LivaNova PLC (NASDAQ:LIVN) Q4 2025 Earnings Call Transcript

LivaNova PLC (NASDAQ:LIVN) Q4 2025 Earnings Call Transcript February 25, 2026

LivaNova PLC misses on earnings expectations. Reported EPS is $0.567 EPS, expectations were $0.8.

Operator: Good day, ladies and gentlemen, and welcome to the LivaNova PLC fourth quarter and full year 2025 earnings conference call. My name is Emily, and I will be coordinating your call today. After the presentation, you will have the opportunity to ask any questions. As a reminder, this conference call is being recorded. I would now like to introduce your host for today’s conference, Ms. Briana Gotlin, LivaNova PLC’s Vice President of Investor Relations. Please go ahead.

Briana Gotlin: Thank you, and welcome to our conference call and webcast discussing LivaNova PLC’s financial results for the fourth quarter and full year of 2025. Joining me on today’s call are Vladimir Makatsaria, our Chief Executive Officer and member of the Board of Directors; Alex Shvartsburg, our Chief Financial Officer; Ahmet Tezel, our Chief Innovation Officer; and Zach Glaser, 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, 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 investors.livanova.com.

I will now turn the call over to Vladimir Makatsaria.

Vladimir Makatsaria: Thank you, Briana, and thank you everyone for joining us today. Welcome to LivaNova PLC’s conference call for the fourth quarter and full year of 2025. 2025 was a year of strong performance for LivaNova PLC. We delivered double-digit revenue growth, meaningful adjusted operating margin expansion, and robust cash generation, reflecting strong execution across our cardiopulmonary and epilepsy businesses. 2025 marked LivaNova PLC’s fifth consecutive year of double-digit EPS growth, and third consecutive year of double-digit organic revenue growth. Importantly, we also continued to advance our long-term strategy and made progress toward the financial targets outlined at our November Investor Day. Our core businesses provide a durable foundation of growth, profitability, and cash generation, which enables disciplined investment in innovation to drive our next chapter, entering high-growth, high-margin markets to build a more profitable, more sustainable financial profile over time.

The first stage of that next chapter is obstructive sleep apnea, where we have a clear right to win based on rigorous clinical evidence, a differentiated technology designed to treat a broader range of challenging patients, and our existing neuromodulation capabilities. At the same time, we will continue to preserve upside optionality in difficult-to-treat depression pending a CMS reimbursement decision, and we remain focused on advancing the work required to reach clarity there. As we execute the strategy, our goal is to transform LivaNova PLC into a best-in-class medtech company for the long term. Over time, entering higher growth markets like OSA will shift LivaNova PLC’s overall weighted average market growth upward and position the company for sustained acceleration.

Our approach leverages our competitive advantages and is grounded in disciplined capital allocation and focused execution. We have also been deliberate in strengthening the capabilities required to execute the strategy, including our innovation engine, our digital platform investments, and targeted leadership and talent upgrades across the organization. Consistent with that focus, we recently appointed Lucille Blaise as Global Head of Commercialization for obstructive sleep apnea, further strengthening our leadership team as we prepare to scale this opportunity. Lucille brings a strong track record in creating new sleep therapy pathways, improving patients’ access to care, and building high-performing teams. I would like to welcome Lucille to LivaNova PLC and look forward to her leadership in advancing our OSA program.

For the remainder of the call, I will discuss our fourth quarter and full year 2025 segment results and provide top-line guidance for 2026. After my comments, Ahmet will discuss key innovation updates, including recent clinical and regulatory progress. Alex will then provide additional details on our results and 2026 guidance. I will wrap up with closing remarks before moving on to Q&A. Now turning to segment results. For the cardiopulmonary segment, revenue was $207 million in the quarter, an increase of 10% versus 2024. Cardiopulmonary revenue for the full year was $785 million and grew 13%. The heart-lung machine revenue grew in the mid-single digits in the quarter, driven by an increase in Essence placements and sustained favorable price premiums.

Some planned Essence placements and tender activity for the quarter shifted into 2026, moderating the fourth quarter contribution. As a point of reference, Essence represented approximately 55% of our annual HLM units placed in 2025. HLM growth remains strong with full year revenue growing in the mid-teens. Cardiopulmonary consumables revenue grew in the mid-teens in the quarter, driven by market share gains, procedure growth, and price. Strong demand for oxygenators continues to outpace the market’s ability to supply. Our manufacturing capacity expansion plans are progressing well and remain on track, and we continue to partner with third-party suppliers to increase component supply for even more rapid expansion. For the full year, consumables revenue grew in the low teens.

Looking ahead, our growth strategy in cardiopulmonary is driven by three levers, as we outlined at Investor Day. First, continued market share gains in consumables, enabled by capacity expansion and enhanced by our next-generation oxygenator, with an estimated launch in 2028. Second, the continued upgrade cycle of 80% of our new heart-lung machine placements to be Essence by 2026. And third, recurring revenue streams via software, hardware, and service attachments leveraging the breadth of our HLM installed base. For the full year 2026, we expect cardiopulmonary revenue to grow 7% to 8%. Our forecast incorporates continued HLM growth as we drive Essence penetration globally. It also reflects strong demand for consumables and expanded manufacturing capacity.

Turning to epilepsy. Revenue increased 9% versus 2024 with growth across all regions. Epilepsy revenue in the Europe and Rest of World regions increased a combined 17% versus the prior-year period, while U.S. epilepsy revenue increased 8% year over year. These results reflect strong commercial execution globally. For the full year, epilepsy revenue grew 6%, with strength across all regions. Epilepsy revenue in Europe and Rest of World grew a combined 13% versus 2024, while U.S. epilepsy revenue grew 5% year over year. We expect continued profitable growth in this business supported by three key strategic levers. First, impactful clinical evidence leveraging the CORE VNS clinical study, which we presented at the American Epilepsy Society in the fourth quarter.

The study has been well received and is reshaping the perception of VNS Therapy effectiveness, prompting clinicians to reevaluate where VNS Therapy sits within the treatment algorithm. Second, innovation, including our Connected Care and Bluetooth-enabled generator, will remove barriers to access and improve both the patient experience and physician workflow. Ahmet will provide additional details on recent progress with our digital health platform and how we intend to leverage it as a foundational innovation. Finally, sustained commercial excellence, including reimbursement and market access initiatives, will continue to be a driver as demonstrated by recently improved reimbursement in the U.S. Effective 01/01/2026, provider reimbursement for VNS Therapy procedures for drug-resistant epilepsy under Medicare increased significantly, with hospital outpatient payments rising by approximately 48% for new patient implants and 47% for end-of-service procedures versus 2025 rates.

This shift will improve hospital economics for VNS Therapy, creating a more sustainable financial foundation for providers and paving the way for expanded patient access. As a reminder, there are more than 1,000,000 DRE patients in the U.S., yet fewer than 10% receive advanced treatment. These changes significantly reduce a known barrier to procedure penetration, as historical hospital rates for Medicare patients did not fully cover VNS Therapy procedure costs. For the full year 2026, we expect epilepsy revenue growth of 5.5% to 6.5%. This forecast incorporates mid-single-digit growth in the U.S. We continue to evaluate the positive impact of reimbursement on the U.S. business. It also assumes the Europe and Rest of World regions will deliver a combined growth of high single digits for the year.

In summary, our growth in 2025 was driven by healthy markets, the continued successful rollout of Essence, market share gains in cardiopulmonary consumables, strong commercial execution in epilepsy, and pricing strategies. These drivers will continue to fuel growth in 2026, supported by sustained execution in cardiopulmonary, and the combination of impactful clinical evidence and improved reimbursement dynamics in epilepsy that should support expanded patient access over time. As a result, we are guiding full year 2026 revenue growth between 6% and 7%, which is consistent with the 2025 to 2028 framework detailed at our Investor Day. Alex will provide additional details on our 2026 guidance later in the call. I will now turn the call over to Ahmet Tezel to discuss progress with our digital health platform and continued regulatory and clinical evidence momentum in OSA and difficult-to-treat depression.

Ahmet Tezel: Thank you, Vlad. Innovation remains the key driver of value creation for LivaNova PLC, both by strengthening our core businesses and by enabling our next chapter of growth. Starting in epilepsy, we recently received FDA approval for our cloud-based digital health platform. This approval establishes the foundation for our Connected Care roadmap and enables the initial rollout of our cloud-based clinician portal. At Investor Day, we also described a multiyear innovation roadmap in epilepsy, starting with the clinician portal, followed by a Bluetooth-enabled generator that integrates patient and clinician applications. The goal is to streamline workflows that include remote titration, provide immediate access to patient insights, and enable more digitally connected care pathways that remove barriers to access.

Consistent with this roadmap, we expect a limited market rollout of the clinician portal in 2026, primarily focused on workflow validation and clinical engagement, with limited financial impact. A full market release is planned for 2027 alongside the launch of our next-generation Bluetooth-enabled implantable pulse generator. More broadly, this is a strategic investment in Connected Care, and epilepsy is the first step. Importantly, it also establishes a single shared cloud platform across the entire portfolio. That means the same digital infrastructure we are building for epilepsy can be leveraged across OSA, depression, and cardiopulmonary over time, accelerating the cadence of our software and digital health innovations and supporting a connected ecosystem approach.

To be more specific, for cardiopulmonary, these same capabilities can also support more connected workflows and data-driven insights as we continue to build around Essence. This includes a pipeline of hardware and software upgrades designed to improve workflow and outcomes. Our innovation efforts in cardiopulmonary consumables also continue to progress. We recently completed a design freeze for our next-generation oxygenator and will now move towards manufacturing scale-up. Turning to obstructive sleep apnea, our modular PMA submission continues to progress with the FDA, and our timing expectations have not changed. We continue to expect PMA approval for the clinical trial device in the first half of this year, followed by a PMA supplement for the commercial MRI-compatible device.

This supports a limited market release of the MRI-compatible device in 2027, followed by a broader commercial launch in the second half of that year. We continue to view OSA as a very compelling de-risked opportunity, grounded in differentiated technology and clinical evidence, as well as our established neuromodulation capabilities. On the clinical evidence front, we expect a full 12-month dataset from the OSPREY trial to be published imminently. OSPREY is the first and only randomized controlled trial in the HGNS space, bringing gold standard scientific rigor to the field. As previously disclosed, patients with the complete concentric collapse, or CCC, were not excluded from OSPREY, and approximately 45% of participants were high risk for this condition.

OSPREY also enrolled a challenging patient population with higher baseline AHI and BMI compared to other pivotal U.S. trials, yet the responder rates were comparable to these studies, even though other studies screened the more difficult-to-treat patients out. This is reflected in their FDA labels as contraindications or warnings. Additionally, our PolySync evaluation continues to progress. As a reminder, PolySync is our advanced titration algorithm designed to fully leverage the six-electrode architecture of our HGNS cuff, which was not done in OSPREY. It enables multicontact activation for greater nerve and muscle selectivity, optimizing therapy for each patient. PolySync’s demonstrated ability to convert nonresponders into responders both strengthens our competitive positioning versus existing HGNS therapies and has the potential to expand penetration by bringing neurostimulation to a broader range of patients.

We look forward to sharing the full PolySync results at the SLEEP conference in June, but are confident we will be able to convert at least half of the nonresponders into responders using the PolySync algorithm. As a reminder, we intend to make PolySync immediately available during our commercial launch to ensure all of our patients have access to this advanced algorithm at their initial titration. This will not be used as a follow-up for nonresponders. We will optimize therapy with PolySync for all patients from the start. Now turning to difficult-to-treat depression. In January, the RECOVER durability manuscript was published in the International Journal of Neuropsychopharmacology. The durability profile of VNS Therapy is central to why we believe it is a differentiated option in this markedly ill patient population, where therapies can often get patients better for a short time but cannot keep patients better over time.

RECOVER demonstrated that after 24 months, more than 80% of patients maintain clinically meaningful improvements across symptoms, daily function, and quality of life. With respect to CMS, we remain in active contact with the agency, and we are working toward our next meeting with them. We view this as an important step towards submitting our reconsideration package, which remains a top priority. Given current scheduling uncertainty, we will not speculate on the exact submission timing at this stage. In summary, we are encouraged by our progress, from advancing our Connected Care foundation across our portfolio to continued regulatory and clinical evidence momentum in OSA and DTD. We look forward to providing future updates as milestones are achieved.

I will now turn the call over to Alex.

Alex Shvartsburg: Thanks, Ahmet. During my portion of the call, I will share a brief recap of the fourth quarter results and provide commentary on 2026 guidance. Turning to results. Revenue in the quarter was $361 million, an increase of 9.5% on a constant currency and organic basis versus the prior year. Foreign exchange in the quarter had a favorable year-over-year impact on revenue of approximately $9 million, or 3%. Adjusted gross margin as a percent of net revenue was 68%, in line with 2024. Favorable product mix and pricing across segments and geographies were offset by unfavorable currency changes and tariff impacts. Adjusted SG&A expense for the fourth quarter was $131 million compared to $122 million in 2024. SG&A as a percent of net revenue was 36%, down from 38% in 2024.

The year-over-year decline as a percent of net revenue was driven by fixed cost leverage. Adjusted R&D expense in the fourth quarter was $49 million compared to $40 million in 2024. R&D as a percent of net revenue was 14%, up from 13% in 2024. The year-over-year increase was driven by OSA and core product development investments. Adjusted operating income was $64 million compared to $56 million in 2024. Adjusted operating income margin was 18%, as compared to 17% in 2024. The increase was primarily driven by revenue growth and operating leverage from fixed costs, partially offset by investments in cardiopulmonary oxygenator capacity expansion as well as higher R&D spend in both OSA and the core. Adjusted effective tax rate in the quarter was 24%, up from 20% in 2024.

The increase was related to changes in geographic mix and the roll-off of certain tax attributes that have contributed to our historically low effective tax rate. Adjusted diluted earnings per share was $0.86 compared to $0.81 in 2024, reflecting strong revenue growth in both the epilepsy and cardiopulmonary businesses, as well as effective cost management. Additionally, Q4 2025 included $0.04 of favorable impact versus prior guidance assumptions related to cardiopulmonary investments, primarily due to timing of the Essence printed circuit board conversion, where the related costs have been rephased over the rollout period. Importantly, the printed circuit board conversion program remains on track and is reflected in our 2026 guidance assumptions that I will cover in a moment.

Moving to our cash balance at December 31, cash was $636 million, up from $429 million at year-end 2024. The increase reflects improvements in operating cash flows and the release of $295 million of restricted cash following the SNIA litigation guarantee termination. Total debt at December 31 was $377 million compared to $628 million at year-end 2024. The reduction in total debt was a result of the $200 million early repayment of a portion of the term facilities as well as the $58 million repayment of the 2025 convertible notes. On January 8, we fully repaid the outstanding term facilities through an early payment of $98 million inclusive of accrued interest. Adjusted free cash flow for the quarter was $53 million as compared to $62 million in the prior-year period.

The year-over-year decrease was driven by increased capital spend. Adjusted free cash flow for the full year of 2025 was $183 million, up from $163 million in the prior-year period. We forecast 2026 revenue growth between 6% and 7% on a constant currency basis. Adjusted effective tax rate is forecasted at approximately 23%. We project adjusted diluted earnings per share in the range of $4.15 to $4.25, with adjusted diluted weighted average shares outstanding to be approximately 56 million for the full year. The EPS range represents approximately 8% growth at midpoint. This range also incorporates the assumption of a third-quarter SNIA payment of approximately $400 million, representing a $0.06 unfavorable impact to adjusted free cash flow due to the liability.

Adjusted free cash flow is expected to be in the range of $160 million to $180 million. This range includes $120 million in capital spend, and the next-generation oxygenator manufacturing changes shared today incorporate our best estimate of the impact of current assumptions.

Vladimir Makatsaria: To close the prepared remarks, 2026 is an important year for LivaNova PLC with a number of key milestones, including the manufacturing scale-up of our next-generation oxygenator in cardiopulmonary, the launch of our digital health platform in epilepsy, PMA approval for our clinical trial device in OSA followed by PMA supplement submission for the MRI-compatible system, and the formal submission of reimbursement reconsideration to CMS in difficult-to-treat depression. I want to thank our colleagues around the world for their focus and dedication to serving our customers and improving outcomes for patients. We have the right team and the right strategy, and I am confident in LivaNova PLC’s path forward and our ability to deliver sustained value for shareholders as we look ahead. We will now open for questions.

Operator: If you have a question at this time, please press the star then the number one key on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press star then 2. 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. The first question today comes from Adam Maeder with Piper Sandler. Please go ahead, Adam.

Q&A Session

Adam Maeder: Hi, good morning. Congrats on a nice 2025 campaign, and thank you for taking the questions. Two for me. The first one on 7% to 8% growth for FY 2026. Can you help us think about how you are thinking about oxygenators versus HLM growth in 2026? And then you did signal some HLM tenders shifted from Q4 into 2026. Maybe just flesh that out for us in more detail and which regions, and if possible, could you quantify that? And then I had a follow-up. Thanks.

Alex Shvartsburg: Hi, Adam. Yes. We expect the same growth drivers in 2026 that we saw last year: one, Essence upgrades; two, market share gains in consumables; and three, price. As far as the components of the guide, the Essence upgrades are going to drive approximately double-digit growth, which means that the market share gains will continue into the year, so we will have good growth on consumables as well. Given the timing of the year and consistent with the typical guidance philosophy that we have, we have made some prudent assumptions around our outlook. We have assumed a moderation in the price premium for Essence, as well as being conservative on the oxygenator output, given the third-party supply constraints that we experienced in 2025.

Adam Maeder: And Alex, any color on the shifting of the tenders from Q4 to 2026?

Alex Shvartsburg: Yes. We are going to fully recapture those in the first quarter. It was not super material in terms of the shift, so it is fully incorporated into our full-year guide.

Adam Maeder: Thank you.

Operator: The next question comes from David Rescott with Baird. David, please go ahead.

David Rescott: Great. Thanks for taking the question, and congrats on the strong end to the year here. I wanted to ask maybe first on the epilepsy business and what is baked into the guide for the year. It looks like the outlook that you have laid out for this year is higher than the epilepsy guidance you initially laid out in 2025. So curious if at all there is anything with comps there or if it is fair to read into maybe some incremental tailwinds coming in from the elevated reimbursement front. If so, when you think about the potential either pricing or contracting tailwinds that could be there or utilization benefits through the year, how should we be thinking about the pieces that you have baked into this epilepsy look for 2026?

Vladimir Makatsaria: David, good morning. Thank you for the question. I will start and then I will turn it over to Alex and Ahmet because there are important components in that. Just to remind everybody, in our epilepsy business, the procedure penetration is still significantly low and there were a number of barriers to this penetration. We have two significant tailwinds that happened early this year and last year in terms of removing those barriers. The first one is reimbursement improvement close to 50% on both new patient implants and replacement implants. The second one is the CORE VNS study clinical results that were published and received very strong support from the clinical community. While maybe this is early to measure the impact, strategically those two drivers will be lasting levers to continue growth and durability of growth in the epilepsy business. Maybe Alex can address reimbursement, and Ahmet can address the clinical side.

Alex Shvartsburg: Sure. As Vlad said, we are excited about the tailwinds with both the CORE VNS as well as the increased Medicare reimbursement. What we have baked into the guide is price will be driving increased penetration and will be a short-term contributor to growth, but it will take some time, so we are being prudent at this point given those assumptions. We ended 2025 with strong results, and we are confident we can continue building on that momentum, but it also means that we have a difficult comp in the second half of 2026. The other thing I want to remind everybody is that two-thirds of the U.S. epilepsy revenue comes from replacement implants. This provides us with a durable, profitable recurring revenue stream, but it also means that increased growth in new patient volume has less of an impact on the overall epilepsy growth rate in 2026.

Ahmet Tezel: Yes. Maybe I will give a quick summary of the CORE study. This was the largest global prospective study for VNS to date, with 800 patients in 60 sites over 16 countries, and the study demonstrated that VNS Therapy delivers early, durable, and meaningful seizure reduction and freedom in both children and adults that have drug-resistant epilepsy. Just to give you a few key points, the study demonstrated that seizure frequency across multiple seizure types, including the most severe and disabling seizures, significantly reduced. For example, at 36 months, seizure reduction was 80% for patients with focal onset seizures, and there was a meaningful improvement in outcomes. We continue to roll it out in conferences and through publications.

Vladimir Makatsaria: David, I think in summary, the combination of those two factors gives us more confidence in the durability of our growth in epilepsy.

Unknown Analyst: Okay. Thank you. Maybe just on this WISER program that I think may have an impact on the VNS business. Maybe it does not. But I know we have heard some other companies call out some of the denials in the Medicare patient populations so far in 2025. Can you be more specific on where that is happening and, if it is in China, your fresh perspective as it launches in China?

Vladimir Makatsaria: Yes. So, Mike, good morning. Good to hear from you. On the first part of the question, like Alex said, the shift in some placements was immaterial and will be fully captured, the majority of it in Q1 of this year and then maybe potentially some in Q2. Regarding China, our launch is going as planned. We continue to be very optimistic about that market. Just a reminder, China is our second-largest market in terms of placed units. We are the market leader there, and our current win rate in China is above 80%. To give you a little bit of flavor on the launch, we had the product approved in the first half of the year. We had a commercial launch in the second half of the year. Given the timing of capital sales cycles, the first placement actually was in November, which gives you a little bit of a flavor that 2025 was the year of preparation and launch, and 2026 will be the first year of significant impact with this launch in China.

We see the funnel of new placements, and we are very confident. As a reminder, Essence in terms of percent placements of all HLM is going from approximately 55% last year to approximately 80% this year.

Unknown Analyst: On the reimbursement increase, can you remind us how long the window is to get a replacement? I am imagining it is 12 months. I think I see evidence the device alerts that much in advance. Could there be a dynamic that you have not fully thought about with the reimbursement change?

Vladimir Makatsaria: We always thought of the improvement in reimbursement for end of service as a step-up in end of service, similar to a new patient implant opportunity. Expanding penetration across all of our account universe is what we are focused on.

Unknown Analyst: A couple of months ago, CMS actually removed the HGNS procedures from joining your current reimbursement. Can you comment on the change versus any changes in economics as it pertains to the HGNS opportunity down the road?

Ahmet Tezel: This is Ahmet. Maybe I will start by summarizing what happened so that everyone on the call has the same information. Just as a reminder, with HGNS, the previous-generation device of the incumbent was in a different code than VNS. When they moved into the latest generation, temporarily they started utilizing the VNS code for HGNS therapy as well. Consistent with the recent statement by CMS, we believe that the code for VNS Therapy for epilepsy should be separate and not shared with reimbursement codes for HGNS or OSA. As we prepare for our launch, we will continue to work with the relevant medical societies to have the most appropriate HGNS code, and at the time of our launch we will utilize the prevailing codes at that time.

Because the features and the procedure of our technology for HGNS are similar to the incumbent, we do not see any risk of misclassifications for new patients with VNS Therapy, and as I said, we believe VNS Therapy for epilepsy and OSA therapy should be separate codes.

Unknown Analyst: Alright. Super helpful. And then may I ask for an early read on commercial focus areas this year? You had said you were going to focus on reopening accounts that had closed for you and prioritizing price relative to volume. Any update there?

Ahmet Tezel: I can answer this. Our early read is consistent with what we said we were going to focus on. First and foremost, trying to reopen accounts that have closed for us, and we are seeing some green shoots there that we are pleased with. On price relative to volume, we remain focused on value-based discussions with accounts.

Operator: Our next question comes from Anthony Petrone with Mizuho Group. Anthony, please go ahead.

Anthony Petrone: Thank you, and good morning, everyone. Congrats on a strong 2025. Question on RECOVER and one on R&D spend. When we think on RECOVER and depression, I know timing is still up for debate. But if we look ahead and take a glass half-full approach, assuming that we get favorable coverage, I am wondering from the company’s perspective: is favorable coverage now level six coding—that in depression we should expect that to code to level six, i.e., payout $45,000 or so on an outpatient basis versus what we estimate is a $25,000 device input cost—or should we assume that still level five coding at $30,000 to $35,000 is still a best-case outcome? And I have one quick question on R&D spend. Thanks.

Ahmet Tezel: I will comment on the code piece and then ask Alex to comment on the pricing piece. We anticipate that depression would be the same code as VNS Therapy. So whatever the classification for VNS Therapy is for epilepsy, depression will be together with it.

Alex Shvartsburg: I would just say it is too early to comment on our ASPs, given that we are still awaiting the reimbursement decision from CMS.

Anthony Petrone: Helpful. And then just R&D spend, Alex. It ticked up a little bit in Q4. I am just wondering what the complexion was there. Was that RECOVER manuscripts? Was it setting up sleep apnea? Something else that we are not seeing—device redesign—and is the fourth quarter level for R&D sort of the new run rate?

Alex Shvartsburg: I will speak to R&D in general as it relates to 2026. We are largely maintaining our R&D investment in the core for 2026. Obviously, we want to continue to advance innovation, and that is what is going to fuel the sustainable growth for both epilepsy and cardiopulmonary. As far as focus in 2026, in epilepsy we are prioritizing development of our next-generation Bluetooth-enabled IPG, which we intend to launch in 2027. In cardiopulmonary, we are investing in the next-gen oxygenator and additional HLM hardware enhancements to strengthen our market leadership. The next-gen oxygenator is expected to launch in 2027/2028.

Ahmet Tezel: This year, we are increasing our investment in OSA product development. The investment is focused on our next-generation device, which will be the product that we launch into the market in 2027. Just as a reminder, our goal is to continue to drive adjusted operating margins above 20% annually, despite the fact that we are ramping investments in the OSA business, and so our 2026 guidance is very much in line with the targets we set.

Operator: The next question comes from Mike Matson with Needham & Company. Mike, please go ahead.

Mike Matson: Yes, thanks. With where things currently stand with the OSA HGNS reimbursement, assuming nothing changes there going into 2027 when you go into your full launch, what does that mean for that launch and that business for LivaNova PLC? Does it limit you somehow, or can it still be equally successful if reimbursement does not improve?

Ahmet Tezel: I am going to comment on the reimbursement piece. We are very comfortable with the current coding that CMS guided towards. It will still be a very meaningful growth opportunity for us. Our excitement around the OSA space has not changed at all. We believe we have a differentiated technology with very interesting and differentiated clinical outcomes, and we believe this is a disease state that has unmet needs. It is underdiagnosed. The growth for the patient population is there. Nothing has changed for us since the Investor Day that we communicated around our excitement.

Mike Matson: Got it. And then just another one on sleep apnea. I think at the Investor Day you had spoken about making some investments in 2026. Can you maybe talk about what you are doing this year to set the stage there? Are you going to start hiring reps, and then how much have you baked into the OpEx guidance to account for those investments this year?

Ahmet Tezel: This is Ahmet again. I will give a broad answer to that. On the R&D side, we have multiple key deliverables. One, we need to continue and finalize the PolySync clinical piece; we are spending time and energy there. We are still actively working in getting our clinical trial device approved. Nothing has changed there; we expect that in the first half of this year, and we are actively working on our commercial launch device, which is the MRI-compatible version, which will be submitted after we have the FDA approval of the clinical trial version. Those are the key R&D pieces where we are spending time and energy. We are going to invest in our commercial organization, but it is fairly limited in 2026. The broader build of the commercial capabilities is more in 2027 onwards, as we discussed during the Investor Day. Again, nothing has changed compared to what we shared in November.

Operator: Our next question comes from John McAulay with Stifel. John, please go ahead.

John McAulay: Hi, good morning. Just want to follow up on the earlier guidance questions we heard. The last three years, by our math, you grew double digits. This year, you are saying 6% to 7%, albeit that is in line with the Investor Day guidance. I just want to be very clear that there is not any negative shift in dynamics that is reflected there, whether it be tougher comps or being later in the Essence upgrade cycle. Is this truly just conservative positioning as you start the year?

Vladimir Makatsaria: John, thank you for the question. There are no negative dynamics. We are consistent with our guidance philosophy that we have had in the past years. I was asked a question during Investor Day: what are the biggest levers to the upside from our plan? They remain the same. We have to see how the reimbursement improvement and the clinical data impacts our epilepsy business. On the cardiopulmonary side, Alex noted that we are continuing to gain market share in our oxygenator business, and our ability to scale manufacturing faster will be an additional lever of growth.

Alex Shvartsburg: I would just add to that. In terms of our guidance, we assumed a moderation in the price premium on Essence relative to the premiums we realized in 2025. The other conservative assumption is on the oxygenator output, given the third-party component supply constraints that we have been working through. Those are the two elements that have moderated our assumptions going into 2026.

John McAulay: That is very helpful color. Switching gears to epilepsy, if I recall, something like 40% of your patient population is covered by Medicaid—you can correct me if that number is off—but my understanding is that the reimbursement there for a decent portion of states has to be adjusted at the state level. Could you give us an update on where you are in terms of Medicaid reimbursement changes and where you might expect to be by the end of the year?

Alex Shvartsburg: The way to think about this is Medicaid is essentially going to follow Medicare. While it is going to take some time to work through the individual state situations, we assume that ultimately Medicaid will get to the same level of reimbursement.

Operator: Those are all the questions we have time for today, and so I will turn the call back over to Vladimir Makatsaria for closing remarks.

Vladimir Makatsaria: Thank you, everyone, for joining the call today, and thank you for your continued support and interest in LivaNova PLC, and have a good day ahead.

Operator: Thank you everyone for joining us today. Bye-bye.