LivaNova PLC

LIVANOVA PLC AND SUBSIDIARIES’

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Note 1. Nature of Operations

Description of the Business

LivaNova PLC is a market-leading global medical technology company. The Company designs, develops, manufactures, markets and sells products and therapies that are consistent with LivaNova’s mission to provide hope for patients and their families through innovative medical technologies that deliver life-changing improvements. 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.”

Business Segments

For the periods presented herein, LivaNova was comprised ofthree reportable segments: Cardiopulmonary, Neuromodulation and ACS. For additional information, please refer to “Note 22. Subsequent Event.”

Macroeconomic Environment

The current macroeconomic environment, including foreign exchange volatility, inflationary pressures, geopolitical instability, and supply chain challenges, has impacted and may continue to impact LivaNova’s business and profitability. Furthermore, LivaNova continues to experience supply chain delays and interruptions, labor shortages, inflationary pressures and logistical and capacity constraints, though, to date, the Company’s supply of raw materials and the production and distribution of finished products have not been materially affected. Moreover, freight and labor costs at LivaNova’s manufacturing facilities have increased substantially in the wake of inflation globally. The Company continues to respond to such challenges, and 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.

Cybersecurity Incident

As previously disclosed, in November 2023, LivaNova detected a cybersecurity incident that resulted in a disruption of portions of the Company’s information technology systems. Promptly after detecting the issue, LivaNova began an investigation with assistance from external cybersecurity experts and coordinated with law enforcement. LivaNova took action to remediate the issue by, for example, taking certain systems offline. As a result of these and other measures, the Company believes it has contained the cybersecurity threat, though its investigation and mitigation efforts are ongoing. At this time, all of LivaNova’s manufacturing sites worldwide are operating at normal levels. The Company continues to assess the full impact of the cybersecurity event on its business, results of operations, cash flows and financial condition.

LivaNova incurred direct costs of approximately $2.6 million during the three and twelve months ended December 31, 2023, in connection with this incident. These costs primarily included external cybersecurity experts, legal counsel, and system restoration costs. These costs do not include business interruption or other non-direct costs, and the Company expects to incur additional costs related to this incident in the future. LivaNova maintains insurance, including cyber insurance, which is subject to certain retentions and policy limitations that may serve to limit the amount that the insurers may pay the Company when the Company makes a claim. LivaNova plans to file for reimbursement of covered costs related to this incident, but the Company’s insurance coverage may be insufficient to cover all costs and expenses related to this cybersecurity incident, and the insurance carrier may not cover all submitted costs and expenses related to this cybersecurity incident.

Note 2. Basis of Presentation, Use of Accounting Estimates and Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements of LivaNova have been prepared in accordance with US GAAP.

Consolidation

The accompanying consolidated financial statements for LivaNova include LivaNova’s wholly owned subsidiaries and the Trust. All intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of LivaNova’s consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in such financial statements and accompanying notes. These estimates are based on management’s best knowledge of current events and actions that LivaNova may undertake in the future. Estimates are used in accounting for, among other items, valuation and amortization of intangible assets, goodwill, other long-lived assets (asset group), measurement of deferred tax assets and liabilities, uncertain income tax positions, contingent consideration arrangements, legal and other contingencies, stock-based compensation, obsolete and slow-moving inventories, models, such as an impairment analysis, and in general, allocations to provisions and the fair value of assets and liabilities recorded in a business combination. Actual results could differ materially from those estimates.

Reclassifications

The Company has reclassified certain prior period amounts on the consolidated balance sheets for comparative purposes. These reclassifications had no impact on LivaNova’s financial condition.

Cash and Cash Equivalents

LivaNova considers all highly liquid investments with an original maturity of three months or less, consisting of demand deposit accounts and money market mutual funds, to be cash equivalents. Cash equivalents are carried on the consolidated balance sheets at cost, which approximates their fair value.

Restricted Cash

The Company classifies cash that is not available for use in its operations as restricted cash within current assets on the consolidated balance sheets. As of December 31, 2023, LivaNova’s restricted cash balance totaled $311.4 million and was comprised of cash deposits with Barclays held as collateral for the SNIA Litigation Guarantee. As security for the SNIA Litigation Guarantee, LivaNova is required to grant cash collateral to Barclays in USD in an amount equal to the USD equivalent of 105% of the amount of the SNIA Litigation Guarantee calibrated on a biweekly basis. For additional information regarding the SNIA litigation, please refer to “Note 13. Commitments and Contingencies.”

Accounts Receivable

Accounts receivable consists of trade receivables from direct customers and distributors. The Company maintains an allowance for doubtful accounts for potential credit losses based on its estimates of the ability of customers to make required payments, historical credit experience, existing economic conditions and expected future trends. LivaNova writes off uncollectible accounts against the allowance when all reasonable collection efforts have been exhausted.

Inventories

LivaNova states its inventories at the lower of cost, using the FIFO method, or net realizable value. The Company’s calculation of cost includes the acquisition cost of raw materials and components, direct labor and overhead, including depreciation of manufacturing related assets. LivaNova reduces the carrying value of inventories for those items that are potentially excess, obsolete or slow moving based on changes in customer demand, technology developments or other economic factors.

PP&E

PP&E is carried at cost, less accumulated depreciation. Maintenance, repairs and minor replacements are charged to expense as incurred, while significant renewals and improvements are capitalized. LivaNova computes depreciation using the straight-line method over estimated useful lives. Leasehold improvements are depreciated over the shorter of the following terms: the useful life of the asset or a term that includes required lease periods and renewals that are deemed to be reasonably assured at the date the leasehold improvements are purchased. Capital improvements to the building are added as building components and depreciated over the useful life of the improvement or the building, whichever is less.

Goodwill

LivaNova allocates the amounts the Company pays for an acquisition to the assets acquired and liabilities assumed based on their fair values at the date of acquisition, including property, plant and equipment, inventories, accounts receivable, long-term debt, and identifiable intangible assets which either arise from a contractual or legal right or are separable from goodwill. The Company 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. LivaNova allocates any excess purchase price over the fair value of the net tangible and identifiable intangible assets acquired to goodwill. Transaction costs associated with these acquisitions are expensed as incurred and are reported in SG&A on the consolidated statements of income (loss). LivaNova recognizes adjustments to the provisional amounts identified during the measurement period with a corresponding adjustment to goodwill in the reporting period in which the adjustment amounts are determined. The effect on earnings of changes in depreciation, amortization or other income effects, if any, as a result of the change to the provisional amounts are recorded in the same period’s consolidated financial statements, calculated as if the accounting had been completed at the acquisition date.

Intangible Assets, Other than Goodwill

Intangible assets shown on the consolidated balance sheets consist of finite-lived and indefinite-lived assets expected to generate future economic benefits and are recorded at their respective fair values as of their acquisition date. Finite-lived intangible assets consist primarily of developed technology and technical capabilities, including patents, related know-how and licensed patent rights, as well as trade names and customer relationships. Customer relationships consist of relationships with hospitals and surgeons in the countries where LivaNova operates. Indefinite-lived intangible assets other than goodwill are composed of IPR&D assets acquired in acquisitions. LivaNova amortizes its finite-lived intangible assets over their useful lives using the straight-line method. Estimating the useful lives of intangible assets requires LivaNova to apply significant judgment.

Amortization expense is included on LivaNova’s consolidated statements of income (loss) within cost of sales or SG&A based on the nature of the underlying intangible asset. LivaNova evaluates its intangible assets each reporting period to determine whether events and circumstances indicate either a different useful life or impairment. If LivaNova changes its estimate of the useful life of an asset, the Company amortizes the carrying amount over the revised remaining useful life.

Impairments of Long-lived Assets and Goodwill

Long-lived Assets Impairment

Assets Held and Used

LivaNova evaluates the carrying value of its long-lived assets and investments for impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Such changes in circumstance may include, among other items, (i) an expectation of a sale, discontinuation or disposal of a long-lived asset or asset group, (ii) adverse changes in market or competitive conditions, (iii) an adverse change in legal factors or business climate in the markets in which LivaNova operates and (iv) operating or cash flow losses.

For PP&E and intangible assets used in LivaNova’s operations, recoverability generally is determined by comparing the carrying value of an asset or group of assets to their expected undiscounted future cash flows. If the carrying value of an asset, or group of assets is not recoverable, the amount of impairment loss is measured as the difference between the carrying value of the asset or group of assets and its estimated fair value. The asset grouping as well as the determination of expected undiscounted cash flow amounts requires significant judgments, estimates, and assumptions, including with regard to cash flows generated upon disposition. LivaNova measures fair value as the price that would be received if the Company were to sell the assets in an orderly transaction. Assets to be disposed of are carried at the lower of their financial statement carrying amount or fair value less costs to sell.

LivaNova conducts impairment testing of its indefinite-lived intangible assets on October 1st each year. LivaNova tests indefinite-lived intangible assets for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. An impairment loss is recognized when the asset’s carrying value exceeds its fair value.

Goodwill Impairment

LivaNova conducts impairment testing of its goodwill on October 1st each year. Testing is performed at the reporting unit level, which is defined as an operating segment or a component of an operating segment that constitutes a business for which financial information is available and is regularly viewed by management. LivaNova’s operating segments are deemed to be its reporting units for purposes of goodwill impairment testing. LivaNova tests goodwill for impairment between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount.

If LivaNova determines that goodwill is more-likely-than-not impaired, the Company compares the fair value of the reporting unit to its carrying amount, including goodwill. Fair value refers to the price that would be received if LivaNova were to sell the unit as a whole in an orderly transaction. Fair value is estimated using a discounted cash flow model and requires various assumptions, including revenue growth rates and discount rates. If the carrying amount of the Company’s reporting unit is greater than zero and its fair value exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. An impairment loss is recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit, up to and including the carrying amount of the goodwill.

If the aggregate fair value of LivaNova’s reporting units exceeds its market capitalization, the Company evaluates the reasonableness of the implied control premium which includes a comparison to implied control premiums from recent market transactions within its industry or other relevant benchmark data.

Goodwill impairment evaluations are highly subjective. In most instances, they involve expectations of future cash flows that reflect LivaNova’s judgments and assumptions regarding future industry conditions and operations. The estimates, judgments and assumptions used in the application of LivaNova’s goodwill impairment policies reflect both historical experience and an assessment of current operational, industry, market, economic and political environments. The use of different estimates, judgments, assumptions and expectations regarding future industry and market conditions and operations could result in materially different asset carrying values and operating results.

Quantitative factors used to determine the fair value of the reporting units reflect LivaNova’s best estimates, and the Company believes they are reasonable. Future declines in the reporting units’ operating performance or LivaNova’s anticipated business outlook may reduce the estimated fair value of the Company’s reporting units and result in an impairment in the future. Factors that could have a negative impact on the fair value of the reporting units include, but are not limited to:

•decreases in revenue as a result of the inability of LivaNova’s sales force to effectively market and promote the Company’s products;

•increased competition, patent expirations or new technologies or treatments commercialized by competitors;

•declines in anticipated growth rates;

•the outcome of litigation, legal proceedings, investigations or other claims resulting in significant cash outflows; and

•increases in the market-participant risk-adjusted WACC.

Derivatives and Risk Management

US GAAP requires companies to recognize all derivatives as assets and liabilities on the balance sheet and to measure the instruments at fair value through earnings unless the derivative qualifies for hedge accounting. If the derivative qualifies for hedge accounting, depending on the nature of the hedge and hedge effectiveness, changes in the fair value of the derivative will either be recognized immediately in earnings or recorded in OCI until the hedged item is recognized in earnings. The changes in the fair value of the derivative are intended to offset the change in fair value of the hedged asset, liability or probable commitment. LivaNova evaluates hedge effectiveness at inception. Cash flows from derivative contracts are reported as operating activities on the consolidated statements of cash flows.

LivaNova uses currency exchange rate derivative contracts to manage the impact of currency exchange on earnings and cash flows. Forward currency exchange rate contracts are designed to hedge anticipated foreign currency transactions and changes in the value of specific assets and liabilities. At inception of the forward contract, the derivative is designated as either a freestanding derivative or a cash flow hedge. LivaNova does not enter into derivative contracts for speculative purposes. All derivative instruments are recorded at fair value on the consolidated balance sheets, as assets or liabilities (current or non-current) depending upon the gain or loss position of the contract and contract maturity date.

Forward contracts designated as cash flow hedges are designed to hedge the variability of cash flows associated with forecasted transactions denominated in a foreign currency that will take place in the future. For derivative instruments that are designated and qualify as a cash flow hedge, the gain or loss on the derivative instrument is reported as a component of AOCI and reclassified into earnings to offset exchange differences originated by the hedged item or the current earnings effect of the hedged item.

Upon the settlement of LivaNova’s foreign currency cash flow hedges in the fourth quarter of 2022 and following an in-depth analysis of the utility of the Company’s cash flow hedging program, LivaNova discontinued its foreign currency cash flow hedging program. LivaNova continues to use freestanding derivative forward contracts to offset exposure to the variability of the value associated with assets and liabilities denominated in a foreign currency. These derivatives are not designated as hedges, and therefore changes in the value of these forward contracts are recognized in earnings, thereby offsetting the current earnings effect of the related change in value of foreign currency denominated assets and liabilities.

Historically, LivaNova has entered into interest rate derivative instruments designated as cash flow hedges to manage the exposure to interest rate movements and to reduce the risk of increased borrowing costs by converting floating-rate debt into fixed-rate debt. Under these agreements, LivaNova agrees to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to agreed-upon notional principal amounts. These interest rate swaps are structured to mirror the payment terms of the underlying loan. The fair value of the interest rate swaps is reported on the consolidated balance sheets as assets or liabilities (current or non-current) depending upon the gain or loss position of the contract and the maturity of the future cash flows of each contract. The gain or loss on these derivatives is reported as a component of AOCI and reclassified to interest expense during the period of the respective interest payment. The Company’s interest rate swaps expired on April 6, 2023. LivaNova elected not to renew the interest rate swaps as interest expense associated with the Initial Term Facility is principally offset by holding a significant portion of the Initial Term Facility in a depository account, which earns a floating rate of interest.

Fair Value Measurements

LivaNova follows the authoritative guidance on fair value measurements and disclosures with respect to assets and liabilities that are measured at fair value on both a recurring and nonrecurring basis. Under this guidance, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The authoritative guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability, based on market data obtained from sources independent of LivaNova. Unobservable inputs are inputs that reflect LivaNova’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The categorization of financial assets and financial liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is broken down into three levels defined as follows:

•Level 1 - Inputs are quoted prices in active markets for identical assets or liabilities;

•Level 2 - Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly; and

•Level 3 - Inputs are unobservable for the asset or liability.

LivaNova’s financial assets and liabilities classified as Level 2 include derivative instruments, primarily forward and option currency contracts and interest rate swap contracts, which are valued using standard calculations and models that use readily observable market data as their basis.

LivaNova’s financial assets and liabilities classified as Level 3 include contingent consideration liability arrangements, derivative and embedded derivative instruments and convertible notes receivable.

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 earn-outs. Contingent consideration is recognized at fair value at the date of acquisition based on the consideration expected to be transferred and estimated as the probability of future cash flows, discounted to present value in accordance with accepted valuation methodologies. The discount rate used is determined at the time of measurement. Contingent consideration is remeasured each reporting period with the change in fair value, including accretion for the passage of time, recorded in earnings. The change in fair value of contingent consideration based on the achievement of regulatory milestones is recorded as research and development expense while the change in fair value of sales-based earnout contingent consideration is recorded as cost of sales. Contingent consideration payments made soon after the acquisition date are classified as an investing activity. Contingent consideration payments that are not made soon after the acquisition date are classified as a financing activity up to the amount of the contingent consideration liability recognized at the acquisition date, with any excess classified as an operating activity. For further information on LivaNova’s Level 3 contingent consideration liability arrangements, please refer to “Note 9. Fair Value Measurements.” For further information on LivaNova’s Level 3 derivative and embedded derivative instruments, please refer to “Note 10. Financing Arrangements” and “Note 9. Fair Value Measurements.” For further information on LivaNova’s Level 3 convertible notes receivable, please refer to “Note 8. Investments.”

Investments in Equity Securities

LivaNova’s investments in equity securities, and related loans, comprise investments in affiliates that are not publicly traded and are in various stages of development. The Company’s equity investments are reported in investments, and related loans are reported in other assets, on the consolidated balance sheets.

LivaNova elects to measure investments that do not have readily determinable fair values, at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or a similar investment of the same issuer.

LivaNova’s investments in affiliates in which the Company has significant influence but not control are accounted for using the equity method. LivaNova’s share of net income or loss is reflected as one line item on the Company’s consolidated statements of income (loss) under losses from equity-method investments and will increase or decrease, as applicable, the carrying value of the Company’s equity method investments reported under investments on the consolidated balance sheets. LivaNova regularly reviews its investments for changes in circumstance or the occurrence of events that suggest its investments may not be recoverable, and if an impairment is considered to be other-than-temporary, the loss is recognized on the consolidated statements of income (loss) in the period the determination is made and reported as losses from equity-method investments.

Warranty Obligation

LivaNova offers a warranty on various products. The Company estimates the costs that may be incurred under warranties and records a liability in the amount of such costs at the time the product is sold. The amount of the reserve recorded is equal to the estimated net costs to repair or otherwise satisfy the claim. LivaNova includes the warranty obligation in accrued liabilities and other on the consolidated balance sheets. Warranty expense is recorded to cost of goods sold on LivaNova’s consolidated statements of income (loss).

Retirement Benefit Plan Assumptions

LivaNova sponsors various retirement benefit plans, including defined benefit pension plans (pension benefits), defined contribution savings plans and termination indemnity plans, covering substantially all US employees and employees outside the US. Pension benefit costs include assumptions for the discount rate, retirement age, compensation rate increases and the expected return on plan assets.

Product Liability Accruals

Accruals for product liability claims are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on existing information. Accruals for product liability claims are adjusted periodically as additional information becomes available.

Revenue Recognition

Refer to “Note 3. Revenue Recognition.”

Research and Development

All R&D costs are expensed as incurred. R&D includes costs of basic research activities as well as engineering and technical effort required to develop a new product or make significant improvements to an existing product or manufacturing process. R&D costs also include regulatory and clinical study expenses, including post-market clinical studies.

Leases

LivaNova determines if an arrangement is or contains a lease at its inception. For operating leases with a term greater than 12 months, LivaNova recognizes operating lease assets and operating lease liabilities based on the present value of the future minimum lease payments over the lease term at the latter of the Company’s lease standard adoption date of January 1, 2019, or the lease commencement date. LivaNova does not record an operating lease asset and corresponding liability for leases with terms of 12 months or less. The Company recognizes the lease payments for such short-term leases within profit and loss on a straight-line basis over the lease term. Variable lease payments, such as common area rent, maintenance charges, and rent escalations not known upon lease commencement, are not included in the determination of the minimum lease payments and are expensed in the period in which the obligation for those payments is incurred. Operating lease assets also includes any lease payments made in advance and excludes lease incentives. LivaNova’s lease terms may include options to extend or terminate a lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

As most of LivaNova’s leases do not provide a readily determinable implicit rate, LivaNova uses its IBR based on the information available at the lease commencement date in determining the present value of future payments. LivaNova’s IBR represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the lease term within a particular currency environment. LivaNova used the IBR available nearest to the Company’s adoption date for leases that commenced prior to that date.

Additionally, LivaNova monitors for events or changes in circumstances that may require a reassessment of the Company’s leases to determine if a remeasurement is required. For additional information, refer to “Note 12. Leases.”

Stock-Based Compensation

Stock-Based Awards

LivaNova may grant stock-based awards to directors, officers and key employees. The Company measures the cost of services received in exchange for an award of equity instruments based on the grant date fair market value of the award. LivaNova recognizes equity-based compensation expense ratably over the period that services are provided in exchange for the entire award (all vesting periods). LivaNova issues treasury shares for vesting of RSUs and the exercise of SARs and new shares upon stock option exercises. The Company has the right to elect to pay the cash value of vested restricted stock units in lieu of the issuance of new shares.

SARs

LivaNova may grant SARs that confer upon the grantee the contractual right to receive an amount of cash, stock, or a combination of both, that equals the appreciation in the company’s stock from the award’s grant date to the exercise date. SARs may be exercised at the grantee’s discretion during the exercise period and do not give the grantee an ownership right in the underlying stock. SARs do not involve payment of an exercise price. LivaNova uses the Black-Scholes option pricing methodology to calculate the grant date fair market value of SARs and compensation is expensed ratably over the service period. The Company determines the expected volatility of the awards based on historical volatility. Calculation of compensation for SAR stock awards requires the Company to estimate historical volatility and forfeiture rates.

RSUs

LivaNova may grant service-based RSUs at no purchase cost to the grantee. The grantees of unvested units have no voting rights or rights to dividends. Sale or transfer of the stock and stock units is restricted until they are vested. The fair market value of service-based RSUs is determined using the market closing price on the grant date, and compensation is expensed ratably over the service period. Calculation of compensation for RSU stock awards requires the Company to estimate forfeiture rates.

Market Performance-Based RSU’s

LivaNova may grant market performance-based RSUs at no purchase cost to the grantee. The grantees of unvested units have no voting rights or rights to dividends and sale or transfer of the units is restricted until they are vested. The number of shares that are ultimately transferred to the grantee is dependent upon the Company’s percentile rank of total shareholder return relative to a peer group. The fair market value of market performance-based RSUs is determined utilizing a Monte Carlo simulation on the grant date and compensation is then expensed ratably over the service period. Calculation of compensation for market performance-based stock awards requires the Company to estimate historical volatility and forfeiture rates.

Operating Performance-Based Awards RSU’s

LivaNova may grant operating performance-based RSUs at no purchase cost to the grantee. The grantees of unvested units have no voting rights or rights to dividends and sale or transfer of the units is restricted until they are vested. The number of shares that are ultimately transferred to the grantee is dependent upon the Company’s percent achievement of certain targets for cumulative adjusted free cash flow and adjusted return on invested capital. The fair market value of operating performance-based RSUs is determined using the market closing price on the grant date. Compensation is expensed ratably over the service period and is adjusted based upon the estimated and actual percent achievement of cumulative adjusted free cash flow and return on invested capital as compared to target.

LivaNova is a UK corporation and operates through the Company’s various subsidiaries in a number of countries throughout the world. LivaNova’s provision for income taxes is based on the tax laws and rates applicable in the jurisdictions in which the Company operates and earns income. LivaNova uses significant judgment and estimates in accounting for its income taxes. The Company recognizes deferred tax assets and liabilities for the anticipated future tax effects of temporary differences between the financial statement basis and the tax basis of LivaNova’s assets and liabilities, which are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

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.

LivaNova files federal and local tax returns in many jurisdictions throughout the world and is subject to income tax examinations for its fiscal year 2018 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 in order to determine the appropriateness of the Company’s reserves; however, the actual outcome of an audit can be significantly different than LivaNova’s expectations, which could have a material impact on the Company’s tax provision. LivaNova’s tax positions are evaluated for recognition using a more-likely-than-not threshold. Uncertain tax positions requiring recognition are measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon effective settlement with a taxing authority that has full knowledge of all relevant information. Some of the reasons a reserve for an uncertain tax benefit may be reversed are: completion of a tax audit; a change in applicable tax law including a tax case or legislative guidance; or an expiration of the statute of limitations. LivaNova recognizes interest and penalties associated with unrecognized tax benefits and records interest in interest expense, and penalties in SG&A, on LivaNova’s consolidated statements of income (loss).

Foreign Currency

LivaNova’s reporting currency is the USD; however, a portion of the revenues earned and expenses incurred by certain of LivaNova’s subsidiaries are denominated in currencies other than the USD. LivaNova determines the functional currency of its subsidiaries that exist and operate in different economic and currency environments based on the primary economic environment in which the subsidiary operates, that is, the currency of the environment in which an entity primarily generates and expends cash. LivaNova’s significant foreign subsidiaries are located in Europe and the US. The functional currency of LivaNova’s significant European subsidiaries is the Euro, and the functional currency of LivaNova’s significant US subsidiaries is the USD.

Assets and liabilities of subsidiaries whose functional currency is not the USD are translated into USD based on a combination of both current and historical exchange rates, while their revenues earned and expenses incurred are translated into USD at average period exchange rates. Translation adjustments are included in AOCI on LivaNova’s consolidated balance sheets. Gains and losses arising from transactions denominated in a currency different from an entity’s functional currency are included in foreign exchange and other income/(expense) on LivaNova’s consolidated statements of income (loss). Taxes are not provided on cumulative translation adjustments, as substantially all translation adjustments are related to earnings which are intended to be indefinitely reinvested in the countries where earned.

Contingencies

LivaNova is subject to product liability claims, environmental obligations, government investigations and other legal proceedings in the ordinary course of business. Legal fees and other expenses related to litigation are expensed as incurred and included in SG&A on LivaNova’s consolidated statements of income (loss). Contingent liabilities are recorded when LivaNova determines that a loss is both probable and reasonably estimable. Due to the fact that legal proceedings and other contingencies are inherently unpredictable, LivaNova’s assessments involve significant judgment regarding future events.

Note 3. Revenue Recognition

LivaNova generates revenue through contracts with customers consisting primarily of hospitals, healthcare institutions and distributors. Revenue is measured based on consideration specified in customer contracts and excludes amounts collected on behalf of third parties. The Company measures the consideration based upon the estimated amount to be received. The amount of consideration LivaNova ultimately receives varies depending upon the return terms, sales rebates, discounts, and other incentives the Company may offer, which are accounted for as variable consideration when estimating the amount of revenue to recognize. The estimate of variable consideration requires significant judgment.

LivaNova has historically experienced a low rate of product returns, and the total dollar value of product returns has not been significant to the Company’s consolidated financial statements.

LivaNova recognizes revenue when a performance obligation is satisfied by transferring the control of a product or providing service to a customer. Some of LivaNova’s contracts include the purchase of multiple products and/or services. In such cases, LivaNova allocates the transaction price based upon the relative estimated stand-alone price of each product and/or service sold.

LivaNova records state and local sales taxes net; that is, the Company excludes sales tax from revenue. Typically, LivaNova’s contracts do not have a significant financing component.

LivaNova incurs incremental commission fees paid to the sales force associated with the sale of products. LivaNova applies the practical expedient within ASC 606-10-50-22 and has elected to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset the entity would otherwise recognize is one year or less. As a result, no commissions have been capitalized as contract costs since adoption of ASC 606. The following is a description of the principal activities (separated by reportable segments) from which LivaNova generates its revenue. For more detailed information about LivaNova’s reportable segments including disaggregated revenue results by major product line and primary geographic markets, see “Note 19. Geographic and Segment Information.”

Cardiopulmonary Products and Services

Cardiopulmonary products include HLMs, oxygenators, autotransfusion systems, perfusion tubing systems, cannulae and other related accessories.

Cardiopulmonary products may include performance obligations associated with assembly and installation of equipment. Accordingly, LivaNova allocates a portion of the sales prices to installation obligations and recognizes that revenue when the service is provided. LivaNova recognizes revenue for equipment and accessory product sales when control of the equipment or product passes to the customer.

Technical services include installation, repair and maintenance of cardiopulmonary equipment under service contracts or upon customer request. Technical service agreements generally provide for upfront payments in advance of rendering services or periodic billing over the contract term. Amounts billed in advance are deferred and recognized as revenue when the performance obligation is satisfied. Technical services are not a significant component of Cardiopulmonary revenue and have been presented with the related equipment and accessories revenue.

Neuromodulation Products

Neuromodulation products are comprised of neuromodulation therapy systems for the treatment of DRE and DTD. LivaNova’s Neuromodulation product line includes the VNS Therapy System, which consists of an implantable pulse generator, a lead that connects the generator to the vagus nerve, and other accessories. LivaNova recognizes revenue for Neuromodulation product sales when control passes to the customer.

Advanced Circulatory Support Products

LivaNova’s ACS segment was engaged in the design, development, manufacture, marketing and selling of temporary life support products. ACS’s products, which comprise the LifeSPARC and Hemolung systems, and standalone cannulae and accessories, including ProtekDuo and transseptal (TandemHeart) cannulae, simplify temporary extracorporeal cardiopulmonary life support solutions for critically ill patients.

ACS products are comprised of temporary life support products, including the LifeSPARC platform, ProtekDuo cannulae kits and the Hemolung RAS. ACS revenue is recognized when control passes to the customer, usually at the point of shipment.

During the first quarter of 2024, LivaNova transitioned all ACS standalone cannulae and accessories, including ProtekDuo and transseptal (TandemHeart) cannulae, into its Cardiopulmonary segment. Further sales of the LifeSPARC and Hemolung Systems were discontinued during the first quarter of 2024.

Contract Balances

Due to the nature of LivaNova’s products and services, revenue producing activities may result in contract assets and contract liabilities. These activities relate primarily to Cardiopulmonary technical services contracts for short-term and multi-year service agreements. Contract assets are primarily comprised of unbilled revenues, which occur when a performance obligation has been completed, but not billed to the customer. Contract liabilities are made up of deferred revenue, which occurs when a customer pays for a service, before a performance obligation has been completed. Contract assets are included within prepaid expenses and other current assets on the consolidated balance sheets and were insignificant as of December 31, 2023 and 2022. As of December 31, 2023 and 2022, contract liabilities of $15.3 million and $14.1 million, respectively, were included within accrued liabilities and other and other long-term liabilities on LivaNova’s consolidated balance sheets.

Note 4. Business Combinations

As of December 31, 2021, LivaNova owned a 3% investment in ALung, a privately held medical device company focused on creating advanced medical devices for treating respiratory failure. On May 2, 2022, LivaNova acquired the remaining 97% of equity interests in ALung for a purchase price of up to $110.0 million, consisting of $10.0 million paid at closing, subject to customary adjustments, and contingent consideration of up to $100.0 million payable upon achievement of certain sales-based milestones beginning in 2023 and ending in 2027. Total consideration included approximately $5.5 million of non-cash consideration.

The following table presents the acquisition date fair value of the consideration transferred and the fair value of LivaNova’s interest in ALung prior to the acquisition, including certain measurement period adjustments (in thousands):

(1)During the third quarter of 2022, measurement period adjustments were recorded based on information obtained about facts and circumstances that existed as of the acquisition date.

The purchase price allocation at fair value for the ALung acquisition was finalized during the second quarter of 2023 and is presented in the following table, which includes certain measurement period adjustments (in thousands):

(1)During the third quarter of 2022, measurement period adjustments were recorded based on information obtained about facts and circumstances that existed as of the acquisition date.

Goodwill arising from the ALung acquisition, which is not deductible for tax purposes, primarily represents the anticipated synergies between ALung and LivaNova’s ACS business. The assets acquired, including goodwill, are recognized in LivaNova’s ACS segment. The goodwill for the ACS reporting unit was fully impaired during the third quarter of 2022. Please refer to “Note 7. Goodwill and Intangible Assets” for further details.

LivaNova recognized ALung acquisition-related expenses of approximately $5.1 million during the year ended December 31, 2022, within SG&A on the Company’s consolidated statements of income (loss).

The Company’s consolidated financial statements include the operating results of ALung from the acquisition date. Separate post-acquisition operating results and pro forma financial information for this acquisition have not been presented as the effect was not material.

The ALung contingent consideration payments are triggered upon the achievement of thresholds associated with sales of products covered by the purchase agreement and are estimated to occur during the years reflected in the table below. The sales-based earnout was valued using projected sales from LivaNova’s internal strategic plan and is a Level 3 fair value measurement, which includes the following significant unobservable inputs (in thousands):

The ALung contingent consideration arrangement states that, in the event that LivaNova ceases the operations of ALung, LivaNova would be subject to a one-time phase-out payment of $13.8 million. In January 2024, LivaNova announced the wind down of ACS, including ALung, as part of the 2024 Restructuring Plan. As a result, the ALung contingent consideration arrangement liability was adjusted to the phase-out payment amount of $13.8 million as of December 31, 2023. For a reconciliation of the beginning and ending balance of contingent consideration liabilities, refer to “Note 9. Fair Value Measurements.”

Note 5. Divestiture of Heart Valve Business

On December 2, 2020, LivaNova entered into a Purchase Agreement with Mitral, a company incorporated under the laws of Luxembourg and wholly-owned and controlled by funds advised by Gyrus Capital S.A., a Swiss private equity firm. The Purchase Agreement provided for the divestiture of certain of LivaNova’s subsidiaries, as well as certain other assets and liabilities relating to the Company’s Heart Valve business and site management operations conducted by the Company’s subsidiary LSM at the Company’s Saluggia campus for $64.1 million.

On April 9, 2021, LivaNova and Mitral entered into an Amended & Restated Purchase Agreement to, among other things, defer the closing of the sale and purchase of LSM by up totwo years and include or amend certain additional terms relating to such deferral, including certain amendments relating to the potential hazardous substances provision of LSM and the related expense reimbursement provisions. On April 7, 2023, Mitral provided notice to LivaNova, consistent with the terms of the Amended & Restated Purchase Agreement, that they would not exercise their right to purchase LSM.

The sale of the Heart Valve business closed on June 1, 2021. LivaNova received $45.5 million in 2021, and the remaining deferred purchase price of $9.5 million in 2022. Also, in 2022, LivaNova made a $4.8 million payment to Mitral upon finalizing the trade working capital and net indebtedness adjustments. During the year ended December 31, 2021, LivaNova recognized a loss from the sale of the Heart Valve business of $1.9 million, which is included within other operating expenses on the consolidated statements of income (loss).

In conjunction with the sale, LivaNova entered into a transition services agreement to provide certain support services generally for up to twelve months from the closing date of the sale. These services include, among others, accounting, information technology, human resources, quality assurance, regulatory affairs, supply chain, clinical affairs and customer support. During the year ended December 31, 2021, LivaNova recognized income of $1.9 million, for providing these services. Income recognized related to the transition services agreements is recorded as a reduction to the related expenses in the associated expense line items in the consolidated statements of income (loss).

Note 6. Restructuring

LivaNova initiates restructuring plans to leverage economies of scale, streamline distribution and logistics, and strengthen operational and administrative effectiveness in order to reduce overall costs.

During the fourth quarter of 2020, LivaNova initiated a reorganization plan to reduce the Company’s cost structure. LivaNova incurred restructuring expense under the 2020 Restructuring Plan of $9.7 million during 2021, primarily associated with severance costs for 27 employees terminated during 2021 and lease abandonment costs. The reorganization plan was completed during 2022.

During the second quarter of 2022, management committed to implement a cost-optimization and cost reduction program to adapt to current economic conditions, which included a workforce reduction to be completed by mid-2023. LivaNova recognized restructuring expense under the 2022 Restructuring Plan of $0.9 million and $6.6 million during the years ended December 31, 2023 and 2022, respectively. The total estimated restructuring costs associated with the plan were approximately $10.0 million including employee termination benefits, consulting fees and contract termination costs.

On January 5, 2024, the Board of Directors of LivaNova PLC approved the 2024 Restructuring Plan to enhance the Company’s focus on its core Cardiopulmonary and Neuromodulation segments. The main component of this plan is to wind down the ACS segment, which the Company anticipates will be substantially complete by the end of 2024. LivaNova recognized restructuring expense under the 2024 Restructuring Plan of $0.1 million in other operating expenses, and $12.6 million for inventory obsolescence in cost of sales on its consolidated statements of income (loss) during the year ended December 31, 2023. Additionally, the Company determined that it was more likely than not that the carrying amounts associated with the ACS segment, including the long-lived assets (asset group), may not be recoverable. This was determined to be a triggering event occurring in the fourth quarter of 2023 requiring an impairment assessment, based on certain factors, including the results of an updated long-term financial outlook for the ACS segment. As such, LivaNova recorded impairments of the following long-lived assets during the year ended December 31, 2023, included within impairment of long-lived assets on its consolidated statements of income (loss) (in thousands):

In connection with the 2024 Restructuring Plan, LivaNova expects to incur pre-tax restructuring charges in the range of approximately $15 million to $20 million. The anticipated charges are comprised of approximately $10 million to $12 million in severance expenses and retention bonuses and approximately $5 million to $8 million in other expenses, including lease termination, facilities remediation, and asset disposal expenses. LivaNova expects the majority of the severance expenses to be incurred in the first half of 2024. Retention bonuses will be earned over the period of service, which is expected to be over the full year of 2024. All future cash payments related to these restructuring charges are expected to be paid out during 2024. These estimates are subject to change.

The following table presents a reconciliation of the beginning and ending balance of the accruals and other reserves recorded in connection with LivaNova’s restructuring plans included within accrued liabilities and other on the consolidated balance sheets for the years ended December 31, 2023, 2022 and 2021 (in thousands):

(1)Cumulative restructuring expense, inclusive of discontinued operations, since the merger of Cyberonics and Sorin in October 2015 totaled $136.4 million as of December 31, 2023.

The following table presents restructuring expense by reportable segment for the years ended December 31, 2023, 2022 and 2021 (in thousands):

(1)Other primarily includes restructuring expense not allocated to segments.

(2)Restructuring expense is included within other operating expenses on the consolidated statements of income (loss).

Note 7. Goodwill and Intangible Assets

The following table presents LivaNova’s finite-lived and indefinite-lived intangible assets as of December 31, 2023 and 2022 (in thousands):

The following table presents the amortization periods for LivaNova’s finite-lived intangible assets as of December 31, 2023:

The following table presents estimated future amortization expense based on LivaNova’s finite-lived intangible assets as of December 31, 2023 (in thousands):

In connection with the 2024 Restructuring Plan, as previously discussed in “Note 6. Restructuring,” LivaNova recorded impairments of the ACS developed technology and trade names intangible assets of $78.1 million and $7.1 million, respectively, during the year ended December 31, 2023, which is included within impairment of long-lived assets on the consolidated statements of income (loss).

Goodwill

The following table presents the changes in the carrying amount of goodwill by reportable segment for the years ended December 31, 2023, 2022 and 2021 (in thousands):

(1)Refer to “Note 4. Business Combinations” for additional information.

As part of LivaNova’s third-quarter 2022 goodwill impairment assessment, the Company considered that revenue for its ACS reporting unit during the nine months ended September 30, 2022 had declined by approximately 29% compared to the prior year period, primarily as a result of a reduction in severe COVID-19 cases, hospital-related challenges and product mix. As a result, the Company lowered its future revenue projections for the ACS reporting unit. Based on these circumstances, LivaNova concluded it was more likely than not that the goodwill of LivaNova’s ACS reporting unit was impaired and performed a quantitative assessment of the goodwill as of September 30, 2022, using management’s then current estimate of future cash flows. Based on the valuation performed, LivaNova determined that the fair value of the ACS reporting unit was less than the carrying value and recognized a goodwill impairment of $129.4 million in LivaNova’s consolidated statement of income (loss) during the year ended December 31, 2022.

LivaNova performed a quantitative assessment for its Cardiopulmonary and Neuromodulation reporting units as of October 1, 2023. The quantitative impairment assessment was performed 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 by 23% and 528%, respectively. Therefore, LivaNova concluded that its Cardiopulmonary and Neuromodulation reporting units’ goodwill were not impaired on the October 1, 2023 test date.

Cumulative goodwill impairments from continuing operations since the merger of Cyberonics and Sorin in October 2015 totaled $193.1 million as of December 31, 2023.

Note 8. Investments

The following table presents the carrying value of LivaNova’s investments in equity securities of non-consolidated affiliates without readily determinable fair values and an investment accounted for under the equity method. Investments, excluding the equity method investment, are reported at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. The below equity investments are included in investments on the consolidated balance sheets as of December 31, 2023 and 2022 (in thousands):

(1)During the first quarter of 2023, LivaNova invested in Cadence Neuroscience, Inc., a privately held medical device company focusing on advancements in neuromodulation to detect specific signals from the brain and deliver electrical stimulation to modify the activity of neural circuits.

(2)As of December 31, 2023 and 2022, LivaNova had commitments to fund follow-on investments up to approximately €1.9 million and €3.0 million (approximately $2.0 million and $3.2 million as of December 31, 2023 and 2022, respectively) based on cash calls.

Note 9. Fair Value Measurements

LivaNova reviews its fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. There were no transfers between Level 1, Level 2 or Level 3 during the years ended December 31, 2023, 2022 or 2021.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2023 and 2022 (in thousands):

The following table provides a reconciliation of the beginning and ending balances of LivaNova’s recurring fair value measurements, using significant unobservable inputs (Level 3) for the years ended December 31, 2023, 2022 and 2021 (in thousands):

(1)For further details refer to “Note 4. Business Combinations.”

(2)During the year ended December 31, 2023, the contingent consideration change in fair value resulted in an increase of $3.8 million recorded tocost of sales and an increase of $5.6 million recorded to R&D. During the year ended December 31, 2022, the contingent consideration change in fair value resulted in a decrease of $10.5 million recorded tocost of sales and a decrease of $19.4 million recorded to R&D.

(3)Changes in the fair value of the embedded exchange feature derivative liability and capped call derivative asset are recognized in foreign exchange and other income/(expense) in the consolidated statements of income (loss). See the below section titled “Embedded Exchange Feature and Capped Call Derivatives”for further information on the changes in fair value as it relates to the embedded exchange feature and capped call derivatives.

(4)The decrease in fair value associated with contingent consideration arrangements during the year ended December 31, 2022 was primarily related to the change in (i) the discount rates due to increasing interest rates, (ii) the probability of the regulatory milestone-based payment associated with the acquisition of TandemLife and (iii) the timing of projected achievement of a certain regulatory milestone and timing of sales-based earnout payments associated with the acquisition of ImThera.

Embedded Exchange Feature and Capped Call Derivatives

In June 2020, the Company issued $287.5 million in Notes and entered into related capped call transactions. The Notes include an embedded exchange feature that is bifurcated from the Notes. Please refer to “Note 10. Financing Arrangements” for further details. The embedded exchange feature derivative is measured at fair value using a binomial lattice model and estimated discounted cash flows that utilize observable and unobservable market data. The capped call derivative is measured at fair value using the Black-Scholes model utilizing observable and unobservable market data, including stock price, remaining contractual term, expected volatility, risk-free interest rate and expected dividend yield, as applicable.

The embedded exchange feature and capped call derivatives are classified as Level 3 because the Company uses historical volatility and implied volatility from actual options traded to determine expected stock price volatility, an unobservable input that is significant to the valuation. In general, an increase in LivaNova’s stock price or stock price volatility would increase the fair value of the embedded exchange feature and capped call derivatives which would result in an increase in expense. As the remaining time to the expiration of the derivatives decreases, the fair value of the derivatives decreases. The future impact of the derivatives on net income depends on how significant inputs such as stock price, stock price volatility and time to the expiration of the derivatives change in relation to other inputs. Changes in the fair value of the embedded exchange feature and capped call derivatives are recognized in foreign exchange and other income/(expense) in the consolidated statements of income (loss).

The fair value of the embedded exchange feature derivative liability and the capped call derivative assets was$45.6 million and$38.5 million, respectively, as of December 31, 2023, and the stock price volatility was 38%. As of December 31, 2023, a 10% lower volatility, holding other inputs constant, would reduce the fair value for the embedded exchange feature derivative liability by $13.4 million, and a 10% higher volatility, holding other inputs constant, would increase the fair value by $13.3 million. As of December 31, 2023, a 10% lower volatility, holding other inputs constant, would decrease the fair value of the capped call derivatives by $9.1 million, and a 10% higher volatility, holding other inputs constant, would increase the fair value by $4.8 million.

Contingent Consideration Arrangements

The following table presents the fair value of LivaNova’s Level 3 contingent consideration arrangements by acquisition as of December 31, 2023 and 2022 (in thousands):

The ImThera business combination involved contingent consideration arrangements composed of potential cash payments upon the achievement of a certain regulatory milestone and a sales-based earnout associated with sales of products. The sales-based earnouts are valued using projected sales from LivaNova’s internal strategic plan. These arrangements are Level 3 fair value measurements and include the following significant unobservable inputs as of December 31, 2023:

The ALung business combination involved a contingent consideration arrangement composed of potential cash payments upon the achievement of certain sales-based thresholds associated with sales of products. The ALung contingent consideration arrangement states that, in the event that LivaNova ceases the operations of ALung, LivaNova would be subject to a one-time phase-out payment of $13.8 million. In January 2024, LivaNova announced the wind down of ACS, including ALung, as part of the 2024 Restructuring Plan. As a result, the ALung contingent consideration arrangement liability was adjusted to the phase-out payment amount of $13.8 million as of December 31, 2023.

The TandemLife business combination involved a contingent consideration arrangement composed of potential cash payments upon the achievement of certain regulatory milestones. The probability of payment for the final regulatory milestone was reduced to 0% during the year ended December 31, 2022.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

LivaNova’s investments in equity securities of non-consolidated affiliates without readily determinable fair values are reported at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. LivaNova’s investments in non-financial assets such as goodwill, intangible assets, and PP&E are measured at fair value if there is an indication of impairment and recorded at fair value only when an impairment is recognized. LivaNova classifies the measurement input for these assets as Level 3 inputs within the fair value hierarchy.

Other

The carrying values of LivaNova’s cash, cash equivalents and restricted cash, accounts receivable, accounts payable and accrued liabilities approximate their fair values due to the short-term nature of these items.

The carrying value of LivaNova’s long-term debt including the current portion as of December 31, 2023 and 2022 was $586.0 million and $539.0 million, respectively. The fair value of the Notes as of December 31, 2023 and 2022 was $314.4 million and $328.1 million, respectively. For all other long-term debt obligations, LivaNova believes the carrying value approximates fair value.

Note 10. Financing Arrangements

The following table presents the remaining outstanding principal amounts of LivaNova’s long-term debt facilities as of December 31, 2023 and 2022 (in thousands, except interest rates):

The following table presents the contractual annual principal maturities of LivaNova’s long-term debt facilities as of December 31, 2023 (in thousands):

Revolving Credit

The outstanding principal amount of LivaNova’s short-term unsecured revolving credit agreements and other agreements with various banks was $0.6 million and $2.5 million as of December 31, 2023 and 2022, respectively, with an average interest rate of 4.94% and loan terms ranging from overnight to 364 days as of December 31, 2023.

On August 13, 2021, LivaNova PLC and its wholly-owned subsidiary, LivaNova USA as borrower, entered into a First Lien Credit Agreement with the lenders and issuing banks party thereto and Goldman Sachs Bank USA, as First Lien Administrative Agent and First Lien Collateral Agent, relating to a $125 million senior secured multi-currency revolving credit facility to be made available to the borrower, referred to as the 2021 First Lien Credit Agreement. The 2021 First Lien Credit Agreement, as amended from time to time, expires on August 13, 2026, and bears interest at a rate equal to, for USD-denominated loans, an adjusted SOFR with a floor of 0.00%, or a Base Rate, plus, in each case, a variable margin based on the Company’s Total Net Leverage Ratio, as defined in the agreement. Interest is paid monthly or quarterly, as selected by the borrower, with any outstanding principal due at maturity. The 2021 First Lien Credit Agreement also contemplates the payment of commitment fees on the unused portion of the commitments, at a variable percentage based on the Company’s Total Net Leverage Ratio. As of each of December 31, 2023 and 2022, the applicable commitment fee percentage was 0.5% per annum. The 2021 First Lien Credit Agreement is available for working capital and other general corporate purposes and, if drawn, can be repaid at any time without premium or penalty. As of December 31, 2023, the Company was in compliance with the financial covenants contained in its 2021 First Lien Credit Agreement.

There wereno outstanding borrowings under the 2021 First Lien Credit Agreement’s $125 million revolving credit facility as of December 31, 2023 and 2022.

On August 12, 2021, the Company terminated its previous $50.0 million revolving credit facility agreement with ACF FINCO I LP, which was undrawn, resulting in a loss on debt extinguishment of $1.6 million recognized during the year ended December 31, 2021 primarily associated with the write-off of unamortized debt issuance costs, and is included within loss on debt extinguishment on the consolidated statements of income (loss).

Bridge Loan Facility

On February 24, 2022, LivaNova PLC and its wholly-owned subsidiary LivaNova USA entered into the €200 million Bridge Loan Facility. On March 16, 2022, LivaNova entered into Amendment No. 2 to the 2021 First Lien Credit Agreement, which converted the available borrowings under the Bridge Loan Facility from €200 million to $220 million and converted the EURIBOR rate in the 2021 First Lien Credit Agreement to SOFR. LivaNova delivered a borrowing notice for $220 million in connection with the Bridge Loan Facility, which was funded on March 17, 2022.

On March 18, 2022, LivaNova PLC, acting through its Italian branch, entered into an Indemnity Letter and an Account Pledge Agreement with Barclays, further to which Barclays issued the SNIA Litigation Guarantee. As security for the SNIA Litigation Guarantee, LivaNova is required to grant cash collateral to Barclays in USD in an amount equal to the USD equivalent of 105% of the amount of the SNIA Litigation Guarantee calibrated on a biweekly basis. The proceeds of the Bridge Loan Facility were used by LivaNova to post a portion of the cash collateral supporting the SNIA Litigation Guarantee. Cash collateral classified as restricted cash on the consolidated balance sheets as of December 31, 2023 and 2022 was $311.4 million and $301.4 million, respectively. For additional information regarding the SNIA litigation, please refer to “Note 13. Commitments and Contingencies.”

Debt discounts and issuance costs related to the Bridge Loan Facility were approximately $4.5 million. Amortization of debt discount and issuance costs for the Bridge Loan Facility was $4.5 million for the year ended December 31, 2022 and is included in interest expense on the consolidated statements of income (loss).

The Bridge Loan Facility was repaid in full on July 6, 2022.

Term Facilities

On July 6, 2022, LivaNova and its wholly-owned subsidiary, LivaNova USA, entered into Incremental Facility Amendment No. 2, which provides for LivaNova USA to, among other things, obtain commitments for term loan facilities from a syndicate of lenders in an aggregate principal amount of $350 million consisting of (i) the Initial Term Facility with an aggregate principal amount of $300 million and (ii) the Delayed Draw Term Facility with an additional aggregate principal amount of $50 million. On April 6, 2023, LivaNova drew $50 million under the Delayed Draw Term Facility for general corporate purposes.

Proceeds from the Initial Term Facility were used to repay in full the Bridge Loan Facility on July 6, 2022, with the remainder used for general corporate purposes of the Company. The Term Facilities have a maturity of the earlier of (i)five years or (ii)

91 days prior to December 15, 2025, the maturity date of the 2020 Cash Exchangeable Senior Notes, unless by that date LivaNova USA will have either redeemed or refinanced the Notes, or set aside an amount of cash equal to the then-outstanding principal amount of the Notes. The Term Facilities bear interest at a rate equal to an adjusted term SOFR plus a variable margin based on the Company’s consolidated total net leverage ratio. As of December 31, 2023, the applicable margin over adjusted term SOFR was equal to 3.5% per annum. The Term Facilities are subject to an original issue discount of 1.5% of their principal amount. The Term Facilities are subject to quarterly principal repayment, based on the following amortization schedule: (i) during the first year from the initial funding date:1.9%; (ii) year two:5.0%; (ii) year three:5.0%; (iv) year four:7.5%; and (v) year five:10.0%, with the remainder to be paid at maturity. The effective interest rate of the Term Facilities at December 31, 2023 was 6.53%.

The 2021 First Lien Credit Agreement, as amended, contains customary representations, warranties and covenants, including the requirement to maintain a Senior Secured First Lien Net Leverage Ratio, calculated as the ratio of Consolidated Senior Secured First Lien Net Indebtedness to Consolidated EBITDA, as defined in the credit agreement, for the period of four consecutive fiscal quarters ended on the calculation date, of not more than 3.50 to 1.00 and an Interest Coverage Ratio, calculated as the ratio of Consolidated EBITDA to Consolidated Interest Expense, both as defined in the credit agreement, for the period of four consecutive fiscal quarters ended on the calculation date, of not less than 3.00 to 1.00. As of December 31, 2023, the Company was in compliance with the financial covenants contained in the 2021 First Lien Credit Agreement.

Debt discounts and issuance costs related to the Initial Term Facility were approximately $9.6 million. Amortization of debt discount and issuance costs for the Initial Term Facility was $2.0 million and $0.8 million for the years ended December 31, 2023 and 2022, respectively, and is included in interest expense on the consolidated statements of income (loss). The unamortized discount and issuance costs related to the Initial Term Facility as of December 31, 2023 and 2022 was $6.8 million and $8.7 million, respectively. Issuance costs related to the Delayed Draw Term Facility were approximately $1.6 million. Amortization of issuance costs for the Delayed Draw Term Facility was $0.5 million and $1.1 million for the years ended December 31, 2023 and 2022, respectively, and is included in interest expense on the consolidated statements of income (loss). The issuance costs related to the Delayed Draw Term Facility were fully amortized as of December 31, 2023. The unamortized issuance cost related to the Delayed Draw Term Facility as of December 31, 2022 was $0.5 million, and is included within prepaid expenses and other current assets on the consolidated balance sheets.

2020 Cash Exchangeable Senior Notes

On June 17, 2020, LivaNova’s wholly-owned subsidiary, LivaNova USA, issued $287.5 million aggregate principal amount of 3.00% Notes by private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The sale of the Notes resulted in approximately $278.0 million in net proceeds to the Company after deducting issuance costs. Interest is payable semiannually in arrears on June 15 and December 15 of each year. The effective interest rate of the Notes at December 31, 2023 was 9.95%. The Notes mature on December 15, 2025 unless earlier exchanged, repurchased, or redeemed.

Debt discounts and issuance costs related to the Notes were approximately $82.0 million and included $75.0 million of discount attributable to the embedded exchange feature, discussed below, and $7.0 million of allocated issuance costs to the Notes related to legal, bank and accounting fees. Amortization of debt discount and issuance costs for the Notes was $15.9 million, $14.4 million and $13.1 million for the years ended December 31, 2023, 2022 and 2021, respectively, and is included in interest expense on the consolidated statements of income (loss). The unamortized discount related to the Notes as of December 31, 2023 and 2022 was $32.0 million and $47.9 million, respectively.

Holders of the Notes are entitled to exchange the Notes at any time during specified periods, at their option. This includes the right to exchange the Notes during any calendar quarter, if the last reported sale price of LivaNova’s ordinary shares, with a nominal value of £1.00 per share, is greater than or equal to 130% of the exchange price, or $79.27 per share for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter. The exchange condition was not satisfied on December 31, 2023. As a result, the Company has included its obligations from the Notes and the associated embedded exchange feature derivative as a long-term liability on the consolidated balance sheets as of December 31, 2023. The Notes are exchangeable solely into cash and are not exchangeable into ordinary shares of LivaNova or any other security under any circumstances. The initial exchange rate for the Notes is 16.3980 ordinary shares per $1,000 principal amount of Notes (equivalent to an initial exchange price of approximately $60.98 per share). The exchange rate is subject to adjustment in certain circumstances, as set forth in the indenture governing the Notes.

The Company may redeem the Notes at its option on or after June 20, 2023 and prior to the 51 st scheduled trading day immediately preceding the maturity date, in whole or in part, if the last reported sale price per ordinary share has been at least 130% of the exchange price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. Additionally, the Company may redeem the Notes at its option, prior to their stated maturity, in whole but not in part, in connection with certain tax-related events.

Embedded Exchange Feature

The embedded exchange feature of the Notes requires bifurcation from the Notes and is accounted for as a derivative liability. The fair value of the Notes’ embedded exchange feature derivative at the time of issuance was $75.0 million and was recorded as debt discount on the Notes. This discount is amortized as interest expense using the effective interest method over the term of the Notes. The Notes’ embedded exchange feature derivative is carried on the consolidated balance sheets at its estimated fair value and is adjusted at the end of each reporting period, with the unrealized gain or loss reflected within foreign exchange and other income/(expense) in the consolidated statements of income (loss). The fair value of the embedded exchange feature derivative liability was $45.6 million and $85.7 million as of December 31, 2023 and 2022, respectively.

Capped Call Transactions

In connection with the pricing of the Notes, the Company entered into privately negotiated capped call transactions with certain of the initial purchasers of the Notes or their respective affiliates. The capped call transactions cover, subject to anti-dilution adjustments substantially similar to those applicable to the Notes, the number of LivaNova’s ordinary shares underlying the Notes and are expected generally to offset any cash payments the Company is required to make upon exchange of the Notes in excess of the principal amount thereof in the event that the market value per ordinary share, as measured under the capped call transactions, is greater than the strike price of the capped call transactions, with such offset being subject to an initial cap price of $100.00 per share. If the Company’s share price exceeds the cap price, the proceeds under the capped call transactions would not fully offset the excess principal amount due to the holders of the Notes. The capped call transactions expire on December 15, 2025 and must be settled in cash. If the capped call transactions are converted or redeemed early, settlement occurs at their termination value, which is equal to their fair value at the time of the conversion or redemption. The capped call transactions are carried on the consolidated balance sheets as a derivative asset at their estimated fair value and are adjusted at the end of each reporting period, with unrealized gain or loss reflected within foreign exchange and other income/(expense) in the consolidated statements of income (loss). The fair value of the capped call derivative assets was $38.5 million and $54.4 million as of December 31, 2023 and 2022, respectively. As of December 31, 2023, the capped call derivative assets were classified as long-term.

2020 Senior Secured Term Loan

On August 12, 2021, the Company repaid in full and terminated its previously outstanding $450 million 2020 senior secured term loan, resulting in a loss on debt extinguishment of $58.6 million recognized during the year ended December 31, 2021, which is comprised of a $35.6 million make-whole premium and $23.0 million associated with the write-off of unamortized debt issuance costs, and is included within loss on debt extinguishment on the consolidated statements of income (loss).

Note 11. Derivatives and Risk Management

Due to the global nature of LivaNova’s operations, the Company is exposed to FX fluctuations. Historically, LivaNova has entered into FX derivative contracts and interest rate swap contracts to reduce the impact of FX and interest rate fluctuations, respectively, on earnings and cash flow.

LivaNova is also exposed to equity price risk in connection with its Notes, including exchange and settlement provisions based on the price of its ordinary shares at exchange or maturity of the Notes. The capped call transactions associated with the Notes also include settlement provisions that are based on the price of LivaNova’s ordinary shares, subject to a capped price per share. LivaNova does not enter into derivative contracts for speculative purposes.

LivaNova measures all outstanding derivatives each period end at fair value and reports the fair value as either financial assets or liabilities on the consolidated balance sheets. At inception of the contract, the derivative is designated as either a freestanding derivative or a hedge. Derivatives that are not designated as hedging instruments are referred to as freestanding derivatives with changes in fair value included in earnings. These derivatives are intended to serve as economic hedges and follow the cash flows of the economic hedged item. The cash flows from these derivative contracts are reported as operating activities on LivaNova’s consolidated statements of cash flows.

If the derivative qualifies for hedge accounting, changes in the fair value of the derivative will be recorded in AOCI until the hedged item is recognized in earnings upon settlement/termination. FX derivative gains and losses in AOCI are reclassified to LivaNova’s consolidated statements of income (loss) as shown in the tables below, and interest rate swap gains and losses in

AOCI are reclassified to interest expense on LivaNova’s consolidated statements of income (loss). LivaNova evaluates hedge effectiveness at inception.

Freestanding FX Derivative Contracts

The gross notional amount of FX derivative contracts not designated as hedging instruments outstanding as of December 31, 2023 and 2022 was $223.4 million and $154.5 million, respectively. These derivative contracts are designed to offset the FX effects in earnings of various intercompany loans and trade receivables. LivaNova recorded a net loss for these freestanding derivatives of $1.3 million for the year ended December 31, 2023 and net gains of $4.5 million and $10.9 million for the years ended December 31, 2022 and 2021, respectively. These gains and losses are included in foreign exchange and other income/(expense) on LivaNova’s consolidated statements of income (loss).

Counterparty Credit Risk

LivaNova is exposed to credit risk in the event of non-performance by the counterparties to the Company’s derivatives.

The two counterparties to the capped call transactions are financial institutions. To limit LivaNova’s credit risk, the Company selected financial institutions with a minimum long-term investment grade credit rating. LivaNova’s exposure to the credit risk of the counterparties is not secured by any collateral. If a counterparty becomes subject to insolvency proceedings, LivaNova will become an unsecured creditor in those proceedings, with a claim equal to the Company’s exposure at that time under the capped call transactions with that counterparty.

To manage credit risk with respect to LivaNova’s other derivatives, the Company selects and periodically reviews counterparties based on credit ratings, limits its exposure with respect to each counterparty, and monitors their respective market positions. However, if one or more of these counterparties were in a liability position to the Company and were unable to meet their obligations, any transactions with the counterparty could be subject to early termination, which could result in substantial losses for the Company.

Cash Flow Hedges

Foreign Currency Risk

Historically, LivaNova utilized FX derivative contracts, designed as cash flow hedges, to hedge the variability of cash flows associated with LivaNova’s 12-month USD forecasts of revenues and costs denominated in British Pound, Japanese Yen and the Euro. LivaNova transfers to earnings from AOCI the gain or loss realized on the FX derivative contracts at the time of invoicing. Upon the settlement of LivaNova’s foreign currency cash flow hedges in the fourth quarter of 2022 and following an in-depth analysis of the utility of the Company’s cash flow hedging program, LivaNova discontinued its foreign currency cash flow hedging program.

Interest Rate Risk

Historically, LivaNova entered into interest rate swaps associated with the Initial Term Facility, which qualified for and were designated as cash flow hedges. The Company’s outstanding interest rate swaps expired on April 6, 2023. LivaNova elected not to renew the interest rate swaps as interest expense associated with the Initial Term Facility is principally offset by holding a significant portion of the Initial Term Facility in a depository account, which earns a floating rate of interest.

The gross notional amounts of open derivative contracts designated as cash flow hedges as of December 31, 2023 and 2022 were as follows (in thousands):

The pre-tax gains (losses) for derivative contracts designated as cash flow hedges recognized in OCI and the amount reclassified to earnings from AOCI for the years ended December 31, 2023, 2022 and 2021 were as follows (in thousands):

LivaNova offsets fair value amounts associated with its derivative instruments that are executed with the same counterparty under master netting arrangements on the Company’s consolidated balance sheets. Master netting arrangements include a right to set off or net together purchases and sales of similar products in the settlement process.

The following tables present the fair value and the location of derivative contracts reported on the consolidated balance sheets as of December 31, 2023 and 2022 (in thousands):

(1)For the classification of inputs used to evaluate the fair value of LivaNova’s derivatives, refer to “Note 9. Fair Value Measurements.”

Note 12. Leases

LivaNova has operating leases primarily for (i) office space, (ii) manufacturing, warehouse and R&D facilities and (iii) vehicles. LivaNova’s leases have remaining lease terms up to 15 years, some of which include options to extend the leases, and some of which include options to terminate the leases at the Company’s sole discretion. The following table presents the components of operating lease assets and liabilities as of December 31, 2023 and 2022 (in thousands):

The following table presents the components of operating lease cost for the years ended December 31, 2023, 2022 and 2021 (in thousands):

The following table presents the contractual maturities of LivaNova’s lease liabilities as of December 31, 2023 (in thousands):

The following table presents the weighted average remaining lease term and discount rate as of December 31, 2023 and 2022:

The following table presents the supplemental lease information for the years ended December 31, 2023, 2022 and 2021 (in thousands):

Note 13. Commitments and Contingencies

Saluggia Site Hazardous Substances

LSM, formerly a subsidiary of Sorin, one of the companies that merged into LivaNova PLC in 2015, manages site services for the campus in Saluggia, Italy. In addition to being a former LivaNova manufacturing facility, the Saluggia campus is also the location of manufacturing facilities of third parties, a cafeteria for workers, and storage facilities for hazardous substances and equipment previously used in a nuclear research center, later turned nuclear medicine business, between the 1960s and the late 1990s. Pursuant to authorization from the Italian government, LSM has, and continues to, perform ordinary maintenance, secure the facilities, monitor air and water quality and file applicable reports with the competent environmental authorities.

In 2020, LSM received correspondence from ISIN requesting that, within five years, LSM demonstrate the financial capacity to meet its obligations under Italian law to clean and dismantle any contaminated buildings and equipment, as well as to deliver hazardous substances to a national repository. This repository will be built by the Italian government at a location and time yet to be determined. ISIN subsequently published Technical Guide n. 30, which identifies the technical criteria, and general safety and protection requirements for the design, construction, operation and dismantling of temporary storage facilities for the hazardous substances. In January 2021, a list of 67 potential sites for the national repository was published.

Although there is no legal obligation to begin any work or deliver the hazardous substances, as the performance of these obligations is contingent on the construction of the as-yet unbuilt national repository, based on the aforementioned factors, the Company concluded its obligation to clean, dismantle, and deliver any hazardous substances to a national repository is probable and reasonably estimable. Accordingly, in the fourth quarter of 2020, LivaNova recognized a $42.2 million provision for this matter, which is included within other operating expenses on the consolidated statements of income (loss). The estimated liability as of December 31, 2023 was €35.8 million ($39.7 million), which represented the low end of the estimated range of loss of €35.8 million ($39.7 million) to €45.6 million ($50.5 million) as of December 31, 2023. The estimated liability as of December 31, 2022 was €34.2 million ($36.6 million). The increase in the Saluggia site remediation provision from December 31, 2022 was due to adjustments associated with expected disposal costs.

SNIA Environmental Liability

Sorin was created as a result of a spin-off from SNIA in 2004, and in 2015, Sorin was merged into LivaNova. SNIA subsequently became insolvent, and the Public Administrations sought compensation from SNIA in an aggregate amount of approximately $3.8 billion for remediation costs relating to the environmental damage at chemical sites previously operated by SNIA’s other subsidiaries.

There are proceedings relating to the SNIA bankruptcy to which LivaNova is not a party in the Bankruptcy Court of Udine and the Bankruptcy Court of Milan. In 2011, the Bankruptcy Court of Udine held that the Public Administrations were not creditors of either SNIA or its subsidiaries in connection with their claims in the Italian insolvency proceedings. The Public Administrations appealed. In 2016, the Court of Udine rejected the appeal, and the Public Administrations appealed to the Supreme Court. Similarly, in 2014, the Bankruptcy Court of Milan held that the Public Administrations were not creditors of either SNIA or its subsidiaries. The Public Administrations appealed. In April 2022, Bankruptcy Court of Milan declared the Public Administrations to be a non-privileged creditor of SNIA for up to €454 million, and the Public Administrations appealed to the Supreme Court.

In 2012, SNIA filed a civil action against Sorin in the Civil Court of Milan asserting joint liability of a parent and a spun-off company; the Public Administrations entered voluntarily into the proceeding, asking Sorin, as jointly liable with SNIA, to pay compensation for SNIA’s environmental damages. In 2016, the Court of Milan dismissed all legal actions of SNIA and of the Public Administrations further requiring the Public Administrations to pay Sorin approximately €292,000 (approximately $323,000 as of December 31, 2023) for legal fees. The Public Administrations appealed the 2016 Decision to the Court of Appeal. On March 5, 2019, the Court of Appeal issued a partial decision on the merits declaring Sorin/LivaNova jointly liable with SNIA for SNIA’s environmental liabilities in an amount up to the fair value of the net worth received by Sorin because of the Sorin spin-off, an estimated €572.1 million (approximately $633.1 million as of December 31, 2023). LivaNova appealed the partial decision on liability to the Italian Supreme Court in August 2019.

In November 2021, the Court of Appeal delivered the remainder of its decision, ordering LivaNova to pay damages of approximately €453.6 million (approximately $502.0 million as of December 31, 2023). LivaNova appealed the decision on damages in December 2021. On February 21, 2022, the Court of Appeal notified the Company that it granted the Company a suspension with respect to the payment of damages until a decision has been reached on the appeal to the Italian Supreme Court. This suspension was subject to LivaNova providing a first demand bank guarantee of €270.0 million (approximately $298.8 million as of December 31, 2023) within 30 calendar days, and on March 21, 2022, LivaNova delivered the guarantee, thereby satisfying the condition. Refer to “Note 10. Financing Arrangements” for information on the financing of the guarantee.

In November 2022, in response to one of a number of appeals asserted by LivaNova, the Supreme Court issued an ordinance, a procedural document, whereby the Supreme Court referred a question on interpretation of a European directive on demergers to the ECJ. Specifically, the ordinance asks the ECJ to provide a binding decision as to whether a company resulting from a demerger can be held jointly and severally liable not only for the established liabilities of the demerged company that were articulated at the time of demerger, but also for the environmental liabilities of the demerged company that materialized after the demerger which are derived from actions performed prior to the demerger. Following receipt of the binding decision from the ECJ, which is expected in 2024, the Supreme Court is expected to incorporate and issue a decision in response to all of the appeals of LivaNova and counter-appeals submitted by the Public Administrations. While the timing of the decisions by the ECJ and, subsequently, the Supreme Court are uncertain, the Company believes that the final decision from the Supreme Court is not expected until at least 2025.

In 2011, Caffaro, a SNIA subsidiary, sold its Brescia chemical business to Caffaro Brescia, a third party belonging to the Todisco group, and as part of the acquisition, Caffaro Brescia agreed to secure hydraulic barriers at the site and maintain existing environmental security measures. In 2020, Caffaro Brescia declared it was withdrawing from its agreement to maintain the environmental measures. In 2021, LivaNova (in addition to Caffaro Brescia, and other non-LivaNova entities) received an administrative order from the Italian Ministry of the Environment requiring the Company to ensure the maintenance of the environmental measures and to guarantee that such works remain fully operational, the annual management and maintenance for which is estimated at approximately €1 million per year. The receipt of the Order appears to be based on the aforementioned Court of Appeal decision regarding LivaNova’s alleged joint liability with SNIA for SNIA’s environmental liabilities. LivaNova’s response, dated February 16, 2021, disputes the grounds upon which the Order is based. LivaNova also appealed the Order in the Administrative Court in Brescia.

LivaNova has not recognized a liability in connection with these related matters because any potential loss is not currently probable.

Product Liability Litigation

The Company continues to be involved in litigation involving LivaNova’s 3T device. The litigation includes the cases remaining in the MDL, various US state court cases, and in jurisdictions outside the US. As of February 29, 2024, the Company was aware of approximately 70 filed and unfiled claims worldwide. The complaints generally seek damages and other relief based on theories of strict liability, negligence, breach of express and implied warranties, failure to warn, design and manufacturing defect, fraudulent and negligent misrepresentation or concealment, unjust enrichment, and violations of various state consumer protection statutes.

During the years ended December 31, 2023, 2022 and 2021 LivaNova recorded an additional liability of $34.5 million, $22.3 million and $38.1 million, respectively, due to new information received about the nature of certain claims. As of December 31, 2023, the provision for these matters was $13.9 million. While the amount accrued represents LivaNova’s best estimate for those filed and unfiled claims that LivaNova believes are both probable and estimable at this time, and which are a subset of the filed and unfiled claims worldwide of which the Company is currently aware, the actual liability for resolution of these matters may vary from the Company’s provision. The remaining claims for which a provision has not been recorded are remote or the potential loss is not estimable at this time.

The following table presents the changes in the carrying amount of the litigation provision liability for the years ended December 31, 2023, 2022 and 2021 (in thousands):

(1)Adjustments to the litigation provision are included within other operating expenses on the consolidated statements of income (loss).

(2)Included within other long-term liabilities on the consolidated balance sheets.

Caisson Contract Litigation

On November 25, 2019, LivaNova received notice of a lawsuit initiated by former members of Caisson, a subsidiary of the Company acquired in 2017. The lawsuit, Todd J. Mortier, as Member Representative of the former Members of Caisson Interventional, LLC v. LivaNova USA, Inc., was filed in the United States District Court for the District of Minnesota. The complaint alleged (i) breach of contract, (ii) breach of the covenant of good faith and fair dealing and (iii) unjust enrichment in connection with the Company’s operation of Caisson’s transcatheter mitral valve replacement program and the Company’s November 20, 2019 announcement that it was ending the program at the end of 2019. The lawsuit sought damages arising out of the 2017 acquisition agreement, including various regulatory milestone payments. In May 2022, the District Court granted LivaNova’s motion for summary judgment, and in June 2023, the Eighth Circuit Court of Appeals affirmed the decision. The Company now considers Caisson’s claim against LivaNova to be closed.

Mitral Demand Letter

On July 29, 2022, LivaNova received a demand letter from Mitral for approximately €20.8 million ($23.0 million as of December 31, 2023) for breach of warranty claims under the A&R Purchase Agreement. Specifically, the claims allege failure to disclose certain information relating to a supplier, thereby allegedly impacting the profitability of Mitral’s business in China and Japan. On March 22, 2023, Mitral served a formal claim on LivaNova in the High Court of Justice Commercial Court (King’s Bench Division) alleging damages flowing from the aforementioned asserted breaches of warranties in the A&R Purchase Agreement, and the Company filed its Defense on May 17, 2023. In November 2023, the Company entered into a settlement agreement with Mitral regarding the aforementioned matter pursuant to which the Company paid to Mitral less than €1.0 million ($1.1 million as of December 31, 2023), including costs. The Company now considers this matter closed.

Italian MedTech Payback Measure

As previously disclosed, in 2015, the Italian Parliament introduced rules regarding public contracts with the National Healthcare System for the supply of goods and services. In particular, the law introduced 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. In the intervening years since the rules were first issued, there has been considerable uncertainty about how the law will operate and what the exact timeline is for finalization. In August 2022, a decree was published which provided guidance and timetables for the rule. In response, LivaNova filed an appeal at the Administrative Court against the Decree of the Ministry of Health assessing the amount payable and against the MedTech Payback Guidelines. LivaNova also filed appeals against the regions requesting payments. In August 2023, the Administrative Court upheld LivaNova’s request to suspend the effect of the requests for payment by the regions, pending the decision by the court on the merits of the case. In November 2023, the Administrative Court, in a separate matter, asked the Constitutional Court whether the payback law is compliant with the Italian Constitution and pending the decision by the Constitutional Court, all cases brought by medical device companies in this matter are suspended. The Company has accrued for the “payback” law since 2015 based on market and product information. As of December 31, 2023 and December 31, 2022, the total amount reserved for this matter was $8.2 million and $6.4 million, respectively; however, the actual liability could vary.

Other Matters

Additionally, LivaNova is the subject of various pending or threatened legal actions and proceedings that arise in the ordinary course of LivaNova’s business. These matters are subject to many uncertainties and outcomes that are not predictable and that may not be known for extended periods of time. Since the outcome of these matters cannot be predicted with certainty, the costs associated with them could have a material adverse effect on LivaNova’s consolidated net income, financial position or liquidity.

Note 14. Stockholders' Equity

On August 6, 2021, the Company closed an offering and issued 4,181,818 ordinary shares, par value £1.00 per share, at an offering price of $82.50 per share. Net proceeds from the offering were approximately $322.6 million, after deducting underwriting discounts, commissions and offering expenses. Proceeds from the offering were used to repay the Company’s $450 million 2020 senior secured term loan. For additional information, please refer to “Note 10. Financing Arrangements.”

Accumulated other comprehensive income (loss)

The following table presents the change in each component of AOCI, net of tax and the reclassifications out of AOCI into net income (loss) for the years ended December 31, 2023, 2022 and 2021 (in thousands):

(1)Taxes were not provided for foreign currency translation adjustments as translation adjustments are related to earnings that are intended to be reinvested in the countries where earned.

Note 15. Stock-Based Incentive Plans

Stock-Based Plans

Stock-based awards may be granted under the 2015 Plan and the 2022 Plan in the form of stock options, SARs, RSUs and other stock-based and cash-based awards. As of December 31, 2023, there were approximately 12,098 shares available for future grants to LivaNova’s non-executive directors under the 2015 Plan and 1,422,656 shares pursuant to Options or Stock Appreciation Rights and 902,967 shares pursuant to other types of awards available for future grants to LivaNova’s non-executive directors and employees under the 2022 Plan. In June 2023, the Company’s shareholders approved the A&R 2022 Plan. The A&R 2022 Plan increases the aggregate number of ordinary shares that can be issued under the 2022 Plan pursuant to options or SARs from 1,900,000 to 2,250,000 and the number of ordinary shares that can be issued pursuant to awards other than options or SARs from 1,200,000 to 1,500,000.

During the year ended December 31, 2023, LivaNova issued stock-based compensatory awards with terms approved by the Compensation Committee of LivaNova’s Board of Directors. The awards with service conditions generally vest ratably over four years and are subject to forfeiture unless service conditions are met. The market performance-based awards that were issued cliff vest after three years subject to the rank of LivaNova’s total shareholder return for thethree-year period ending December 31, 2025 relative to the total shareholder returns for a peer group of companies. The adjusted free cash flow and return on invested capital operating performance-based awards that were issued, cliff vest after three years subject to the achievement of certain thresholds of cumulative results for the three-year period ending December 31, 2025.

The Company also provides an ESPP. Compensation expense related to the ESPP for the years ended December 31, 2023, 2022 and 2021 was $1.1 million, $1.2 million and $1.5 million, respectively.

Stock-Based Compensation

The following table presents the amounts of stock-based compensation recognized on LivaNova’s consolidated statements of income (loss), by expense category for the years ended December 31, 2023, 2022 and 2021 (in thousands):

The following table presents the amounts of stock-based compensation expense recognized on LivaNova’s consolidated statements of income (loss) by type of arrangement for the years ended December 31, 2023, 2022 and 2021 (in thousands):

Unrecognized Stock-Based Compensation

The following table presents the amounts of stock-based compensation cost not yet recognized related to non-vested awards, including awards assumed or issued as of December 31, 2023 (in thousands):

Stock Appreciation Rights and Stock Options

LivaNova uses the Black-Scholes option pricing methodology to calculate the grant date fair market value of SARs. The following table lists the assumptions LivaNova utilized as inputs to the Black-Scholes model for the years ended December 31, 2023, 2022 and 2021:

(1)LivaNova has not paid dividends, and no future dividends have been approved.

(2)LivaNova uses yield rates on US Treasury securities for a period that approximates the expected term of the awards granted to estimate the risk-free interest rate.

(3)LivaNova estimated the expected term of the awards granted using historic data of actual time elapsed between the date of grant and the exercise or forfeiture of options or SARs for employees.

(4)LivaNova determines the expected volatility of the awards based on historical volatility.

The following tables present the activity for service-based SARs and stock option awards:

(1)The aggregate intrinsic value of SARs and options is based on the difference between the fair market value of the underlying stock at December 31, 2023, using the market closing stock price, and exercise price for awards where the market closing stock price exceeds the exercise price.

(2)Includes the impact of expected future forfeitures.

Restricted Stock Units Awards

The following tables present the activity for service-based RSU awards:

The following tables present the activity for performance-based RSU awards:

(1)Represents the difference between the target units granted and the actual units awarded based upon the attainment of performance goals for the Company.

Note 16. Employee Retirement Plans

Defined Benefit Plans

LivaNova sponsors several defined benefit pension plans, which include plans in the US, Italy, Germany, Japan and France. The Company maintains a frozen cash balance retirement plan in the US that is a contributory, defined benefit plan designed to provide the benefit in terms of a stated account balance dependent on the employer’s promised interest-crediting rate. In Italy and France, LivaNova maintains a severance pay defined benefit plan that obligates the employer to pay a severance payment in case of resignation, dismissal or retirement. In other jurisdictions, LivaNova sponsors non-contributory, defined benefit plans designated to provide guaranteed minimum retirement benefits to eligible employees.

Risks Related to Defined Benefit Plans

The defined benefit plans expose LivaNova to various demographic and economic risks such as longevity risk, investment risks, currency and interest rate risks and in some cases inflation risk. Pension fund Trustees are responsible for and have full discretion over the investment strategy of the plan assets. In general, Trustees manage pension fund risks by diversifying the investments of plan assets and in some cases by matching the interest rate risk of liabilities in whole or in part.

The Company has an active de-risking strategy in which it consistently looks for opportunities to reduce the risks associated with its defined benefit plans. The plans are governed by Trustees who have a legal obligation to evenly balance the interests of all stakeholders and operate under the local regulatory framework.

The following table presents the change in benefit obligations and funded status of LivaNova’s US pension benefits for the years ended December 31, 2023, 2022 and 2021 (in thousands):

The following table presents the change in benefit obligations and funded status of LivaNova’s non-US pension benefits for the years ended December 31, 2023, 2022 and 2021 (in thousands):

(1)In certain non-US countries, fully funding pension plans is not a common practice. Consequently, certain pension plans have been partially funded.

The following tables present US and non-US net periodic benefit cost of LivaNova’s defined benefit pension plans by component for the years ended December 31, 2023, 2022 and 2021 (in thousands):

The following tables present the major actuarial assumptions used in determining the benefit obligations and net periodic benefit costs for LivaNova’s significant US and non-US defined benefit plans as of December 31, 2023, 2022 and 2021:

To determine the discount rate for LivaNova’s US benefit plan, the Company used the FTSE Above Median Pension Discount Curve. For the discount rate used for non-US benefit plans, LivaNova considers local market expectations of long-term returns, primarily utilizing the Iboxx Corporate Index Bond rating AA, duration higher than 10 years. The resulting discount rates are consistent with the duration of plan liabilities.

The expected long-term rate of return on plan assets assumption for LivaNova’s US defined benefit plan was derived from a study conducted by the Company’s investment managers. The study includes a review of the anticipated future long-term performance of individual asset classes and considers the appropriate asset allocation strategy, given the anticipated funding requirements of the plan, to determine the average rate of earnings expected on the funds invested.

Retirement Benefit Plan Investment Strategy

In the US, LivaNova has an account that holds the defined benefit frozen balance pension plan assets. The Plan Committee sets investment guidelines for the US pension plan. Plan assets in the US are invested in accordance with sound investment practices that emphasize long-term fundamentals. The investment objective for the plan assets in the US is to achieve a positive rate of return that would be expected to close the current funding deficit and enable LivaNova to terminate the frozen pension plan at a reasonable cost. The Plan Committee also oversees the investment allocation process, selects the investment managers, and monitors asset performance. The plan investments consist of a diversified portfolio of fixed income and equity index funds. Securities are also diversified in terms of investment location (domestic and international) tenor (short- and long-term securities), investment objective (growth and value), and size of market.

Outside the US, pension plan assets are typically managed by decentralized fiduciary committees. There is a significant variation in asset allocation policy from country to country. Local regulations, local funding rules, and local financial and tax considerations influence the funding and investment allocation process in each country.

The following table presents LivaNova’s US and Non-US pension plan target allocations by asset category as of December 31, 2023 and 2022:

Retirement Benefit Fair Values

The following is a description of the valuation methodologies used for retirement benefit plan assets measured at fair value:

Equity Mutual Funds: Valued based on the year-end net asset values of the investment vehicles. The net asset values of the investment vehicles are based on the fair values of the underlying investments of the mutual funds valued at the closing price reported in the active markets in which the individual security is traded. Equity mutual funds have a daily reported net asset value.

Fixed Income Mutual Funds: Valued based on the year-end net asset values of the investment vehicles. The net asset values of the investment vehicles are based on the fair values of the underlying investments of the mutual funds valued based on inputs other than quoted prices that are observable.

Money Markets: Valued based on quoted prices in active markets for identical assets.

The following tables present information by level for the US retirement benefit plan assets that are measured at fair value on a recurring basis as of December 31, 2023 and 2022 (in thousands):

The following tables present information by level for the Non-US retirement benefit plan assets that are measured at fair value on a recurring basis as of December 31, 2023 and 2022 (in thousands):

Refer to “Note 2. Basis of Presentation, Use of Accounting Estimates and Significant Accounting Policies” for discussion of the fair value measurement terms of Levels 1, 2, and 3.

Defined Benefit Retirement Funding

LivaNova makes the minimum required contribution to fund the US pension plan as determined by MAP - 21 and the Highway and Transportation Funding Act of 2014. The Company contributed $1.4 million, $0.6 million and $0.7 million to the pension plans (US and non-US) during the years ended December 31, 2023, 2022 and 2021, respectively. LivaNova anticipates the Company will make contributions to the US pension plan of approximately $0.2 million during the year ended December 31, 2024.

The following table presents benefit payments expected to be paid, including amounts to be paid from LivaNova’s assets, and reflecting expected future service, as of December 31, 2023 (in thousands):

Defined Contribution Plans

LivaNova sponsors defined contribution plans in the US including the Cyberonics Employee Retirement Savings Plan, which qualifies under Section 401(k) of the IRC covering US employees and the Cyberonics Non-Qualified Deferred Compensation Plan, covering certain US middle and senior management. In addition, LivaNova sponsors the Belgium Defined Contribution Pension Plan for Cyberonics’ Belgium employees. LivaNova incurred expenses for the Company’s defined contribution plans of $11.1 million, $9.0 million and $10.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Note 17. Income Taxes

Earnings Before Income Taxes and Components of Income Tax Provision

The following table presents the US and non-US components of income (loss) before income taxes and LivaNova’s income tax expense (benefit) for the years ended December 31, 2023, 2022 and 2021 (in thousands):

Effective Income Tax Rate Reconciliation

LivaNova PLC is resident in the UK for tax purposes. LivaNova’s subsidiaries conduct operations and earn income in numerous countries and are subject to the laws of taxing jurisdictions within those countries, and the income tax rates imposed in the tax jurisdictions in which LivaNova’s subsidiaries conduct operations vary. As a result of the changes in the overall level of the Company’s income, the earnings mix in various jurisdictions and the changes in tax laws, LivaNova’s consolidated effective income tax rate may vary from one reporting period to another.

LivaNova is subject to income taxes as well as non-income-based taxes in the US, the UK, the EU and various other jurisdictions. LivaNova continues to monitor the adoption of Pillar Two by the taxing jurisdictions in which it operates. The UK has enacted legislation providing for a minimum effective tax rate of 15% through a multinational top-up tax and a domestic top-up tax for accounting periods beginning on or after December 31, 2023. Draft UK legislation has also been published for an undertaxed profits rule to be introduced, although not before accounting periods beginning on or after December 31, 2024. A UTPR would be a backstop rule intended to ensure that amounts of multinational top-up tax that are not collected under foreign global minimum tax rules can in certain circumstances be collected instead in the UK. LivaNova is assessing the full implications on 2024 financial results and will continue to monitor legislative developments and related guidance in the UK and other jurisdictions that may impact LivaNova’s operations.

The following table presents a reconciliation of the statutory income tax rate to LivaNova’s effective income tax rate expressed as a percentage of loss before income tax for the years ended December 31, 2023, 2022 and 2021:

Deferred Income Tax Assets and Liabilities

The following table presents the significant components of LivaNova’s deferred tax assets and liabilities as of December 31, 2023 and 2022 (in thousands):

LivaNova reviews the realizability of its deferred tax assets by jurisdictions at each balance sheet date by weighing the positive and negative evidence including cumulative losses and impacts of transactions or other events. As of December 31, 2023 and 2022, LivaNova had valuation allowances against deferred tax assets of $182.5 million and $264.8 million, respectively. These valuation allowances were primarily related to continuing operations and are a result of significant negative evidence in the form of cumulative losses in certain jurisdictions. The decrease in valuation allowance in 2023 primarily relates to the release of valuation allowances in the UK of $110.8 million and other jurisdictions, partially offset by continued valuation allowance accruals in the US and Brazil. Any changes to the realizability of the deferred tax assets due to transactions and other events in 2024 will be accounted for during the quarter in which they occur.

The following table provides a reconciliation of the beginning and ending balances of LivaNova’s deferred tax asset valuation allowances for the years ended December 31, 2023, 2022 and 2021 (in thousands):

The following table presents NOL and tax credit carryforwards as of December 31, 2023, which can be used to reduce LivaNova’s income tax payable in future years (in thousands):

No provision has been made for income taxes on undistributed earnings of foreign subsidiaries as of December 31, 2023 because it is LivaNova’s intention to indefinitely reinvest undistributed earnings of its foreign subsidiaries. In the event of the distribution of those earnings in the form of dividends, a sale of the subsidiaries, or certain other transactions, LivaNova may be liable for income taxes and withholding taxes. As of December 31, 2023, it was not practicable to determine the exact amount of the deferred tax liability related to those investments.

Uncertain Income Tax Positions

The following table presents a reconciliation of LivaNova’s total gross unrecognized tax benefit for the years ended December 31, 2023, 2022 and 2021 (in thousands):

(1)The unrecognized tax benefit balance as of December 31, 2023 includes $4.9 million, which is presented on the consolidated balance sheets as a reduction to the related deferred tax assets for net operating loss carryforwards.

Accrued interest and penalties totaled $0.7 million, $0.3 million and $0.2 million as of December 31, 2023, 2022 and 2021, respectively, and were included in other long-term liabilities on LivaNova’s consolidated balance sheets. LivaNova records accrued interest and penalties related to unrecognized tax benefits in interest expense and foreign exchange and other income/(expense), respectively, on LivaNova’s consolidated statements of income (loss).

LivaNova operates in multiple jurisdictions with complex legal and tax regulatory environments, and the Company’s tax returns are periodically audited or subjected to review by tax authorities. LivaNova monitors tax law changes and the potential impact on its results of operations. Tax authorities may disagree with certain positions LivaNova has taken and assess additional taxes. LivaNova regularly assesses the likely outcomes of the Company’s tax positions in order to determine the appropriateness of its reserves for uncertain tax positions. However, there can be no assurance that LivaNova will accurately predict the outcome of these audits, and the actual outcome of an audit could have a material impact on LivaNova’s consolidated results of income, financial position or cash flows. If all of LivaNova’s unrecognized tax benefits as of December 31, 2023 were recognized, $0.5 million would impact the Company’s effective tax rate and $4.9 million would be in the form of a net operating loss carryforward, which is expected to require a full valuation allowance based on present circumstances. LivaNova does not anticipate the balance in unrecognized tax benefits will change significantly during the next twelve months as a results of settlement with tax authorities or the expiration of statutes or limitations.

The major jurisdictions where LivaNova is subject to income tax examinations are as follows:

Note 18. Earnings Per Share

The following table presents the basic and diluted weighted-average shares outstanding used in the computation of basic and diluted net income per share for the years ended December 31, 2023, 2022 and 2021 (in thousands of shares):

(1)Excluded from the computation of diluted earnings per share for the years ended December 31, 2023, 2022 and 2021 were shares forstock options, SARs and RSUs totaling 3.0 million,3.9 million and 3.9 million because to include them would have been anti-dilutive under the treasury stock method.

Note 19. Geographic and Segment Information

Segment Information

LivaNova identifies operating segments based on how it manages, evaluates and internally reports its business activities to allocate resources, develop and execute its strategy and assess performance. For the periods presented herein, LivaNova hadthree reportable segments: Cardiopulmonary, Neuromodulation and ACS. Net revenue of the Company’s reportable segments includes revenues from the sale of products that each reportable segment develops and manufactures or distributes.

LivaNova’s Cardiopulmonary segment is engaged in the design, development, manufacture, marketing and selling of cardiopulmonary products, including heart-lung machines, oxygenators, autotransfusion systems, perfusion tubing systems, cannulae and other related accessories.

LivaNova’s Neuromodulation segment is engaged in the design, development, manufacture, marketing and selling of devices that deliver neuromodulation therapy for treating DRE and DTD. Neuromodulation products include the VNS Therapy System, which consists of an implantable pulse generator, a lead that connects the generator to the vagus nerve, and other accessories. It also includes the development and management of clinical testing of LivaNova’s aura6000 System for treating obstructive sleep apnea. LivaNova’s Neuromodulation segment also includes costs associated with LivaNova’s former heart failure program, which, as previously disclosed, the Company began to wind down during the first quarter of 2023.

LivaNova’s ACS segment was engaged in the design, development, manufacture, marketing and selling of temporary life support products. ACS’s products, which comprise the LifeSPARC and Hemolung systems, and standalone cannulae and accessories, including ProtekDuo and transseptal (TandemHeart) cannulae, simplify temporary extracorporeal cardiopulmonary life support solutions for critically ill patients. For additional information, please refer to “Note 22. Subsequent Event.”

LivaNova operates under three geographic regions: US, Europe, and Rest of World. The table below presents net revenue by operating segment and geographic region for the years ended December 31, 2023, 2022 and 2021 (in thousands):

(1)Includes countries in Europe where the Company has a direct sales presence. Countries where sales are made through distributors are included in “Rest of World.”

(2)Other revenue primarily includes rental income not allocated to segments. For the year ended December 31, 2021, other revenue also includes the net revenue of the Company’s Heart Valve business, which was divested on June 1, 2021.

(3)Net revenue to external customers includes $41.5 million, $32.3 million and $35.8 million in the UK, LivaNova’s country of domicile, for the years ended December 31, 2023, 2022 and 2021, respectively.

(4)No single customer represented over 10% of the Company’s consolidated net revenue. No country’s net revenue exceeded 10% of the Company’s consolidated revenue except for the US.

The following table presents a reconciliation of segment income to consolidated loss before tax for the years ended December 31, 2023, 2022 and 2021 (in thousands):

(1)The Cardiopulmonary results for the years ended December 31, 2023, 2022 and 2021 include an increase in the litigation provision, net related to LivaNova’s 3T Heater-Cooler device of $34.5 million, $21.7 million and $38.1 million, respectively. Refer to “Note 13. Commitments and Contingencies” for additional information.

(2)The ACS results for the year ended December 31, 2023 include an impairment of long-lived assets of $90.0 million, and an inventory obsolescence adjustment of $12.6 million. Refer to “Note 6. Restructuring” for additional information. The ACS results for the year ended December 31, 2022 include a goodwill impairment of $129.4 million. Refer to “Note 7. Goodwill and Intangible Assets” for additional information.

(3)Other income/(expense) primarily includes rental income, non-allocated corporate expenses, and amortization of intangible assets. For the year ended December 31, 2021, other income/(expense) also includes the results of the Company’s Heart Valve business, which was divested on June 1, 2021.

The following table presents assets by reportable segment as of December 31, 2023 and 2022 (in thousands):

(1)During the year ended December 31, 2023, LivaNova recorded an impairment of the ACS reportable segment’s long-lived assets (asset group) of $90.0 million, and an inventory obsolescence adjustment of $12.6 million. Refer to “Note 6. Restructuring” for additional information.

(2)Other assets primarily include corporate assets not allocated to segments.

The following table presents capital expenditures by segment for the years ended December 31, 2023, 2022 and 2021 (in thousands):

(1)Other capital expenditures primarily include corporate capital expenditures not allocated to segments. For the year ended December 31, 2021, other capital expenditures also includes capital expenditures of the Company’s Heart Valve business, which was divested on June 1, 2021.

Geographic Information

The following table presents property, plant and equipment, net by geographic region as of December 31, 2023 and 2022 (in thousands):

Note 20. Supplemental Financial Information

The following table presents the components of inventories as of December 31, 2023 and 2022 (in thousands):

Inventories includes adjustments totaling $24.4 million and $8.2 million as of December 31, 2023 and 2022, respectively, to record balances at lower of cost or net realizable value.

The following table presents the components of property, plant and equipment, net as of December 31, 2023 and 2022 (in thousands):

The following table presents the components of accrued liabilities and other as of December 31, 2023 and 2022 (in thousands):

(1)Refer to “Note 12. Leases.”

(2)Refer to “Note 6. Restructuring.”

The following table presents the items included within foreign exchange and other income/(expense) on the consolidated statements of income (loss) for the years ended December 31, 2023, 2022 and 2021 (in thousands):

(1)Refer to “Note 9. Fair Value Measurements.”

The following table presents a reconciliation of cash, cash equivalents and restricted cash reported on the consolidated balance sheets that sum to the total of the amounts shown on the consolidated statements of cash flows as of December 31, 2023 and 2022 (in thousands):

(1)Restricted cash represents funds held as collateral for the SNIA Litigation Guarantee. Refer to “Note 13. Commitments and Contingencies.”

Note 21. New Accounting Pronouncements

Adoption of New Accounting Pronouncements

The following table provides a description of future adoptions of new accounting standards that may have an impact on LivaNova’s financial statements when adopted:

Note 22. Subsequent Event

Restructuring

During the first quarter of 2024, the Company reorganized its operating and reporting structure upon initiating the 2024 Restructuring Plan and transitioned all ACS standalone cannulae and accessories, including ProtekDuo and transseptal (TandemHeart) cannulae, into its Cardiopulmonary segment. Operations for other ACS products, including LifeSPARC and Hemolung systems, will be discontinued by the end of 2024. For additional information, please refer to “Note 6. Restructuring.”

Effective in the first quarter of 2024, LivaNova changed its reportable segments corresponding to the above-mentioned restructuring and changes in how the Company’s CODM regularly reviews information, allocates resources and assesses performance. The Company’s changes to its reportable segments are summarized as follows:

•LivaNova’s ACS segment will be included within “Other,” excluding the ACS standalone cannulae and accessories business.

•LivaNova’s ACS standalone cannulae and accessories business will be included within the Cardiopulmonary reportable segment.