appreciate your support and interest in Livanova, and we look forward to updating you on our Q2 call. Thank you.
spk00: Thank you. This concludes the Livanova PLC First Quarter 2022 Earnings Conference Call. Thank you all for attending. You may now disconnect.
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