Q3 2021 FINANCIAL RESULTS
Financial Summary1
Net Sales | $253M | |
Adjusted Gross Margin | 71% | |
Adjusted Operating Margin | 19% | |
Adjusted Diluted EPS | $0.68 | |
Net Sales Summary 2, 3 | ||
By Business | ||
"Our third-quarter performance demonstrates continued focus on execution across all regions in our key product lines amidst lingering COVID-19-related headwinds. We are encouraged by our sales growth year over year and compared to 2019, excluding the impact of Heart Valves. In addition, we saw improvements in margins and cash flow generation. We also strengthened our financial flexibility with the completion of an equity offering during the quarter, which allowed us to retire the $450 million term loan and enter into a new $125 million revolver."
By Geography
Neuromodulation | Cardiovascular | ||||||
45% | 55% | ||||||
25% | |||||||
45% | 49% | 57% | |||||
18% | |||||||
US | $144M | 12% | |||||
6% | EU | $46M | 8% | ||||
ROW | $64M | 1% | |||||
Cardiopulmonary ACS Neuromodulation | |||||||
2021 Guidance4 | Highlights | ||||||
Guidance, | Guidance, | >20% | |||||
Aug. 16, 2021 | Nov. 3, 2021 | ||||||
Net Sales | 5-10% | 8-11% | Sales Growth, | Organic Growth in | |||
Adjusted Diluted EPS | $1.75-2.05 | $2.00-2.10 | Margin Expansion and | Advanced | |||
FCF Generation | |||||||
Circulatory Support | |||||||
Adjusted Free Cash Flow (FCF) | $50-70M | $55-75M | sequentially and | driven by LifeSPARC® launch | |||
over previous year(5) |
2021 Strategic Priorities
Core Growth
- Expand the go-to-market initiative for U.S. Epilepsy
- ACS growth of over 30% in 2021
Pipeline Execution
- Achieve key study milestones in:
- RECOVER and ANTHEM HFrEF
- Advance next-generation HLM
Operational Excellence
- Expand operating margin through cost discipline
- Drive improvement in free cash flow generation
Definitions:
- ACS: Advanced Circulatory Support
- HF: Heart Failure
- HLM: Heart-Lung Machine
- Adjusted financial measures are non-GAAP measures and exclude specified items as described and reconciled in the "Reconciliation of GAAP to non-GAAP Financial Measures" contained on the back of this document. All EPS measures in this document refer to diluted EPS from continuing operations. 2) Unless otherwise noted, all sales growth rates in this document reflect constant-currency sales growth, which eliminates the effects of foreign currency fluctuations. Constant-currency growth, a non-GAAP financial measure, measures the change in sales between current and prior-year periods using average exchange rates in effect during the applicable prior-year period. 3) The Heart Valves business was divested and deconsolidated effective June 1, 2021. 4) LivaNova calculates forward-lookingnon-GAAP financial measures based on internal forecasts that omit certain amounts that would be included in GAAP financial measures. For example, forward-looking net sales growth projections are estimated on a constant-currency basis and exclude the impact of foreign currency fluctuations. In addition, management uses the non-GAAP measure of Free Cash Flow defined as Net Cash Used in Operating Activities, less Net Cash Used in Investing Activities and further excludes the following one-time extraordinary adjustments: 3T litigation payments and a tax stimulus benefit. Forward-lookingnon-GAAP adjusted diluted earnings per share guidance exclude other items such as, but not limited to, stock-based compensation costs, changes in fair value of contingent consideration arrangements and product remediation costs that would be included in comparable GAAP financial measures. The most directly comparable GAAP measure for constant-currency net sales and adjusted diluted earnings per share are net sales and earnings per share, respectively. However, non-GAAP financial adjustments on a forward-looking basis are subject to uncertainty and variability as they are dependent on many factors, including but not limited to, the effect of foreign currency exchange fluctuations, impacts from potential acquisitions or divestitures, gains or losses on the potential sale of businesses or other assets, restructuring costs, merger and integration activities, changes in fair value of contingent consideration arrangements, product remediation costs and the tax impact of the aforementioned items, tax law changes or other tax matters. Accordingly, reconciliations to the most directly comparable forward-looking GAAP financial measures are not available without unreasonable effort. *Numbers may not add precisely due to rounding. (5) Excluding the impact of the Heart Valves divestiture.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES - UNAUDITED
Three Months Ended September 30, 2021
Certain Legal, | ||||||||||||
Depreciation and | Contingent | Stock-based | ||||||||||
GAAP | Amortization | Financing | Consideration | Compensation | Certain Tax | Certain Interest | Adjusted | |||||
Financial | Expenses | Transactions | and Other | Costs | Adjustments | Adjustments | Heart Valves | Financial | ||||
Measures | (A) | (B) | (C) | (D) | (E) | (F) | (G) | Measures | ||||
Gross Margin % | 67.2% | 1.6% | -- | 1.8% | 0.1% | -- | -- | -- | 70.7% | |||
Operating Margin % | 7.1% | 2.8% | -- | 4.6% | 4.4% | -- | -- | 0.1% | 18.9% | |||
Diluted EPS - | ||||||||||||
($0.82) | $0.12 | $0.88 | $0.20 | $0.21 | ($0.02) | $0.08 | $0.02 | $0.68 | ||||
Continuing Operations | ||||||||||||
Three Months Ended September 30, 2020 | ||||||||||||
Certain Legal, | ||||||||||||
Depreciation and | Contingent | Stock-based | Product | Merger and | ||||||||
GAAP | Amortization | Financing | Consideration | Compensation | Certain Tax | Certain Interest | Remediation | Restructuring | Integration | Adjusted | ||
Financial | Expenses | Transactions | and Other | Costs | Adjustments | Adjustments | Expenses | Expenses | Expenses | Financial | ||
Measures | (A) | (B) | (C) | (D) | (E) | (F) | (H) | (I) | (J) | Measures | ||
Gross Margin % | 61.5% | 2.2% | -- | 2.2% | 0.2% | -- | -- | 0.5% | -- | -- | 66.5% | |
Operating Margin % | (3.1)% | 4.7% | -- | 7.8% | 3.3% | -- | -- | 0.5% | (0.1)% | 0.5% | 13.4% | |
Diluted EPS - | ||||||||||||
($0.30) | $0.20 | ($0.10) | $0.38 | $0.15 | ($0.05) | $0.07 | $0.02 | ($0.01) | $0.02 | $0.38 | ||
Continuing Operations | ||||||||||||
GAAP results include:
- Includes depreciation and amortization associated with purchase price accounting
- Costs associated with the June 2020 financing transactions, including the mark-to-market adjustment for the exchangeable option feature and capped call derivatives. Three-month period ended September 30, 2021 also includes loss on debt extinguishment.
- 3T Heater-Cooler litigation provision, legal expenses primarily related to 3T Heater-Cooler defense, settlements, other matters and remeasurement of contingent consideration related to acquisitions
- Non-cashexpenses associated with stock-based compensation costs
- Primarily relates to discrete tax items. Three-month period ended September 30, 2020 also includes the tax impact of intercompany transactions.
- Primarily relates to non-cash interest expense on the Senior Secured Term Loan and Cash Exchangeable Senior Notes. Three-month period ended September 30, 2020 also includes non-cash interest expense related to intellectual property migration and interest reversed upon the settlement of a tax litigation matter.
- Loss associated with the sale of Heart Valves
- Costs related to the 3T Heater-Cooler remediation plan
- Restructuring expenses related to organizational changes
- Merger and integration expenses related to our legacy companies and recent acquisitions
- Numbers may not add precisely due to rounding.
NET SALES: COMPARISON OF ACTUAL RESULTS TO CONSTANT CURRENCY - UNAUDITED (1)
(U.S. dollars in millions)
Business
Cardiovascular
Neuromodulation
Other
Total Net Sales
Three Months Ended September 30, | |||
2021 | 2020 | % Change at Actual Currency Rates | % Change at Constant-Currency Rates |
$138.6 | $140.9 | (1.6)% | (1.9)% |
113.3 | 98.4 | 15.1% | 14.6% |
1.3 | 0.8 | 62.4% | 61.2% |
$253.2 | $240.1 | 5.5% | 5.0% |
Region
US
Europe
Rest of World
Total Net Sales
Three Months Ended September 30, | |||
2021 | 2020 | % Change at Actual Currency Rates | % Change at Constant-Currency Rates |
$143.8 | $128.9 | 11.6% | 11.6% |
45.7 | 48.5 | (5.8)% | (7.5)% |
63.7 | 62.7 | 1.6% | 1.3% |
$253.2 | $240.1 | 5.5% | 5.0% |
- Constant-currencygrowth, a non-GAAP financial measure, measures the change in sales between current and prior-year periods using average exchange rates in effect during the applicable prior-year period. The sales results presented are unaudited.
- Numbers may not add or recalculate precisely due to rounding.
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Livanova plc published this content on 03 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 November 2021 10:11:09 UTC.