LivaNova Q2 2026 Earnings: Revenue Growth Lifts Guidance

LivaNova (NASDAQ: LIVN) reported Q2 2026 revenue of $390.6 million, up 10.8% from $352.5 million, while GAAP diluted EPS rose to $1.93 from $0.50 and adjusted diluted EPS increased to $1.26 from $1.05. Both principal segments delivered double-digit reported growth, but a $95.4 million discrete tax benefit created a significant gap between GAAP earnings and underlying operating performance.

Core financial results

Revenue increased 9.8% on a constant-currency basis, slightly below the 10.8% reported increase because currency contributed to reported growth. Gross margin expanded, but higher operating expenses reduced GAAP operating income; on an adjusted basis, operating income and margin both improved.

Adjusted figures and constant-currency growth are non-GAAP measures. The company did not provide prior-year quarterly cash flow comparisons in the release.

Business and segment performance

Cardiopulmonary remained the larger segment and grew slightly faster than Neuromodulation. Both segments also sustained growth after excluding currency effects.

Cardiopulmonary growth was driven by Europe, including Essenz Perfusion System sales, consumables demand, and favorable realized pricing. European Cardiopulmonary revenue increased 26.3% as reported and 23.8% at constant currency.

Neuromodulation grew across all regions, supported by higher volume and favorable realized pricing. Its Rest of World business recorded the fastest regional increase at 22.8% reported and 20.4% at constant currency.

At the company level, Europe was the strongest region, with revenue rising 22.5% reported and 20.0% at constant currency. U.S. revenue increased 5.8%, while Rest of World revenue rose 12.5% reported and 10.7% at constant currency.

Profitability and cash flow

The GAAP gross margin increased to 70.1% from 67.8%, but the improvement did not carry through to GAAP operating margin. SG&A expense rose to $158.1 million from $137.8 million, R&D increased to $53.7 million from $47.2 million, and other operating expense was $12.4 million compared with a $0.2 million benefit a year earlier. These increases contributed to the decline in GAAP operating income.

Adjusted profitability moved in the opposite direction. Adjusted gross margin increased to 71.0% from 68.9%, while adjusted operating margin expanded to 23.2% from 21.9%. Adjusted net income consequently rose to $71.0 million from $57.4 million.

LivaNova generated $66.6 million of operating cash flow and $45.5 million of adjusted free cash flow during the quarter. However, the company reduced its full-year free cash flow outlook to fund additional capacity, innovation, and IT investments.

Tax benefit lifted GAAP EPS while operating income declined

The increase in GAAP net income primarily reflected a favorable ruling from the Italian tax authority. LivaNova recognized a discrete tax benefit of €81.8 million, or $95.4 million, related to the deductibility of its previously recorded SNIA environmental liability. Total income tax benefit for the quarter was $90.2 million, compared with $6.2 million of tax expense a year earlier.

Without that tax effect, the underlying GAAP earnings trend was less favorable. Pretax income declined to $18.5 million from $33.3 million, reflecting lower GAAP operating income and $23.8 million of foreign exchange and other expense versus $4.3 million in the prior-year quarter. Adjusted EPS growth from $1.05 to $1.26 therefore provides a more direct view of the improvement in adjusted operating results than the larger increase in GAAP EPS.

Full-year 2026 guidance

LivaNova raised its constant-currency revenue and adjusted EPS outlook following the quarter. At the same time, it lowered adjusted free cash flow guidance because of incremental strategic spending on Cardiopulmonary capacity expansion, innovation, and IT infrastructure.

The adjusted EPS guidance assumes approximately 56 million shares for the full year. LivaNova did not provide reconciliations of its forward-looking non-GAAP measures to comparable GAAP measures because it said the necessary adjustments cannot be predicted with reasonable certainty.

Management perspective

Chief Executive Officer Vladimir Makatsaria attributed the quarter’s growth to sustained Cardiopulmonary and Epilepsy business performance. Management also emphasized its long-term agreement with Thermo Fisher Scientific, which is expected to improve access to a critical oxygenator component and support higher oxygenator production over time.

The agreement addresses unmet customer demand, but the expected capacity benefit will depend on component availability and the pace at which LivaNova expands output. This investment priority is also reflected in the reduced free cash flow guidance.

Recent insider transactions

The supplied insider transaction data did not list an open-market purchase during the period identified as the previous six months. It reported two sales by director Francesco Bianchi and one derivative-security conversion by executive Franco Poletti; these transactions alone do not establish a view on the company’s prospects.

Risks investors need to watch

• Oxygenator supply and capacity execution: The Thermo Fisher agreement is expected to improve critical component availability over time, indicating that supply has constrained LivaNova’s ability to meet some customer demand. The timing and scale of additional output remain important.
• Lower cash conversion: Full-year adjusted free cash flow guidance was reduced even as revenue and adjusted EPS guidance increased. Capacity, innovation, and IT spending could continue to limit near-term cash generation.
• Operating expense growth: Higher SG&A, R&D, and other operating expenses outweighed gross-margin improvement on a GAAP basis, reducing operating margin to 12.7%.
• GAAP earnings volatility: The $95.4 million tax benefit materially increased quarterly net income, while foreign exchange and other expense also rose. These items can make GAAP EPS less representative of core operating trends.

Summary

LivaNova’s second-quarter results combined double-digit growth in Cardiopulmonary and Neuromodulation with stronger adjusted profitability, supporting higher full-year revenue and adjusted EPS guidance. The main offsets were declining GAAP operating income and a lower free cash flow outlook as the company invests in capacity and infrastructure. Future results will depend partly on converting oxygenator supply improvements into additional production while controlling operating costs and investment-related cash demands.