LivaNova PLC

Ladies and gentlemen, and welcome to the Levenover PLC first quarter 2025 earnings conference call. My name is Emily and I'll be coordinating your call today. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Ms. Brianna Gotland, Levenover's Vice President of Investor Relations. Please go ahead.

Thank you and welcome to our conference call and webcast discussing LevaNova's financial results for the first quarter of 2025. Joining me on today's call are Vladimir Makatsaria, our Chief Executive Officer and member of the Board of Directors, Alex Schwartzberg, our Chief Financial Officer, Amit Tozel, our Chief Innovation Officer, Stephanie Bolton, President of Global Epilepsy, and Zach Glazer, 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 statements. Also, the discussions will include certain non-GAAP financial measures with respect to our performance, including but not limited to Revenue results, which will be stated on a constant currency and organic 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.livanova.com. With that, I'll turn the call over to Vlad.

Thank you, Brianna, and thank you, everyone, for joining us today. Welcome to Livanova's conference call for the first quarter of 2025. Before turning to results in the quarter, allow me to comment on a few important updates. the 12-month data from our Osprey trial, the SNEAR ruling, and the impact of TARIS. This morning, we announced 12-month top-line data from Osprey, a randomized controlled trial for moderate to severe obstructive sleep apnea, or OSA. The study featured a differentiated neurostimulation modality called proximal hypoglossal nerve stimulation, or PD. HGNS. The Osprey trial demonstrated rapid and sustained improvement for patients who received PHGNS, including those with severe OSA, elevated body mass index, or BMI, and high risk of complete concentric collapse. At 12 months of therapy, the treatment time responder rate was 65%. The Osprey 12-month results further validate the potential of this therapy as a treatment alternative for the large and growing OSA population. With the strength of our clinical data, the expertise of our neuromodulation team, and the strategic growth opportunity ahead, we are eager to bring this innovation to patients. Ahmed will provide additional details on the trial results and our differentiated technology later in the call. Turning to the SNEA litigation, Our first quarter results include a liability of $360 million related to the Italian Supreme Court decision, which we disclosed a few weeks ago. Importantly, we believe the court's decision effectively retires a long-standing overhang on the company. Alex will provide more details on the financial implications of the ruling later in the call. Regarding tariffs, We're operating in an uncertain environment, and our top priority is to provide critical medical technologies to our customers and their patients. Based on an assessment of our geographic manufacturing footprint and supply chain, at present, we expect tariffs will be a small and manageable headwind for Livanova, which is captured within the guidance provided today. Alex will provide more details on our manufacturing footprint and financial consideration related to tariffs later in the call. For the remainder of the call, I will discuss our first quarter results and updates to our revenue guidance for the full year 2025. After my comments, Ahmed will discuss our significant clinical and regulatory achievements in OSA and progress in difficult to treat depression or DTD. Alex will then provide additional details on our results and updated 2025 guidance. I will wrap up with closing remarks before moving to Q&A. In the quarter, we achieved 10% organic revenue growth versus the prior year, driven by the continued success of the essence rollout, demand for cardiopulmonary consumables, and strong neuromodulation performance in the Europe and rest of world regions. Notably, this marks the eighth time in the past nine quarters that Limonova has delivered double-digit organic revenue growth. This top line result, coupled with operational efficiencies, contributed to meaningful operating income growth and cash generation. Now turning to segment results. For the cardiopulmonary segment, revenue was $176 million in the quarter. an increase of 15% versus the first quarter of 2024. Hardline machine revenue grew approximately 30% versus the prior year period. In the quarter, we achieved a strong increase in essence placement and sustained favorable price premiums. Oxygenated revenue grew in the high single digits driven by customer demand and price. The oxygenated business continues to see strong demand outpacing the market's ability to supply. Our operations team is working diligently to increase manufacturing capacity to meet customer demand. We now expect cardiopulmonary revenue to grow 9% to 10% for the full year of 2025, up from 7% to 8% previously. Our revised forecast incorporates continued HLM growth as we launch essence in the new market and continue to increase penetration in existing markets. Notably, in April, we received regulatory approval for Essence in China, which is our second largest market for HLMs after the US. Our forecast also reflects increased demand for consumables. Beyond 2025, we believe further oxygenated capacity expansion will continue to enable growth for the cardiopulmonary business. We're currently investing in an additional manufacturing line, which we expect to have running by mid next year. We expect that this increase in output will support our strategy of taking additional share in consumables going forward. We also anticipate sustaining double digit growth in HLM as we continue to launch Essence in new markets and further increase penetration in existing ones. Turning to epilepsy. Revenue increased 4% versus the first quarter of 2024, led by the Europe and rest of world regions, which increased the combined 13% versus the prior year period. We were pleased by the notable improvements in commercial execution across Europe during the quarter. This performance was balanced by U.S. epilepsy revenue growth, which increased 2% year over year. During the quarter, our U.S. epilepsy business experienced procedure deferrals related to a voluntary field safety notification, which we estimate had an unfavorable impact on revenue of less than $2 million. The field safety notice involved a component issue that affected 0.13% of current and past Centiva generators and required a design change. While the current version of Centiva continues to be implanted, the design change was recently approved by the FDA. We expect the updated Centiva generators to be available for distribution by mid-year in the US and most major geographies during the second half of 2025. We believe customer anticipation for the updated generators is delaying procedures in the first half of the year and will primarily impact timing rather than procedure loss. For the full year 2025, we continue to expect epilepsy revenue growth of 4% to 5%. Our forecast incorporates low single-digit growth in the U.S. versus mid-single-digit growth previously and assumes the Europe and rest of world regions will grow a combined low double digits for the year. up from high single digits previously. We continue to see momentum in our global epilepsy business across volume, price, and mix, and we feel confident in our ability to achieve mid-single-digit growth this year. Before turning the call to Amit, I would like to mention a change in our reporting. Over the last year, as Livanova's CEO, I have reviewed our communication and disclosure practices. That reflection has led us to refine what we report on a quarterly basis. While we have historically disclosed U.S. new patient and replacement implant volume growth, going forward, we will not be disclosing these metrics each quarter. However, we will continue to periodically comment on and provide insights into trends when relevant and appropriate to do so. We are making this change because we firmly believe that viewing this business through a long-term value creation framework is the best lens for investors. Our quarterly disclosure approach will focus on revenue growth, which best represents our business performance and is in line with our existing practice for the Europe and rest of world regions. Our teams around the world remain focused on narrowing the drug-resistant epilepsy treatment gap and maximizing VNS therapy access. In summary, due to the strong growth we saw in the first quarter, as well as the continued success of the essence rollout, market share gains and cardiopulmonary consumables, and pricing strategies, we are raising our overall organic growth outlook by 100 basis points to between 7% and 8%. Alex will provide additional details on our 2025 guidance later in the call. With that, I will turn the call over to Ahmed to provide an update on our recent clinical and regulatory achievements in OSA and progress in DTD.