LIVN 10-K & 10-Q changes, risk factors and insider trading

LivaNova is subject to the risks of conducting business internationally.globally.

LivaNova designs, develops, manufactures, markets, and sells products and therapies globally, and the Company intends to continue to pursue growth opportunities worldwide. LivaNova’s international operations areis subject to risks that are inherent in conducting business globally. These risks, many of which LivaNova has experienced first-hand, include higher danger of terrorist activity, war, or civil unrest; greater exposure to inflation; volatility in freight and labor costs; fluctuating interest and exchange rates; increased exposure to cyber-attacks and supply chain challenges; changes to trade protectionagreements measuresand suchrelationships asbetween countries, including the uncertainty of global tariffs, trade restrictions, evolving sanctions, and adverse changes in import and export licensing requirements; changing energy prices; local product changes and compliance requirements; longer payment terms and collection times for receivables in local jurisdictions; difficulty enforcing agreements; greater exposure to creditworthiness of customers and inconsistent local law enforcement of obligations; ensuring compliance with anti-bribery laws; differing labor regulations and workforce instability; selling by way of distributors and agents; and political and economic instability. Many of these risks are rapidly evolving and subject to an accelerating pace of change.

Certain of LivaNova’s subsidiaries are engaged in business dealings in countries subject to comprehensive sanctions, including Iran and Russia. These business dealings represent an insignificant amount of LivaNova’s consolidated revenues and income but expose the Company to a heightened risk of violating applicable sanctions regulations. Violations of these regulations are punishable by civil and criminal penalties, including fines, denial of export privileges, injunctions, asset seizures, debarment from government contracts, and revocations or restrictionrestrictions of licenses, as well as criminal fines and imprisonment. Despite best efforts to comply, there can be no assurance that LivaNova’s policies and procedures will prevent the Company from violating these regulations in every transaction in which LivaNova may engage, and such a violation could adversely affect its reputation, business, results of operations, cash flows, and financial condition.

In addition, LivaNova’s global operations result in revenues and expenses that are denominated in currencies other than LivaNova’s reporting currency, the USD. Fluctuations in exchange rates may impact, and have impacted, LivaNova’s results of operations and financial condition. Although LivaNova has elected in the past elected,past, and may elect in the future elect,future, to hedge certain foreign currency exposures, it is unlikely that any hedging strategy would eliminate its currency risk entirely. LivaNova cannot predict the change in currency exchange rates, the impact of exchange rate changes, or the degree to which it will be able to manage the impact of currency exchange rate changes.

LivaNova purchases many of the components and raw materials used in manufacturing its products from numerous suppliers in various countries. In some cases, LivaNova purchases specific components and raw materials from primary or main suppliers (or in some cases, a single or sole supplier) for reasons related to quality assurance, cost-effectiveness, and availability. Although the Company has generally been able to maintain necessary supplies of raw materials and components, supplier shortages and interruptions of certain components, such as PC-coated PMPthe fiber used in the manufacture of oxygenators,oxygenators and rare earth magnets used in the manufacture of heart-lung machines, have caused, and may in the future cause, meaningful disruptions to LivaNova’s product manufacturing supply chain. Any problem affecting a supplier (whether due to external or internal causes) could have,have andand, in certain instances, has had,had a negative impact on LivaNova. Difficulties and delays in manufacturing, internally, externally, or otherwise within the supply chain, may lead to voluntary or involuntary business interruptions or shutdowns, employee furloughs, product shortages, withdrawals or suspensions of products from the market, and potential regulatory action.

Moreover, due to strict standards and regulations governing the manufacture and marketing of LivaNova’s products, the Company may not be able to locateestablish new supply sources quickly or at all in response to a supply reduction or interruption, especially for components and raw materials sourced byfrom a single or sole supplier, resulting in negative effects on its ability to meet market demand and to manufacture products effectively and timely. To the extent the Company is unsuccessful in managing its supply chain, any such issues could have a material adverse effect on LivaNova’s business, results of operations, cash flows, and financial condition.

LivaNova is increasingly dependent on its information technologyIT systems and those of third parties to operate its business, and certain products of the Company include integrated software and information technology.IT. Such dependencies have been exacerbated by remote work practices. LivaNova relies on information technologyIT systems to collect and process customer orders, manage product manufacturing and shipping, and support regulatory compliance. The Company routinely processes, stores, and transmits large amounts of data, including sensitive personal information, patient health information, and confidential business information. The secure processing, maintenance, and transmission of this information are critical to LivaNova’s operations. The quantity and complexity of the Company’s products and information technologyIT systems make such systems vulnerable to cybersecurity incidents, breakdowns, interruptions, destruction, loss or compromise of data, obsolescence of or incompatibility among systems, inadvertent disclosure of data, or other significant disruptions. Additionally, LivaNova’s IT systems require an ongoing commitment of significant resources to maintain, protect, and enhance existing systems, as well as to develop new systems. To the extent these systems fail to perform as expected, the Company may encounter difficulties in implementing new systems, upgrading systems to keep pace with technological change, or expanding systems to meet future business needs.

The Company has experienced and is continually at risk of being subject to cybersecurity incidents and other disruptions.disruptions, as exemplified by the previously disclosed November 2023 cybersecurity incident that resulted in the disruption of portions of the Company’s IT systems. Programs and systems may require frequent updates or may no longer be supported, which may impact the ability of the Company’s information technologyIT systems to operate properly or without disruption. Unauthorized persons routinely attempt to access LivaNova’s systems to disrupt, disable, or degrade services; obtain proprietary or confidential information; or remotely disrupt or access the systems of large healthcare provider customers of the Company by attempting to exploit the Company’s systems. Furthermore, LivaNova’s security assessments of third-party vendors may be inadequate to determine whether their security protocols are sufficient to prevent a cybersecurity incident or other system or data compromise. LivaNova also cannot be certain that the Company will receive timely notification byfrom its third-party vendors of such matters. Cybersecurity incidents and other system and data compromises could remain undetected for an extended period, which could potentially result in significant harm to the Company’s information technologyIT systems, as well as unauthorized access to, or acquisition of, the information stored on and/or transmitted by the Company’s information technologyIT systems. In addition, to access LivaNova’s products and services, its customers may use computers and other devices that are beyond the Company’s security control safeguards.

Unauthorized disclosure or use of, denial of access to, or other incidents involving sensitive or confidential customer, patient, employee, vendorvendor, or Company data, whether through systems failure, employee negligence, fraud, misappropriation, cybersecurity incidents, or other intentional or unintentional acts, could expose and have exposed the Company to liability under various laws and regulations across jurisdictions and increase the risk of litigation and governmental or regulatory investigation, damage LivaNova’s reputation and its competitive positioning in the marketplace, disrupt its or its customers’ business operations, or cause LivaNova to lose customers, potentially resulting in significant financial exposure and legal liability. Similarly, unauthorized access to or through, denial of access to, or other incidents involving LivaNova or its vendors’ informationIT systems, whether by the Company’s employees or third parties, including a cyber-attack by criminal hackers, or state-sponsored organizations, who continuously develop and deploy viruses, ransomware, malware, or other malicious software programs or social engineering attacks, have resulted and could in the future result in negative publicity, significant remediation costs, legal liability, notification requirements, and damage to LivaNova’s reputation, which could have a material adverse effect on the Company’s business, results of operations, cash flows, and financial condition.

Cybersecurity threats are constantly expanding and evolving,evolving and becoming increasinglymore sophisticated and complex, increasing the difficulty of detecting and defending against them and maintaining effective security measures and protocols. Additionally, artificial intelligenceAI and machine learning may be used for certain cybersecurity incidents, improving or expanding the existing capabilities of threat actors in manners the Company cannot predict at this time, resulting in greater risk of cybersecurity incidents. Even when a cybersecurity incident or other system or data compromise is detected, the full extent of the issue may not be determined immediately. The costs toof the Company to mitigatemitigating cybersecurity incidents or other system or data compromises could be significant, and,and while the Company has implemented security measures to protect its information technologyIT systems and data, its efforts to address potential information security vulnerabilities may not be successful. LivaNova’s cyber risk insurance may be insufficient to cover losses in connection with a cybersecurity incident or other system or data compromise, such as attorney’s fees, regulatory fines, litigation costs, or financial losses that exceed the Company’s policy limits or are not covered under any of its current insurance policies. Cyber risk insurance also has become more expensive to obtain, and LivaNova cannot be certain that the Company’s current levels of insurance will be available in the future on economically reasonable terms.

The costs of complying with the requirements of U.S. federal and state and international laws and regulations pertaining to the privacy and security of personal information, including health-related information, and the potential liability associated with failure to comply with such laws and regulations, could materiallyhave adverselya affectmaterial adverse effect on LivaNova’s business and results of operations.

There is significant regulatory enforcement focus on data protection in the U.S. (at both federal and state levels) and abroad, and an actual or alleged failure to comply with applicable U.S. or international data protection laws or regulations or other data protection standards may expose LivaNova to regulatory investigations, litigation (including class action litigation), fines, sanctions, settlement costs, or other penalties and liabilities, which could harm the Company’s reputation and adversely impact LivaNova’s business, results of operations, cash flows, and financial condition. The Company collects, stores, and handles personnelpersonal and patient data, including sensitive patient health information, which may present material obligations and risks to LivaNova’s business, including significantly expanded compliance burdens, costs, and enforcement risks. If LivaNova does not lawfully collect, store, handle, or otherwise process personal information and does not prevent cybersecurity incidents or other system or data compromises, particularly given the increased risks associated with processing sensitive health information, LivaNova may suffer legal and regulatory consequences in addition to business consequences. See “CybersecurityFailure incidentsto protect, maintain, or other disruptions toupgrade LivaNova’s information technologyIT systems or products, or safeguard against cybersecurity incidents, service disruptions, or data corruption could leadhave toa reducedmaterial revenue,adverse increasedeffect costs, liability claims, regulatory fines, litigation, harm toon LivaNova’s competitivebusiness, position,results of operations, financial condition and loss of reputation.” above.

As a result of its worldwide operations, the Company is subject to various data protection and cybersecurity laws and regulations in many jurisdictions, including HIPAA, U.S. state privacy and data breach notification laws, and the GDPR. Other governments have enacted or amended or are enacting similar data protection laws, including data localization laws that require data to stay within their borders and other technical and operational adaptionsadaptations that may be requiredrequired, given the rapid changes in data protection regulation where LivaNova conducts business. The enactment of such laws could have potentially conflicting requirements that would make compliance challenging. LivaNova’s efforts to comply with applicable laws and regulations may be inadequate, and the Company may be unable to avoid enforcement actions by governmental bodies. Enforcement actions may be costly and could interrupt the regular operations of LivaNova’s business. Moreover, LivaNova’s insurance coverage may be insufficient to cover all losses in connection with alleged non-compliance with applicable data protection laws and regulations. In addition, in the U.S., there is a trend of civil lawsuits and class actions relating to compromises of personal information caused by cybersecurity incidents or other system or data compromises, which typically allege negligence, breach of contract, and violation of various state consumer protection laws. LivaNova USA, Inc., for example, was named as a defendant in six putative class actions arising out of the November 2023 cybersecurity incident, which were consolidated into a single action that has been settled. The Company also has received inquiries from HHS’s Office for Civil Rights, U.S. state regulators, and international data protection authorities regarding the 2023 incident. In connection with any potential future cybersecurity incident, the Company similarly could become a target of civil litigation or government enforcement actions as a result of a compromise to or loss of data.

LivaNova operates in a highly competitive market characterized by increasingly complex products that are expensive and time- consuming to develop and manufacture. In the product lines in which LivaNova competes, the Company faces a mixture of competitors ranging from large manufacturers with multiple business lines to small manufacturers that offer a limited selection of specialized products. Development by other companies of new or improved products, processes, therapies, or technologies, including products developed with the effective use of advanced technologies like artificial intelligence, may make LivaNova’s products or proposed products less competitive. The Company’s failure to adopt or integrate such advanced technologies may hinder product innovation, increase costs, and impact its competitiveness and operational efficiency. In addition, LivaNova faces competition from providers of alternative medical therapies, pharmaceuticals, and surgical interventions, among others. Competitive factors include product quality, reliability and performanceeffectiveness; product technology and innovation; breadth of product lines and product services; ability to identify new market trends; changes to the regulatory environment; cost-effectiveness and price; customer support and training; capacity to recruit engineers, scientists, and other qualified employees; ability to navigate the regulatory approval process in the markets in which LivaNova operates; reimbursement approval; reimbursement coverage; and effectiveness of systems and processes. Additionally, academic institutions, governmental agencies, and other public and private research organizations may also conduct research, seek patent protection, and establish collaborative arrangements for discovery, research, clinical development, and marketing of products similar to LivaNova’s products. Difficulties in any of these areas may have a material adverse effect on LivaNova’s business, results of operations, cash flows, and financial condition.

LivaNova relies on investments and collaborations to provide the Company access to new technologies. LivaNova has sought, and in the future may seek, to supplement its organic growth through strategic investments, alliances, and acquisitions. In addition, LivaNova has sought, and in the future may seek, to divest or wind down certain assets deemed non-core to the Company’s long-term strategic objectives. Such transactions are inherently risky and require significant effort and management attention. LivaNova expects to make investments where it believes that the Company can internally develop, or acquire, new technologies and products to further LivaNova’s strategic objectives and strengthen LivaNova’s existing businesses. The success of any investmentinvestment, alliance, acquisition, or divestiture may be affected by a number ofseveral factors, including the Company’s ability to identify and then properly assess and value the potential business opportunity.opportunity and obtain relevant approvals for a potential business opportunity or to successfully integrate any business LivaNova may acquire. These types of investments and transactions may require more resources than originally anticipated, may divert management’s attention from the Company’s existing business, and may not result in the expected benefits, savings, or synergies. Investments and investment collaborations in and with medical technology companies are inherently risky, and LivaNova cannot guarantee that any of its previous or future acquisitions, investments, or investment collaborations will be successful or will not materially adversely affect LivaNova’s business, results of operations, cash flows, and financial condition.

The success and continuing development of LivaNova’s products depend on the ability to work appropriately with healthcare professionals as needed. If LivaNova fails to maintain its working relationships with physicians and other healthcare professionals, the Company’s products may not be developed and marketed in line with the needs and expectations of the professionals who use and support LivaNova’s products. PhysiciansHealthcare professionals assist LivaNova as researchers, marketing consultants, product consultants, inventors, and public speakers, and LivaNova relies on these professionals to provide the Company with considerable knowledge and experience. If LivaNova is unable to maintain these relationships, the development and marketing of the Company’s products could suffer, which could have a material adverse effect on LivaNova’s business, results of operations, cash flows, and financial condition.

Maintaining the quality of the Company’s products is important to LivaNova and its customers due to the serious and costly consequences of product failure. LivaNova’s quality certifications are critical to the marketing success of the Company’s products and services. If LivaNova fails to meet these standards, the Company’s reputation could be damaged, the Company could lose customers, and LivaNova’s revenue and results of operations could decline. Aside from specific customer standards, LivaNova’s success depends generally on the Company’s ability to manufacture precision-engineered components, sub-assemblies, and finished products to exact tolerances with certified materials. If LivaNova’s components fail to meet these standards or fail to adapt to evolving standards, the Company’s reputation as a manufacturer of high-quality products will be harmed, certain of its inventory may becomenot obsolete,be able to be used for its intended purpose, the Company’s competitive advantage could be damaged,weakened, and LivaNova could lose customers and market share.

If LivaNova’s marketed medical devices are defective or otherwise pose safety risks, the FDA and similar non-U.S. governmental authorities could require their recall or initiate an enforcement action, or LivaNova maycould initiate a recall of the Company’s products or stop sales of products voluntarily.

As a healthcare company, LivaNova’s products are subject to the risk of recalls or enforcement actions. The FDA and similar non-U.S. governmental authorities may require the recall and/or the withdrawal of sales of commercialized products in the event of material deficiencies or defects in design, software, or manufacture, or in the event that a product poses an unacceptable risk to patients’ health. Manufacturers, on their own initiative, may recall a product or stop sales of such product, and the Company has in the past initiated, and may initiate in the future, voluntary product recalls and sale stoppages. Any recall announcement could harm LivaNova’s reputation with customers and negatively affect LivaNova’sits reputation, business, results of operations, cash flows, and financial position. A recall could also impair LivaNova’s ability to produce its products in a cost-effective and timely manner. In the future, LivaNova may initiate voluntary withdrawal, removal, replacement, or repair actions that the Company determines do not require notification as a recall. If a regulatory authority were to disagree with LivaNova’s determinations, it could require the Company to report those actions as recalls.a recall.

Failure to comply with U.S. and international product-related governmentregulatory regulationsrequirements maycould materiallyhave adverselya affectmaterial adverse effect on LivaNova’s business, results of operations, cash flows, and financial condition.

LivaNova’s success depends on its employees and the Company’s ability to attract and retain keyemployees, personnelsuccession neededplan, toand successfully operate its business, plan for future executive transitions, and negotiate with local works councils.

LivaNova’s ability to compete effectively depends on its ability to attract and retain key employees and maintain robust succession planning for key positions. The Company’s ability to recruit and retain key talent depends on many factors, including compensation and benefits, work location, work environment, industry-specific and general economic conditions, and the hiring practices of competitors. If LivaNova fails to attract and retain keypersonnel, personnel inparticularly senior management and other key positions, or if the Company’s succession planning efforts are not effective, it could have a material adverse effect on LivaNova’s business, financial condition, and results of operations.

LivaNova’s products are subject to complex laws and regulations, and failure to obtain or maintain product approvals, clearance, or reimbursement may materiallyhave adverselya affectmaterial adverse effect on LivaNova’s business, results of operations, cash flows, and financial condition.

LivaNova’s medical devices and technologies, as well as its business activities, are subject to a complex set of regulations and rigorous enforcement, including by the FDA, U.S. Department of Justice, U.S. Department of Health & Human Services,HHS, and numerous other federal, state, and non-U.S. governmental authorities. Leadership and other workforce changes within any of the aforementioned agencies asor agovernment result of the change of administration in the U.S.shutdowns may impact regulations, enforcement priorities, and timelines. The time required to obtain approvals from foreign countries may be longer or shorter than that required for FDA clearance, and requirements for such approvals may differ from FDA requirements. To varying degrees, each of these agencies requires LivaNova to comply with laws and regulations governing the development, modification, testing, manufacturing, labeling, reimbursement, marketing, and distribution of LivaNova’s products. As part of the approval, clearance, or reimbursement process for new products, product modifications, and new indications for existing products, LivaNova may conductconduct, and has conducted, clinical trials and studies. Unfavorable or inconsistent clinical data from existing or future clinical trials, or the unfavorable interpretation of such clinical data by customers, regulatory authorities, or third-party payers, may adversely impact LivaNova’s ability to obtain or maintain product approval or clearance, and/or receive reimbursement. Success in pre-clinical testing and early clinical studies does not always ensure that later clinical studies will be successful, and LivaNova cannot be sure that later studies will replicate the results of prior studies.

LivaNova, for example, is currently conducting clinical studies, and any trialTrial delays orcan news regarding unfavorable or inconsistent clinical data couldalso have a material adverse effect on LivaNova’s business. Success in pre-clinical testing and early clinical studies does not always ensure that later clinical studies will be successful, and LivaNova cannot be sure that later studies will replicate the results of prior studies. Any termination or delay in the completion of LivaNova’s clinical studies could delay or preclude the filing of regulatory submissions or requests for coverage determinations and, ultimately, LivaNova’s ability to commercialize new or modified products and obtain or maintain reimbursement for the Company’s products. It is also possible that patients enrolled in clinical studies will experience adverse side effectsevents that are not currently part of the product’s safety profile, which could inhibit further marketing and development of such products.

Even if LivaNova is able to obtain or maintain product approval, product clearance, and reimbursement, it may take a significant amount of time; require the expenditure of substantial resources; involve stringent pre-clinical and clinical testing; require increased post-market surveillance; involve modifications, repairs, or replacements of LivaNova’s products; and/or impose limitations on the proposed uses of its products. Ultimately, LivaNova cannot guarantee that its clinical trials will be successful or that the Company will be able to obtain or maintain approval or clearance and/or reimbursement for new products or modifications to existing products. Any such issues, whether in relation to clinical trials, approvals, clearances, or reimbursement, could have a material adverse effect on LivaNova’s business, results of operations, cash flows, and financial condition.

In response to increases in healthcare costs, there have been and continue to be proposals by governments, regulators, and third- party payers globally to control these costs. These proposals, among other things, have resulted in efforts to enact healthcare system reforms that may lead to restricted access, pricing restrictions, payback requirements, and limits on the amounts of reimbursement available for LivaNova’s products. For example, in 2015, the Italian Parliament introduced rules for entities that supply goods and services to the Italian National Healthcare System, impacting the business and financial reporting of medical technology sector companies that sell devices in Italy, including LivaNova. A key provision of the law is a “payback” measure, requiring companies selling medical devices in Italy to repay a percentage of the healthcare expenditures exceeding the regional maximum caps for medical devices. While LivaNova is appealing the imposition of the guidelines and requests for payment pursuant to the rule, the Constitutional Court, in a separate matter, determined the rule constitutional. As a result, the Company may not be successful in its own appeals. See “Note 11. Commitments and Contingencies” in LivaNova’s consolidated financial statements included in this Report for additional information.

Additionally, LivaNova’s ability to profitably commercialize the Company’s products is dependent, in large part, on whether third-party payers, including private healthcare insurers, managed-care plans, governmental programs, and others, agree to cover the costs and services associated with LivaNova’s products and related medical procedures in the U.S. and internationally. Third-party payers, including private and government insurers, are increasingly requiring evidence that medical devices are clinically-effectiveclinically effective and cost-effective. If LivaNova is unable to demonstrate that the Company’s devices are effective, third-party payers may not reimburse the use of LivaNova’s products or provide sufficient reimbursement for LivaNova’s products, which could reduce sales of the Company’s products to healthcare providers that depend upon reimbursement for payment for their services. Similarly, periodic changes to reimbursement methodologies could have an adverse impact on LivaNova’s business. Adoption of some or all of such healthcare policypolicies and reimbursement proposals could have a material adverse effect on LivaNova’s business, results of operations, cash flows, and financial position.

Furthermore, LivaNova’s devices, products, and therapies are purchased principally by hospitals or physicianshealthcare professionals that typically bill various third-party payers, such as governmental healthcare programs (e.g., Medicare, Medicaid, and comparable non-U.S. programs), private insurance plans, and managed-care plans for the healthcare services provided to their patients. The ability of LivaNova’s customers to obtain and/or maintain appropriate reimbursement for products and services from third-party payers is critical because it affects which products customers purchase and the prices they are willing to pay. LivaNova’s devices, products, and therapies are subject to regulation regarding quality and cost by HHS, including CMS, as well as comparable state and non-U.S. agencies responsible for reimbursement and regulation of healthcare goods and services, including laws and regulations related to kickbacks, false claims, self-referrals, and healthcare fraud. In addition, as a manufacturer of U.S. FDA-approved devices reimbursable by federal healthcare programs, LivaNova is subject to the Physician Payments Sunshine Act and similar U.S. state laws, which require the Company to annually report certain payments and other transfers of value LivaNova makes to U.S.-licensed physicians,healthcare professionals, U.S. teaching hospitals, or other covered recipients. Any failure to comply with these laws and regulations, including similar laws and regulations outside of the U.S., could subject the Company or its officers and employees to criminal and civil financial penalties, potentially resulting in a material adverse effect on LivaNova’s business, results of operations, cash flows, and financial position.

Failure to comply with anti-bribery laws could materiallyhave adverselya affectmaterial adverse effect on LivaNova’s business and result in civil and/or criminal sanctions.

LivaNova is, therefore, exposed to the risk that its employees, independent contractors, principal investigators, consultants, vendors, independent sales agents, and distributors may engage in fraudulent or other illegal activity in violation of these laws and LivaNova’s Code of Ethics & Business Conduct. LivaNova maintains a compliance program that includes policies and training to educate its employees and agents on these legal requirements,requirements and to prevent and prohibit improper practices. However, existing safeguards and any future improvements may not always be effective, and LivaNova’s employees, consultants, sales agents, or distributors may engage in conduct for which LivaNova could be held responsible. In addition, regulators could seek to hold LivaNova liable for conduct committed by companies in which LivaNova invests or acquires. The FCPA can pose unique challenges for companies that operate in foreign cultures where conduct prohibited by the FCPA may not be viewed as illegal in local jurisdictions. Although LivaNova’s compliance program includes mechanisms for detecting and correcting misconduct, including a hotline called the “LivaNova Ethics LineLine,”, it is not always possible to identify and deter misconduct by LivaNova’s employees and other third parties, and the precautions the Company takes to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting LivaNova from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations.

Global enforcement of anti-corruption laws hascontinues increasedto substantiallybe ina recent years,focus, with more frequent voluntary self- disclosuresself-disclosures by companies, aggressive investigations and enforcement proceedings by governmental agencies, and assessment of significant fines and penalties against companies and individuals. LivaNova cannot predict the nature, scope, or effect of future regulatory requirements to which the Company’s international operations might be subject or the manner in which existing laws might be administered or interpreted. Any alleged or actual violations of these laws and regulations may subject LivaNova to government scrutiny, severe criminal or civil sanctions, and other liabilities, including exclusion from government contracting or government healthcare programs, and could negatively affect LivaNova’s reputation, business, results of operations, cash flows, and financial condition.

LivaNova has elected to omit certain discussions on the earliest of the three years covered in this Report. Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations located in LivaNova’s Annual Report on Form 10-K for the year ended December 31, 2023,2024, filed on February 29,25, 2024,2025, for reference to the discussion of 2022,2023, the earliest of the three fiscal years presented.

LivaNova PLC is a market-leading global medical technology company. The Company designs, develops, manufactures, markets, and sells productsproducts, therapies, and therapiesservices that are consistent with LivaNova’s mission to provide“create hope for patients and their families throughingenious medical technologies, delivering life-changing solutions inthat selectignite neurologicalpatient and cardiac conditions.turnarounds.” LivaNova is a public limited company organized under the laws of England and Wales and is headquartered in London, England. LivaNova’s ordinary shares are listed for trading on the Nasdaq under the symbol “LIVN.”

Macroeconomic Environment and Global Supply Chain

The current macroeconomic environment, including FX volatility, inflationary pressures, and geopolitical instability, and global supply chain challenges,challenges hashave impacted and may continue to impact LivaNova’s business, results of operations, cash flows, and financial condition. Furthermore, LivaNova continues to experience logistical, capacity, and labor constraints. However, to date, the Company’s supply of raw materials and the production and distribution of finished products have not been materially affected. The Company continues to respond to such challenges,challenges. and whileWhile LivaNova has business continuity plans in place, the impact of the ongoing challenges the Company is navigating, along with their potential escalation, may adversely affect its business. For further discussion on these macroeconomic pressures and potential implications, refer to “Item 1A. Risk Factors” of this Report.

As previously disclosed, in November 2023, LivaNova detected a cybersecurity incident that resulted in a disruption of portions of the Company’s information technologyIT systems. PromptlyAs aftera detectingresult, the issue,Company LivaNova began an investigation with assistance fromengaged external cybersecurity experts andexperts, coordinated with law enforcement. The Companyenforcement, implemented remediation measures to mitigate the impact of the incident. The Company also assessed the nature and scope of the affected data, analyzed its statutory notification obligations,measures, and notified affected individuals and regulators as required by applicable law. The incident was contained, and the Company’s mitigation efforts are considered complete. For further discussion on related legal and regulatory developments,matters, refer to “Note 11. Commitments and Contingencies” in LivaNova’s consolidated financial statements in this Report. The incident has been contained, and the Company’s mitigation efforts are considered complete.

Through December 31, 2024, LivaNova incurred direct costs totaling $11.6 million in connection with this cybersecurity incident, including $9.0 million and $2.6 million during the twelve months ended December 31, 2024 and 2023, respectively. The total incurred direct costs primarily included external cybersecurity expert and legal fees, system restoration costs, and a $1.2 million provision related to the class action settlement, and do not include business interruption losses. The Company expects to incur additional costs related to this incident in the future. For further discussion on legal and regulatory developments, refer to “Note 11. Commitments and Contingencies” in LivaNova’s consolidated financial statements in this Report. LivaNova maintains insurance, including cyber insurance, which is subject to certain retentions and policy limitations that will likely limit the amount that the insurers may reimburse the Company. LivaNova has filed claims for insurance reimbursement of covereddirect costs and business interruption losses relatedand, toas thisof incidentDecember and31, 2025, the reimbursement process is substantially complete. Through December 31, 2025, LivaNova has submitted additional claims and supplemental requests for reimbursement as new costs have been incurred. During 2024, LivaNova received $8.4$10.7 million,million of insurance reimbursements, including $5.1$6.8 million in reimbursement of covereddirect costs and $3.3$3.9 million in reimbursement of business interruption losseslosses. underFor the Company’syears cyberended insuranceDecember policy.31, 2025 and 2024, LivaNova received $1.7 million and $5.1 million, respectively, in reimbursement of direct costs. For the years ended December 31, 2025 and 2024, LivaNova received $0.6 million and $3.3 million, respectively, in reimbursement of business interruption losses. LivaNova will submit additional claims for reimbursement if incremental costs are incurred. The Company’s insurance coverage may be insufficient to cover all costs and expenses related to this cybersecurity incident or may be unavailable to cover all costs and expenses related to this cybersecurity incident.

LivaNova’s Cardiopulmonary segment is engaged in the design, development, manufacture, marketing, and sale of cardiopulmonary products, including HLMs, oxygenators, autotransfusion systems, perfusion tubing systems, cannulae, and other related accessories.accessories, and provides services related to certain of these products. In particular, the Cardiopulmonary segment includes the Essenz Perfusion System, the Company’s next-generation HLM with an embedded patient monitor for tailored patient care strategies and sensing technology for data-driven decision-making during CPB procedures.

LivaNova’s Neuromodulation segment is engaged in the design, development, manufacture, marketing, and sale of devices that deliver neuromodulation therapy for treating DRE and DTD. LivaNova’s principal Neuromodulation product, theThe VNS Therapy System,System consists of an implantable pulse generator and connective lead that stimulates the left vagus nerve, surgical equipment to assist with the implant procedure, and equipment and instruction manuals that enable a treating physicianhealthcare professional to set parameters for a patient’s pulse generator. The lead does not need to be removed to replace a generator with a depleted battery. The Neuromodulation segment is also engaged inincludes the development and management of clinical testing forof LivaNova’s aura6000 System for treating OSA. The aura6000 device stimulates the hypoglossal nerve, which engages specific tongue and palate muscles to open the airway while a patient sleeps. LivaNova’s Neuromodulation segment also includes costs associated with the Company’s former heart failure program, which the Company wound down during 2023.

Discussions of DepressionDRE, DTD, and Obstructive Sleep ApneaOSA are incorporated by reference to the sections titled “DepressionDRE,” “DTD,” and “Obstructive Sleep Apnea,OSA,” respectively, included within “Part I, Item 1. Business” in this Report.

(2)“Other Revenue” includes revenue from the Company’s former ACS reportable segment, as discussed above, as well as rental and site services income not allocated to segments.

(1)For a reconciliation of segment income to consolidated income (loss) income before income tax, refer to “Note 17. Geographic and Segment Information” in LivaNova’s consolidated financial statements included in this Report.

Cardiopulmonary segment income for the year ended December 31, 20242025 was $76.8$108.3 million, compared to $26.4$76.8 million for the year ended December 31, 2023.2024. The increase in segment income was primarily due to an increase in net revenue, as described above, as well asand a decrease in the litigation provision related to LivaNova’s 3T Heater-Cooler device of $14.8$15.3 million. These increases in segment income were partially offset by increases in sales and marketing and R&D expenses.

Neuromodulation net revenue for the year ended December 31, 20242025 increased 6.6%7.0% to $554.2$592.8 million compared to the year ended December 31, 2023,2024, with growth inacross theall Rest of World and U.S. regions, partially offset by a decline in Europe.regions.

Neuromodulation segment income for the year ended December 31, 20242025 was $195.3$215.5 million compared to $153.4$195.3 million for the year ended December 31, 2023.2024. The increase in segment income was primarily due to an increase in net revenue, as described above, as well as a net decrease in R&D expense,expense primarily resulting from an $18.9 million reduction in costs associated with the winding down of the Company’s heartDTD failure program of $24.8 million. These increases in segment income wereprogram, partially offset by an $11.2 million increase in sales and marketingR&D expense toassociated supportwith the increaseddevelopment revenue.of LivaNova’s aura6000 System for treating OSA.

Cost of sales as a percentage of net revenue was 30.5%32.3% for the year ended December 31, 2024,2025, arepresenting decreasean increase of 2.60.4 percentage points compared to the year ended December 31, 2023.2024. The decreaseincrease was primarily due to anunfavorable inventoryproduct obsolescencemix, adjustmentpartially ofoffset $12.6 million during the year ended December 31, 2023 associated with the wind down of LivaNova’s ACS segment, as well asby a decrease in amortizationcost resultingof sales from the impairmentwinding down of the ACS segment’s developed technology intangible asset in 2023.segment.

SG&A expenses as a percentage of net revenue were 42.0%39.5% for the year ended December 31, 2024,2025, representing a decrease of 2.91.1 percentage points compared to the year ended December 31, 2023.2024. The decrease was primarily due to a decrease in sales and marketing expenses driven by the winding down of the ACS segment, as described above, as well as favorable volumefixed cost leverage.

R&D expenses as a percentage of net revenue were 14.6%13.4% for the year ended December 31, 2024,2025, representing a decrease of 2.21.2 percentage points compared to the year ended December 31, 2023.2024. The decrease was primarily due to a declinereductions in R&D expense of $24.8 millioncosts associated with winding down the Company’s heartDTD failure program, which was completed during the fourth quarterprogram of 2023,$18.9 asmillion, wellpartially asoffset aby declinean of $6.3$11.2 million increase in costs associated with winding down the Company’sdevelopment ACSof segment,LivaNova’s asaura6000 describedSystem above.for treating OSA.

Other Operating ExpensesExpense

Other operating expensesexpense primarily consistconsists of the provision for litigation involving LivaNova’s 3T Heater-Cooler device, the Saluggia site remediation provision, and restructuring expense.

Other operating expensesexpense as a percentage of net revenue werewas 2.6%0.4% for the year ended December 31, 2024,2025, a decrease of 0.72.2 percentage points compared to the year ended December 31, 2023.2024. The decrease was primarily due to a decrease in the amount recorded for the litigation provision related to LivaNova’s 3T Heater-Cooler device of $14.8$15.3 millionmillion, andas well as a decrease in the amount recorded for the Saluggia site decommissioning provision of $2.3 million. These decreases were partially offset by an increase in restructuring expense of $12.4$13.5 million resulting from the 2024 Restructuring Plan.million. For additional information, refer to “Note 4.11. RestructuringCommitments and Contingencies” and “Note 11.4. Commitments and ContingenciesRestructuring” in the consolidated financial statements in this Report.

For the year ended December 31, 2025, LivaNova incurred a loss on debt extinguishment of $2.7 million associated with the write-off of unamortized debt issuance costs in connection with the early repayment of $200 million on principal borrowings under the Term Facilities in May 2025. In connection with the 2025 Notes Repurchase Transaction, duringfor the year ended December 31, 2024, LivaNova incurred a loss on debt extinguishment of $25.5 million. For additional information, refer to “Note 9. Financing Arrangements” in the consolidated financial statements in this Report.

Foreign exchange and other income/(expense) was an expense of $2.7 million and income of $47.8 million and $46.1 million for the years ended December 31, 20242025 and 2023,2024, respectively. For furtheradditional details,information, refer to “Note 18. Supplemental Financial Information” in LivaNova’s consolidated financial statements included in this Report.

Income TaxesTax Expense (Benefit)

LivaNova PLC is resident in the UK. LivaNova’s effective income tax rate fluctuates based on, among other factors, changes in pre-tax income in countries with varying statutory tax rates, valuation allowances, tax credits and incentives, unrecognized tax benefits associated with uncertain tax positions, and tax laws. LivaNova’s tax returns are periodically audited or subjected to review by tax authorities. The Company operates in multiple jurisdictions worldwide and assesses the recoverability of its deferred tax assets for each period and jurisdiction by considering whether it is more likely than not that all or a portion of the deferred tax assets will not be realized. The Company considers all available evidence (both positive and negative) in determining whether a valuation allowance is required. Depending on operating results in the future, a release of the valuation allowance could occur within the next 12 months. The timing and amount of the valuation allowance release could vary based on the Company’s assessment of all available evidence.

LivaNova’s effective income tax rate was 28.4%(9.8%) and 121.7%28.4% for the years ended December 31, 20242025 and 2023,2024, respectively. Compared with the year ended December 31, 2023,2024, the change in the effective tax rate for 20242025 was primarily attributable to year-over-year changes in theincome mix of taxablebefore income tax in variouscountries jurisdictions,with non-deductiblevarying intereststatutory andtax premiums,rates, certain discrete tax items, including the SNIA environmental liability, and changes in tax valuation allowances. For additional information, please refer to “Note 15. Income Taxes” in LivaNova’s consolidated financial statements included in this Report.

LivaNova allocates the purchase price consideration of an acquisition to the assets acquired and liabilities assumed based on their fair values at the date of acquisition, including property, plant, and equipmentPP&E; inventories; accounts receivable; long-term debt; and identifiable intangible assets which either arise from a contractual or legal right or are separable from goodwill. LivaNova allocates any excess purchase price over the fair value of the net tangible and identifiable intangible assets acquired to goodwill. LivaNova bases the fair value of identifiable intangible assets acquired in a business combination, including IPR&D, on valuations that use information and assumptions provided by management, which consider management’s best estimates of inputs and assumptions that a market participant would use.

Each reporting period, LivaNova determines whether there are circumstances that warrant an evaluation of the carrying amounts of LivaNova’s property and equipmentPP&E and its finite-lived intangible assets to determine whether such carrying amounts continue to be recoverable. Such changes in circumstance may include, among other items, an expectation of a sale or disposal of a long-lived asset or asset group, adverse changes in market or competitive conditions, an adverse change in legal factors or business climate in the markets in which LivaNova operates, and operating or cash flow losses. Long-lived assets held and used are assessed for possible impairment by comparing their carrying values with their associated undiscounted, future cash flows. In order to calculate the impairment charge, LivaNova generally measures fair value by considering sale prices for similar assets, discounted estimated future cash flows using an appropriate discount rate, and/or estimated replacement cost.

LivaNova evaluates the goodwill and indefinite-lived intangible assets for impairment annually on October 1st and whenever other facts and circumstances indicate that the carrying amounts of goodwill and other indefinite-lived intangible assets may not be recoverable. Estimating the fair value of goodwill and indefinite-lived intangible assets requires various assumptions, including revenue growth rates and discount rates. LivaNova performed a quantitative goodwill impairment assessment for its Cardiopulmonary and Neuromodulation reporting units as of October 1, 2024,2025, including sensitivity analyses of key assumptions. The assessment was conducted using management’s current estimate of future cash flows. LivaNova concluded that the fair value of its Cardiopulmonary and Neuromodulation reporting units exceeded the carrying value of the respective reporting units and were, therefore, not impaired on the October 1, 20242025 test date.

LivaNova files federalnational and local tax returns in many jurisdictions throughout the world and is subject to income tax examinations for its fiscal year 20192020 and subsequent years, with certain exceptions. While LivaNova believes that its tax return positions are fully supported, tax authorities may disagree with certain positions the Company has taken and assess additional taxes, and, as a result, LivaNova may establish reserves for uncertain tax positions, which require a significant degree of management judgment. LivaNova regularly assesses the likely outcomes of its tax positions to determine the appropriateness of the Company’s reserves; however, the actual outcome of an audit can be significantly different from LivaNova’s expectations, which could have a material impact on the Company’s tax provision. The Company has accrued $15.2$13.4 million, of which $14.1$10.2 million is unrecognized tax benefit, as of December 31, 2024.2025.

LivaNova periodically assesses the recoverability of its deferred tax assets by considering whether it is more likely than not that some or all of the actual benefit of those assets will be realized. To the extent that realization does not meet the “more-likely-than-not” criterion, the Company establishes a valuation allowance. LivaNova periodically reviews the adequacy and necessity of the valuation allowance by considering significant positive and negative evidence relative to its ability to recover deferred tax assets and to determine the timing and amount of valuation allowance that should be released. This evidence includes: profitability in the most recent quarters; internal profitability forecasts for the current and next two future years; the amount of deferred tax asset relative to estimated profitability; the potential effects on future profitability from increasing competition, healthcare reforms, and overall economic conditions; limitations and potential limitations on the use of LivaNova’s net operating losses due to ownership changes, pursuant to IRC Section 382; and the implementation of prudent and feasible tax planning strategies, if any. Depending on operating results in the future, a release of the valuation allowance could occur within the next 12 months. The timing and amount of the valuation allowance release could vary based on the Company’s assessment of all available evidence. For additional information, please refer to “Note 15. Income Taxes” in LivaNova’s consolidated financial statements included in this Report.

Provisions for legal contingencies are recognized when the Company determines it is probable that a loss has been incurred and the amount is reasonably estimable, the determination of which requires significant judgment. Estimates are used in assessing the likelihood of a loss being incurred and when determining a reasonable estimate of the loss for each claim. Final settlement amounts may be materially different from the provision recorded. For additional information, please refer to “Note 11. Commitments and Contingencies” in LivaNova’s consolidated financial statements included in this Report.

Contingent consideration liabilities result from acquisition agreements that include potential future payment of consideration that is contingent upon the achievement of performance milestones and/or sales-based earnouts. Contingent consideration liabilities are measured at fair value each reporting period, the determination of which requires significant judgments and estimates. The fair value of contingent consideration is determined based on the consideration expected to be transferred based on estimated future cash flows of the acquired business, discounted to present value in accordance with accepted valuation methodologies. For additional information, please refer to “Note 8. Fair Value Measurements” in LivaNova’s consolidated financial statements included in this Report.

In June 2020 and March 2024, the Company issued the 20252029 Notes and 2029 Notes, respectively, and entered into related capped call transactions. The 2025 Notes and 2029 Notes include an embedded derivativesderivative that areis bifurcated from the 2025 Notes and 2029 Notes. The embedded derivativesderivative areis measured at fair value using a binomial lattice model and estimated discounted cash flows that utilize observable and unobservable market data. The capped call derivatives are measured at fair value using the Black-Scholes model utilizing observable and unobservable market data, including stockshare price, remaining contractual term, expected volatility, risk-free interest rate, and expected dividend yield, as applicable. The Company uses historical volatility and implied volatility from options traded to determine expected stockshare price volatility, which is an unobservable input that is significant to the valuations. For additional information, please refer to “Note 8. Fair Value Measurements” and “Note 9. Financing Arrangements” in LivaNova’s consolidated financial statements included in this Report.

For a discussion of new accounting standards and disclosure requirements, please refer to “Note 19. New Accounting Pronouncements” in LivaNova’s consolidated financial statements included in this Report.

During the year ended December 31, 2023,2025, LivaNova received $50.0 million in proceeds from the issuance of long-term debt and repaid $21.6$280.9 million in long-term debt.

For additional information on LivaNova’s debt obligations and Capped Call Transactions, refer to “Note 9. Financing Arrangements” and “Note 7. Derivatives and Risk Management” and “Note 9. Financing Arrangements” in the consolidated financial statements in this Report.

The following table presents net cash, cash equivalents, and restricted cash provided by (used in) operating, investing, and financing activities and the net (decrease) increase in the balance of cash, cash equivalents, and restricted cash (in thousands):

There have been no material changes in LivaNova’s risk factors from those disclosed in Part I, Item 1A of the Company’s 2025 Annual Report on Form 10-K.

LivaNova PLC is a market-leading global medical technology company. The Company designs, develops, manufactures, markets, and sells products, therapies, and services that are consistent with LivaNova’s mission to “create ingenious medical solutions that ignite patient turnarounds.” LivaNova is a public limited company organized under the laws of England and WalesWales, andwith isa headquarteredregistered office in London,Gloucester, England. LivaNova’s ordinary shares are listed for trading on the Nasdaq under the symbol “LIVN.”

The current macroeconomic environment, including FX volatility, inflationary pressures, and geopolitical instability, and global supply chain challenges have impacted and may continue to impact LivaNova’s business, consolidated results of operations, financial condition, and/or cash flows. Furthermore, LivaNova continues to experience logistical, capacity, and labor constraints. However, to date, the Company’s supply of raw materials and the production and distribution of finished products have not been materially affected. The Company continues to respond to such challenges.challenges, including through entry into supply agreements where possible. While LivaNova has business continuity plans in place, the impact of the ongoing challenges the Company is navigating, along with their potential escalation, may adversely affect its business.

In addition, the impact that the imposition of tariffs and changes to global trade policies could have on the Company’s results of operations is uncertain. A significant number of LivaNova’s Cardiopulmonary products and component parts are sourced and produced outside of the U.S., including in Italy and Germany. Similarly, LivaNova manufactures its Neuromodulation products in the U.S., which are then often distributed internationally. ForIn early 2025, the U.S. government imposed tariffs under the IEEPA, which impacted the Company. However, the U.S. Supreme Court ruled the IEEPA tariffs unlawful, resulting in a refund process with U.S. Customs and Border Protection. While the Company recognized net IEEPA tariff refunds that impacted segment income by $5.8 million ($7.7 million reducing cost of sales and $1.9 million reducing net revenue) for the three and six months ended June 30, 2026, adverse changes in export and import costs, including the potential for new or expanded trade restrictions and additional information,global seetariffs, “Partcould I,result Itemin 1A.future Riskincreased Factors”costs ofor thesupply Company’schain 2025disruptions. FormThe 10-K.Company continues to monitor developments in global trade policy and assess potential implications for sourcing, pricing, and logistics.

For a discussion of LivaNova’s critical accounting estimates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the 2025 Form 10-K. For the threesix months ended MarchJune 31,30, 2026, there were no material changes to the application of critical accounting policies and estimates previously disclosed in LivaNova’s 2025 Form 10-K.

Cardiopulmonary net revenue for the three and six months ended MarchJune 31,30, 2026 increased 18.3%11.2% to $208.7$221.6 million and 14.5% to $430.2 million compared to the three and six months ended MarchJune 31,30, 2025, with growth across all regions, driven by growth in Europe, primarily reflecting Essenz Perfusion System sales, strong consumables demand, and favorable realized price.

Neuromodulation net revenue for the three and six months ended MarchJune 31,30, 2026 increased 9.3%10.1% to $151.8$166.9 million and 9.7% to $318.7 million, respectively, compared to the three and six months ended MarchJune 31,30, 2025, with growth across all regions, driven by total implantvolume growth and favorable realized price.

Neuromodulation segment income for the three and six months ended MarchJune 31,30, 2026 was $44.2$60.9 million and $105.1 million, respectively, compared to $52.4$56.0 million and $108.4 million for the three and six months ended MarchJune 31,30, 2025.2025, respectively. The increase in segment income for the three-month comparative period primarily resulted from an increase in net revenue, as described above. The decrease in segment income for the six-month comparative period primarily resulted from $9.7 million of higher expense from the net unfavorable change in fair value of contingent consideration arrangements associated with the ImThera acquisition, as well as a $5.5$9.7 million increase in R&D expense associated with the design and development of neurostimulation devices for treating OSA, and $6.8 million of higher expense from the net unfavorable changes in fair value of contingent consideration arrangements associated with the ImThera acquisition, partially offset by an increase in net revenue, as described above.

Cost of sales as a percentage of net revenue was 32.7%29.9% and 31.3% for the three and six months ended MarchJune 31,30, 2026, respectively, representing an increasedecreases of 1.02.3 and 0.7 percentage points compared to the three and six months ended MarchJune 31,30, 2025, respectively, primarily dueas toa result of recognizing $7.7 million in tariff refunds, partially offset by unfavorable product mix.

SG&A expense as a percentage of net revenue was 39.6%40.5% and 40.1% for the three and six months ended MarchJune 31,30, 2026, respectively, representing a decreaseincreases of 1.21.4 and 0.2 percentage points compared to the three and six months ended MarchJune 31,30, 2025, respectively, primarily driven by increased share-based compensation expense resulting primarily from accelerated recognition of expense for retirement-eligible employees. The six-month comparative period was partially offset by fixed cost leverage.

R&D expense as a percentage of net revenue was 16.2%13.7% and 14.9% for the three and six months ended MarchJune 31,30, 2026, respectively, representing an increaseincreases of 4.20.3 and 2.2 percentage points compared to the three and six months ended MarchJune 31,30, 2025, respectively. The increase in the six-month comparative period was primarily due to $8.9 million of higher expense from the net unfavorable change in fair value of the milestone-based contingent consideration arrangement associated with the ImThera acquisition, as well as a $5.5$9.7 million increase in costs associated with the design and development of neurostimulation devices for treating OSA.OSA, as well as $8.5 million of higher expense from the net unfavorable changes in fair value of the milestone-based contingent consideration arrangement associated with the ImThera acquisition.

On March 14, 2025, the Italian Supreme Court issued its decision in response to all of the appeals of the Company and counter-appeals submitted by the Public Administrations. The Italian Supreme Court determined that LivaNova can be held jointly and severally liable for the established liabilities of SNIA at the time of demerger, as well as the environmental liabilities of the demerged company that materialized after the demerger, which are derived from actions performed prior to the demerger. As a result of the decision by the Italian Supreme Court, the Company recorded €333.3 million ($360.4$362.1 million) as SNIA environmental liability expense for the threesix months ended MarchJune 31,30, 2025. For additional information, refer to “Note 5.6. Commitments and Contingencies” in the condensed consolidated financial statements in this Report.

Interest expense decreased to $8.3$7.2 million and $15.5 million for the three and six months ended MarchJune 31,30, 2026, respectively, compared to $15.3$14.9 million and $30.2 million for the three and six months ended MarchJune 31,30, 2025, respectively, primarily due to repayments ofrepaying the Term Facilities and 2025 Notes. For additional information, refer to “Note 4.5. Financing Arrangements” in the condensed consolidated financial statements in this Report.

Foreign exchange and other income/(expense) was expense of $5.7$23.8 million and $29.5 million for the three and six months ended MarchJune 31,30, 2026, respectively, compared to expense of $4.3 million and income of $11.4$7.2 million for the three and six months ended MarchJune 31,30, 2025.2025, respectively. For additional information, refer to “Note 11.12. Supplemental Financial Information” in the condensed consolidated financial statements in this Report.

LivaNova’s effective income tax rate for the three and six months ended MarchJune 31,30, 2026 and 2025 was 15.8%(488.1)% and (3.7186.8)%, respectively, compared to 18.5% and (6.3)% for the three and six months ended June 30, 2025, respectively. The changes in the effective tax rates for the three and six months ended MarchJune 31,30, 2026, compared to the prior year period, were primarily attributable to year-over-year changes in income before income tax in countries with varying statutory tax rates, certain discrete tax items, including the SNIA environmental liability,liability recognized in 2025 and the discrete tax benefit resulting from the Italian tax ruling recognized in 2026 (further described below), and changes in valuation allowances.

The Company considers all available evidence (both positive and negative) in determining whether a valuation allowance is required.required on deferred tax assets. Depending on operating results in the future, a release of a valuation allowance could occur within the next 12 months. The timing and amount of the valuation allowance release could vary based on the Company’s assessment of all available evidence.

LivaNova’s operating and working capital obligations primarily consist of liabilities arising from the normal course of business, including inventory supply contracts, the future settlement of derivative instruments, and future payments of operating leases, as well as contingent consideration arrangements resulting from acquisitionsacquisitions, and obligations associated with legal and other accruals.

(1)On January 8, 2026, LivaNova made ana $95.9 million early repayment of $95.9the millionremaining onoutstanding principal borrowings in fullbalance under the Term Facilities.

The following table presents net cash, cash equivalents, and restricted cash provided by (used in) operating, investing, and financing activities and the net (decrease) increase in the balance of cash, cash equivalents, and restricted cash (in thousands):

Cash provided by operating activities for the threesix months ended MarchJune 31,30, 2026 decreased by $8.8$5.1 million, compared to the same prior year period, primarily due to an increaseincreases in annualpayments incentiveto payoutsemployees and highervendors, cashas outflowswell foras inventories,$10.0 million from the June 2026 payment satisfying the ImThera regulatory-based contingent consideration liability, partially offset by higher customer collections resulting from an increase in sales,sales asand wella asdecrease lowerin paymentscash paid for professional services.interest.

Cash used in investing activities for the threesix months ended MarchJune 31,30, 2026 increased $4.0$26.9 million, compared to the same prior year period, primarily due to an increase in purchases of property, plant, and equipment of $3.5$19.9 million, principally related to purchases and development of internal-use software.software, as well as a decrease in proceeds from investments of $6.5 million.

Cash used in financing activities for the threesix months ended MarchJune 31,30, 2026 increaseddecreased $89.8$62.7 million, compared to the same prior year period, primarily resultingdue to a decrease of $114.3 million in repayments of long-term debt obligations, partially offset by $50.4 million from the JanuaryJune 2026 earlypayment repayment ofsatisfying the TermImThera Facilities.regulatory-based contingent consideration liability.