LivaNova PLC

Good day, ladies and gentlemen, and welcome to the Livernova PLC third quarter of 2023 earnings conference call. If you'd like to ask a question at the end of the presentation, you can press star followed by one on your telephone keypad. If you'd like to remove your question, you may press star followed by two. As a reminder, this conference call is being recorded. I'd now like to introduce your host for today's call, Mr. Matthew Dodds, Livernova's Senior Vice President of Corporate Development and IT. Please go ahead.

Thank you, Alex, and welcome to our conference call and webcast discussing Livanova's financial results for the third quarter of 2023. Joining me on today's call are Bill Cozy, our Chairman of the Board of Directors and Interim Chief Executive Officer, Alex Schwarzberg, our Chief Financial Officer, Stephanie Bolton, President of Global Epilepsy, and Brianna Gotland, 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 investor section of our website under news events and presentations at investor.Levanova.com. With that, I will now turn the call over to Bill.

Hey, thank you, Matt. And thank you everyone for joining us. Welcome to Levanova's conference call for the third quarter of 2023. Before turning to results for the quarter, allow me to provide a brief update on the CEO search. Our process remains on track and the Board and I are currently interviewing select candidates. We are encouraged by our progress and are committed to selecting the right individual to lead the company. For the remainder of the call, I'll discuss our third quarter results and then turn to our strategic portfolio initiatives. After my comments, Alex will provide additional details on our performance and updates to 2023 guidance. I'll wrap up with closing remarks before moving on to Q&A. In the quarter, we achieved 12% revenue growth versus the prior year marked by double digit growth across all regions and improved profitability. Our performance reflects strong execution throughout the organization, as demonstrated by the growth in all three business units. Notably, we maintained our commitment to modest leverage, achieving adjusted operating income growth of 23%, contributing to value creation in the quarter. Now, turning to segment results. For the cardiopulmonary segment, revenue was $145 million in the quarter, an increase of 18% versus the third quarter of 2022. Oxygenator revenue grew in the mid-teens, driven globally by higher than expected demand, again. And I'd like to acknowledge our cardiopulmonary manufacturing and supply chain team on their excellent performance in the quarter. Heart-lung machine revenue increased more than 25%, driven by Essence installations in the U.S. and Europe, and S5 placements in the rest of the world region. At the end of August, we received U.S. FDA 510K clearance and CE mark for the Essence inline blood monitor in the U.S. and Europe, respectively. These clearances are important product milestones that enable increased customer adoption of Essence. Accordingly, our commercial rollout is now fully underway, and we have been successful in both evaluations and placements, including shipments to highly prestigious hospital systems in the U.S. While we continue to anticipate increased contribution from Essence through year-end, we should see a more meaningful benefit in 2024 and beyond. We now expect cardiopulmonary revenue to grow 12 to 14 percent for full year 2023. Our revised forecast incorporates the strong performance through the first nine months of the year in HLMs and oxygenators, with our current oxygenator production capacity running at its limit. As previously stated, we continue to expect a modest ramp in essence revenue through year end. Epilepsy revenue increased 6% versus the third quarter of 2022. U.S. epilepsy revenue increased 7% year over year, driven by higher realized price and favorable product mix. We achieved 815 new patient implants in the quarter, representing 1% growth versus the prior year, but well aligned with our expectations after the 13% growth experienced in the second quarter. 1,827 replacements, representing a decline of 1% versus the prior year. Again, though, very much in line with our phasing expectations. Epilepsy revenue in Europe grew 7% versus prior year, led by the UK. And epilepsy revenue in the rest of world region decreased 3%, primarily due to uneven distributor ordering patterns and the sanctions. Building on our commitment to invest in our core businesses, we had a very successful go-live in Houston with our first manufacturing execution systems, widely known as MES. And we now have 15 super users in the Levanova organization. This initiative represents a meaningful operating upgrade to fully digitized manufacturing quality systems. For the full year 2023, we now expect global epilepsy revenue to grow 7% to 9%. Our revised forecast incorporates the performance during the first nine months of the year. ACS revenue was $11 million in the quarter, an increase of 27% versus the third quarter of 2022, reflecting growth in cardiac and respiratory case volumes partially offset by product mix. For 2023, we continue to expect ACS to be flat year over year. Turning now to the strategic portfolio initiatives. DTD revenue for the third quarter was $2 million. For 2023, we continue to anticipate DTD revenue of approximately $6 to $8 million, primarily from the RECOVER study. The RECOVER study continues to advance. As a reminder, enrollment for the unipolar cohort of the study has been completed. Upon receipt of the 12-month follow-up data for the 500 unipolar patients in June of 2024, we will conduct a final analysis. We continue to expect the publication of that study results by late 2024. The bipolar cohort continues to enroll as expected, and we're pleased with the success we had in refocusing our recruitment efforts from unipolar to bipolar patients. As a reminder, the bipolar cohort is similar to the unipolar cohort in that the randomized controlled study is designed with frequent interim analyses that assess if predictive probability of success or futility was reached or if the study should continue enrolling. Moving to OSA, the Osprey trial continues to progress with all 25 sites actively recruiting patients. In heart failure, the closeout of the Anthem clinical study is progressing. We continue to expand the overall R&D spend related to heart failure this year to be approximately $24 million, the majority of which occurred in the first half of the year. With that, I will turn the call over to Alex.