Skip to content
    LIVN
    Earnings call· Mar 2026(Q1 FY26)

    LivaNova Q1 FY26 earnings call LIVN

    May 6, 2026 Source

    Executive summary

    LivaNova Q1 FY26 — Strong Revenue Growth Across Segments Driven by Essenz and Epilepsy Reimbursement

    LivaNova delivered a strong first quarter, exceeding expectations with double-digit revenue growth across its core cardiopulmonary and epilepsy businesses. The company raised its full-year revenue guidance, reflecting robust performance driven by the Essenz upgrade cycle, market share gains in consumables, and improved U.S. reimbursement for VNS therapy. Strategic investments in innovation, particularly for the obstructive sleep apnea (OSA) program, are progressing with key regulatory and clinical milestones achieved, positioning the company for future high-growth market entry.

    Highlights

    5

    • Total revenue grew 11% on a constant currency basis, with strength across all regions.

    • Cardiopulmonary segment revenue increased 14% YoY, driven by Essenz placements and consumables market share gains.

    • Epilepsy segment revenue increased 8% YoY, supported by improved U.S. Medicare reimbursement (48% for new implants, 47% for end-of-service) and strong clinical evidence.

    • U.S. FDA premarket approval received for the aura6000 system for moderate to severe OSA, the first HGNS device without a complete concentric collapse contraindication.

    • Full-year 2026 revenue guidance raised to 7-8% constant currency growth, up from 6-7% previously.

    Concerns

    3

    • Adjusted free cash flow decreased to $4 million in Q1 FY26 from $20 million in Q1 FY25, primarily due to increased capital spend and higher working capital.

    • Anticipated $5 million adverse impact on adjusted operating income for FY26 due to higher shipping, logistics, and fuel costs related to the Middle East conflict.

    • Adjusted gross margin decreased to 68% from 69% in Q1 FY25, offset by unfavorable currency and product mix.

    Guidance & targets

    22
    CategoryTargetConfidence
    Full-year 2026 revenue growth
    7% to 8%
    high materiality
    High
    Full-year 2026 cardiopulmonary revenue growth
    8.5% to 9.5%
    medium materiality
    High
    Full-year 2026 epilepsy revenue growth
    6% to 7%
    medium materiality
    High
    Full-year 2026 adjusted diluted EPS
    $4.20 to $4.30
    high materiality
    High
    Full-year 2026 adjusted free cash flow
    $160 million to $180 million
    medium materiality
    High
    Full-year 2026 adjusted operating income margin
    20% to 21%
    medium materiality
    High
    Full-year 2026 adjusted effective tax rate
    approximately 23%
    low materiality
    High
    Full-year 2026 tariff net impact on adjusted operating income
    less than $5 million
    low materiality
    High
    Full-year 2026 Middle East conflict impact on adjusted operating income
    approximately $5 million
    low materiality
    Medium
    Full-year 2026 adjusted diluted weighted average shares outstanding
    approximately 56 million
    low materiality
    High
    Full-year 2026 capital spending
    $120 million
    medium materiality
    High
    Essenz HLM unit placement penetration
    approximately 80%
    medium materiality
    High
    Full-year 2026 oxygenator manufacturing output increase
    low double digits
    medium materiality
    High
    PMA supplement submission for commercial MRI compatible OSA device
    H2 2026
    medium materiality
    High
    Limited market release for MRI compatible OSA device
    H1 2027
    medium materiality
    High
    Broader commercial launch for MRI compatible OSA device
    H2 2027
    medium materiality
    High
    Full market release of cloud-based clinician portal and app (epilepsy)
    2027
    low materiality
    High
    Next-generation Bluetooth-enabled generator launch (epilepsy)
    2027
    low materiality
    High
    Next-generation oxygenator launch
    2028
    medium materiality
    High
    Oxygenator capacity increase
    60%
    medium materiality
    High
    Oxygenator market share improvement
    800 basis points
    medium materiality
    High
    Adjusted free cash flow conversion
    80%
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Cardiopulmonary
    Driven by Essenz placements, sustained favorable price premiums, underlying demand, and market share gains in consumables. Improvements in third-party component availability enabled increased manufacturing output.
    Heart-lung machine revenue growth: high teensEssenz placements: increased sequentially and year-over-yearCardiopulmonary consumables revenue growth: mid-teensConsumables market share: gainsProcedure growth: positivePrice: favorable
    		$209 million14%——
    Epilepsy
    Growth across all regions, supported by impactful clinical evidence, improved U.S. Medicare reimbursement, and sustained commercial excellence. Improved realized pricing driven by less volume discounting and annual list price increase.
    Total implant growth: positiveRealized price: favorableEurope and Rest of World epilepsy revenue growth: 12%U.S. epilepsy revenue growth: 7%
    		—8%——

    Operational metrics

    24
    Adjusted gross margin
    68%vs 69% in Q1 FY25
    Q1 FY26
    Adjusted SG&A expense
    $129 millionvs $116 million in Q1 FY25
    Q1 FY26
    SG&A as % of net revenue
    36%vs 37% in Q1 FY25
    Q1 FY26
    Adjusted R&D expense
    $47 millionvs $38 million in Q1 FY25
    Q1 FY26
    R&D as % of net revenue
    13%vs 12% in Q1 FY25
    Q1 FY26
    Adjusted operating income
    $71 millionvs $65 million in Q1 FY25
    Q1 FY26
    Adjusted operating income margin
    20%generally in line with prior year period
    Q1 FY26
    Adjusted effective tax rate
    23%vs 24% in Q1 FY25
    Q1 FY26
    Adjusted diluted earnings per share
    $0.98vs $0.88 in Q1 FY25
    Q1 FY26
    Cash balance
    $540 millionvs $636 million at year-end 2025
    as of March 31, 2026
    Total debt
    $288 millionvs $377 million at year-end 2025
    as of March 31, 2026
    Early repayment of term facilities
    $98 million
    Q1 FY26

    Resulted in reduction of cash and total debt.

    Capital spend
    $14 millionvs $11 million in Q1 FY25
    Q1 FY26
    Foreign exchange impact on revenue
    $10 million3% favorable year-over-year impact
    Q1 FY26
    Oxygenator market share
    approximately 40%up from approximately 30%
    current

    Achieved over the last couple of years.

    U.S. Medicare reimbursement increase for VNS therapy (new patient implants)
    approximately 48%compared to 2025 levels
    effective January 1, 2026

    For hospital outpatient payments.

    U.S. Medicare reimbursement increase for VNS therapy (end-of-service procedures)
    approximately 47%compared to 2025 levels
    effective January 1, 2026

    For hospital outpatient payments.

    DRE patients in U.S.
    approximately 1 million
    current
    DRE patients receiving advanced treatment in U.S.
    fewer than 10%
    current
    OSPREY nonresponders converted by PolySync
    over 50%
    clinical study

    Findings indicate this conversion rate.

    OSPREY cumulative responder rate with PolySync
    exceeding 80%
    clinical study

    Across the entire OSPREY trial population.

    Middle East revenue exposure
    approximately 4%
    current

    Of total revenue base.

    [Indiscernible] sales decline
    $5 millionfrom $27 million in 2025
    2026

    Observed competitor exiting the space, majority from consumables, heater coolers, and HLM.

    OSPREY participants with complete concentric collapse (CCC) high risk
    approximately 45%
    clinical study

    Study enrolled a challenging patient population.

    Industry KPIs

    11
    MetricValueDetails
    Tariff impactless than $5 millionUSD
    Pricing realized priceFavorable
    New product launch rampH1 2027
    Procedure volume growthHealthy
    FCF conversion leverage guidance80%%
    Installed base system placementsIncreased
    Segment franchise organic growth11%%
    Consumables recurring revenue mixmid-teens%
    Sales force commercial capacity buildLate 2026 / early 2027
    Indicated addressable patient populationUp to 1 millionpatients
    Pivotal trial clinical evidence milestonesPublished

    Product announcements

    3
    ProductTypeDetails
    Cloud-based clinician portal and applicationlaunch
    Next-generation Bluetooth-enabled generatorlaunch
    Next-generation oxygenatormilestone

    Risks & headwinds

    3
    Current challenges in the HGNS market (obstructive sleep apnea)Temporary

    Ambiguity and reimbursement challenges

    Mitigation: View the long-term effect of GLP-1s on the market as net positive. Believe LivaNova has a clear right to win supported by rigorous clinical evidence and differentiated technology. Working with AMA and other societies to ensure appropriate codes at launch.

    Tariff net impactFull year 2026

    Less than $5 million on adjusted operating income for the full year 2026

    Mitigation: Working through the government's refund process; LivaNova remains well positioned to manage the impact of tariffs.

    Middle East conflict impactFull year 2026

    Approximately $5 million on adjusted operating income for the full year 2026

    Mitigation: Primarily related to higher shipping, logistics, and fuel costs. Monitoring developments closely. LivaNova is in a good position to manage through this conflict.

    What to watch in Q2 FY26

    5

    Epilepsy volume growth from new/reopened accounts

    Second half of 2026
    CurrentImproved realized pricing in Q1, but volume-driven assumptions expected to materialize in H2.
    TargetMaterialization of volume growth from new/expanded/reopened accounts.

    Why it matters

    Indicates the effectiveness of improved Medicare reimbursement and clinical evidence in expanding patient access and driving VNS therapy adoption beyond price.

    So the volume-driven assumptions, including new expanded and reopen accounts are expected to materialize in the second half.

    Q&A highlights

    8

    How will the improved Medicare reimbursement impact the epilepsy business, commercially and competitively, and what is the outlook?

    The improved reimbursement will lead to immediate pricing improvements through reduced volume discounts and an opportunity for increased procedure volume over time as economic barriers are removed. Volume-driven growth from new and reopened accounts is expected to materialize in the second half of 2026.

    “We see an opportunity for improved penetration of VNS procedures in epilepsy, basically, the volume increase of procedures, and that is going to be driven by this changing algorithm within practice of current epileptologists that are doing already VNS procedures and potentially opening new centers that will do BNS procedures because now the economic barrier has been removed.”

    asked by Rick Wise · answered by Unknown Executive

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Q1 Performance and Raised Outlook

    LivaNova reported 11% constant currency revenue growth in Q1 FY26, driven by robust performance in both cardiopulmonary and epilepsy segments. This strong start led to an upward revision of full-year 2026 revenue guidance to 7-8% constant currency growth and adjusted EPS to $4.20-$4.30, reflecting confidence in sustained momentum and execution.

    02

    Cardiopulmonary Segment Strength

    The cardiopulmonary segment saw 14% revenue growth, fueled by the successful Essenz upgrade cycle, increased placements, and market share gains in consumables. The company plans to increase oxygenator manufacturing output by low double digits in FY26, with a new manufacturing line coming online in H2, and aims for 60% capacity increase and 800 bps market share improvement by 2030.

    03

    Epilepsy Business Reinvigoration

    Epilepsy revenue grew 8%, benefiting significantly from improved U.S. Medicare reimbursement rates (48% for new implants, 47% for end-of-service procedures) effective January 1, 2026. This, combined with strong clinical evidence from the Core VNS study, is reducing volume discounting and strengthening the patient funnel, leading to an improved outlook for the segment.

    04

    OSA Program Milestones

    LivaNova achieved critical milestones for its obstructive sleep apnea (OSA) program, including U.S. FDA premarket approval for the aura6000 system, notable for being the first HGNS device approved without a complete concentric collapse contraindication. Additionally, 12-month OSPREY RCT results were published, demonstrating clinically meaningful responses and sustained improvements, with PolySync showing potential to convert over 50% of nonresponders.

    05

    Innovation Pipeline and Digital Health

    Beyond OSA, the company is advancing its innovation agenda with a limited market release of a cloud-based clinician portal and app for epilepsy, with a full launch planned for 2027 alongside a next-gen Bluetooth-enabled generator. The next-generation oxygenator design is finalized, with manufacturing scale-up underway for a 2028 launch.

    06

    Financial Discipline and Capital Allocation

    Despite increased R&D investments in OSA and higher capital spend for capacity expansion, the company maintained its adjusted operating income margin guidance of 20-21% and reaffirmed its adjusted free cash flow guidance of $160-$180 million. The reduction in total debt by $89 million in Q1 reflects disciplined capital allocation.

    AI-generated summary of the company’s earnings call. Not investment advice.