Financing Arrangements

6 Months Ended

Jun. 30, 2024

Debt Disclosure [Abstract]

Financing Arrangements

Note 4. Financing Arrangements

The following table presents a summary of LivaNova’s long-term debt obligations (in thousands, except interest rates):

	June 30, 2024		December 31, 2023		Maturity	Interest Rate
Term Facilities	$	320,684	$	328,459	July 2027	8.65%
2029 Notes	249,838		—		March 2029	2.50%
2025 Notes	52,052		255,500		December 2025	3.00%
Bank of America, U.S.	1,500		1,500		January 2025	8.19%
Other	463		568
Total long-term facilities	624,537		586,027
Less: Current portion of long-term debt	19,105		17,484
Total long-term debt obligations	$	605,432	$	568,543

Revolving Credit and Term Facilities

The outstanding principal amount of LivaNova’s short-term unsecured revolving credit agreements and other agreements with various banks was $0.6 million at each of June 30, 2024 and December 31, 2023 with an average interest rate of 4.94% and loan terms ranging from overnight to 364 days as of June 30, 2024.

On March 8, 2024, LivaNova and LivaNova USA entered into Incremental Facility Amendment No. 3, which provides for LivaNova USA to obtain revolving commitments in an aggregate principal amount of $225.0 million. The $225.0 million revolving facility is subject to the terms and conditions of the 2021 First Lien Credit Agreement, as amended thereof, and replaced the previously existing $125.0 million revolving facility under the 2021 First Lien Credit Agreement. The $225.0 million revolving facility is available for working capital and other general corporate purposes and, if drawn, can be repaid at any time without premium or penalty. The $225.0 million revolving facility matures on March 8, 2029. There were no outstanding borrowings under the revolving facilities under the 2021 First Lien Credit Agreement as of June 30, 2024 and December 31, 2023.

The 2021 First Lien Credit Agreement, as amended, also requires the payment of certain commitment fees on the unused portion of the commitments, at a variable percentage based on LivaNova’s Total Net Leverage Ratio. As of June 30, 2024 and December 31, 2023, the applicable commitment fee percentage was 0.5% per annum.

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 of not more than 3.50 to 1.00, 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 and an Interest Coverage Ratio of not less than 2.00 to 1.00, 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. As of June 30, 2024, the Company was in compliance with the financial covenants contained in the 2021 First Lien Credit Agreement.

Debt discount and issuance costs related to the Initial Term Facility were $9.6 million. Amortization of debt discount and issuance costs for the Initial Term Facility was $0.5 million and $1.0 million for the three and six months ended June 30, 2024, respectively, and $0.5 million and $1.0 million for the three and six months ended June 30, 2023, respectively. Amortization of debt discount and issuance costs is included in interest expense on the condensed consolidated statements of income (loss). The unamortized discount and issuance costs related to the Initial Term Facility as of June 30, 2024 and December 31, 2023 were $5.9 million and $6.8 million, respectively. Issuance costs related to the Delayed Draw Term Facility were $1.6 million and were fully amortized as of December 31, 2023. Amortization of issuance costs for the Delayed Draw Term Facility was zero and $0.5 million for the three and six months ended June 30, 2023, respectively.

2029 Notes Issuance and 2025 Notes Repurchase Transactions

On March 8, 2024, LivaNova issued $345.0 million aggregate principal amount of 2.50% notes due 2029 by private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act, which included exercise in full of the initial purchasers’ option to purchase up to an additional $45.0 million principal amount of the 2029 Notes. The 2029 Notes are senior unsecured obligations of the Company. The Company used part of the proceeds from the issuance of the 2029 Notes to repurchase $230.0 million aggregate principal amount of the 2025 Notes in privately-negotiated transactions for an aggregate cash repurchase consideration of $270.5 million.

The 2025 Notes Repurchase Transaction was treated as a debt extinguishment. The carrying value of the related 2025 Notes, which included the unamortized debt issuance cost and discounts and the fair value of the embedded derivative, was derecognized, and the 2029 Notes issued were recognized at fair value. The difference between the consideration used to extinguish the 2025 Notes, the carrying value of the 2025 Notes (including unamortized debt discount and issuance cost) and the fair value of the embedded derivative was recognized as an extinguishment loss of $25.5 million recorded through loss on debt extinguishment on LivaNova’s condensed consolidated statements of income (loss). Any third-party costs incurred directly related to the 2025 Notes Repurchase Transaction were deferred and capitalized as additional debt issuance cost to be amortized on the 2029 Notes.

Contemporaneously with the 2025 Notes Repurchase Transaction, the Company and the financial institutions party to the 2025 Capped Calls agreed to terminate a portion of the 2025 Capped Calls in a notional amount corresponding to the amount of 2025 Notes repurchased. The Company received $22.5 million in cash consideration, the fair value of the terminated portion, upon settlement. The terms of the remaining 2025 Capped Calls remain unchanged and continue to be classified as long-term derivative assets.

2029 Notes

The sale of the 2029 Notes resulted in $332.1 million in net proceeds to the Company after deducting issuance costs. Interest is payable semiannually in arrears on March 15 and September 15. The effective interest rate of the 2029 Notes at June 30, 2024 was 9.79%. The 2029 Notes mature on March 15, 2029, unless earlier repurchased, redeemed or converted.

Debt discount and issuance costs related to the 2029 Notes were $99.6 million, including $87.5 million of discount related to the embedded derivative (discussed below), and $12.1 million of new debt issuance costs related to the 2029 Notes. Amortization of debt discount and issuance cost for the 2029 Notes was $3.9 million and $4.8 million for the three and six months ended June 30, 2024, respectively, and is included in interest expense on the condensed consolidated statements of income (loss). The unamortized debt issuance cost and discount related to the 2029 Notes as of June 30, 2024 was $95.2 million.

Commencing after the calendar quarter ending on June 30, 2024, and prior to the close of business on the business day immediately preceding December 15, 2028, the 2029 Notes will be convertible only under the following circumstances:

•During any calendar quarter commencing after the calendar quarter ending on June 30, 2024 (and only during such calendar quarter), if the last reported sale price of ordinary shares of the Company 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 is greater than or equal to 130%, or $90.22 per share, of the conversion price on each applicable trading day;

•At any time during the five business day period immediately after any ten consecutive trading day period, if the trading price per $1,000 principal amount of the 2029 Notes for each trading day of the Convertible Notes Measurement Period was less than 98% of the product of the last reported sale price of the ordinary shares on each such trading day and the conversion rate on each such trading day;

•If the Company calls any or all of the 2029 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding December 15, 2028; or

•Upon the occurrence of specified corporate events (as set forth in the indenture governing the 2029 Notes).

Upon any conversion of the 2029 Notes, LivaNova will be required to pay cash up to the aggregate principal amount of the 2029 Notes to be converted and may elect to settle the conversion obligation in excess of the aggregate principal amount of the 2029 Notes being converted in cash, shares, or a combination of the two.

On or after December 15, 2028, holders of the 2029 Notes may convert their 2029 Notes at their option at any time until the close of business on the second Scheduled Trading Day (as defined in the indenture governing the 2029 Notes) immediately preceding the maturity date.

There have been no changes to the initial conversion price of the 2029 Notes since issuance. During the three months ended June 30, 2024, the conditions for conversion were not met. Therefore, the 2029 Notes are not convertible during the three months ending September 30, 2024.

The Company may redeem the 2029 Notes in whole or in part at its option on or after March 22, 2027 for cash if the last reported sale price per ordinary share has been at least 130%, or $90.22 per share, of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption. Additionally, the Company may redeem the 2029 Notes at its option, in whole but not in part, in connection with certain tax-related events.

Holders of the 2029 Notes may require the Company to repurchase their 2029 Notes upon the occurrence of a Fundamental Change (as defined in the indenture governing the 2029 Notes) at a repurchase price equal to the principal amount thereof plus accrued and unpaid interest to, but excluding, the repurchase date. In addition, in connection with certain corporate events or if the Company issues a notice of redemption, the Company will, under certain circumstances, increase the conversion rate for holders who elect to convert their 2029 Notes in connection with such corporate event or during the relevant redemption period.

The indenture governing the 2029 Notes contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee (as defined in the indenture governing the 2029 Notes) or holders of at least 25% in aggregate principal amount of the 2029 Notes then outstanding may declare the entire principal amount of all the 2029 Notes, and accrued and unpaid interest on such 2029 Notes, to be immediately due and payable. Upon events of default in connection with specified bankruptcy events involving the Company, the 2029 Notes will become due and payable immediately.

2029 Notes Embedded Derivative

The embedded derivative of the 2029 Notes requires bifurcation from the 2029 Notes and is accounted for as a derivative liability. The fair value of the 2029 Notes embedded derivative at the time of issuance was $87.5 million and was recorded as a debt discount. The debt discount is amortized as interest expense using the effective interest method over the term of the 2029 Notes, together with other debt issuance cost and discounts. The 2029 Notes embedded derivative liability is carried on the condensed 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 in foreign exchange and other income/(expense) in the condensed consolidated statements of income (loss). The fair value of the 2029 Notes embedded derivative liability was $95.4 million as of June 30, 2024.

2029 Capped Calls

In connection with pricing the 2029 Notes, the Company entered into privately-negotiated capped call transactions with certain financial institutions. The 2029 Capped Calls have an initial strike price of $69.40, subject to certain adjustments, which corresponds to the initial conversion price of the 2029 Notes. The 2029 Capped Calls are subject to anti-dilution adjustments substantially similar to the 2029 Notes and cover the number of LivaNova’s ordinary shares underlying the 2029 Notes. The 2029 Capped Calls are generally expected to offset cash payments or the cash equivalent value of ordinary shares upon conversion if the market value per ordinary share is greater than the strike price, with such offset being subject to an initial cap price of $94.28 per share. If the Company’s share price exceeds the cap price at the time of valuation in respect of a conversion, the proceeds under the 2029 Capped Calls would not fully offset the excess principal amount due to the holders of the 2029 Notes. The 2029 Capped Calls expire on March 15, 2029 and must be settled in cash. If the 2029 Capped Calls are early terminated, settlement occurs at their termination value, which is equal to their fair value at the time of the early termination. The 2029 Capped Calls are carried on the condensed 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 in foreign exchange and other income/(expense) in the condensed consolidated statements of income (loss). The fair value of the 2029 Capped Calls was $32.1 million as of June 30, 2024. The 2029 Capped Calls were classified as long-term assets as of June 30, 2024.

2025 Notes

On June 17, 2020, LivaNova USA issued $287.5 million aggregate principal amount of 3.00% notes due 2025 by private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The 2025 Notes are senior

unsecured obligations of the Company. The sale of the 2025 Notes resulted in $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. On March 8, 2024, in connection with the issuance of the 2029 Notes, the Company used part of the net proceeds to repurchase $230.0 million aggregate principal amount of the 2025 Notes in privately-negotiated transactions. For additional information, refer to “2029 Notes Issuance and 2025 Notes Repurchase Transactions” above. The effective interest rate of the 2025 Notes at June 30, 2024 was 9.16%. The 2025 Notes mature on December 15, 2025 unless earlier exchanged, repurchased, or redeemed.

Debt discount and issuance costs related to the 2025 Notes were $82.0 million and included $75.0 million of discount attributable to the embedded derivative, discussed below, and $7.0 million of allocated issuance costs to the 2025 Notes related to legal, bank, and accounting fees. Upon the closing of the 2025 Notes Repurchase Transaction in March 2024, the remaining unamortized debt discount and issuance costs related to the 2025 Notes were $5.8 million. Amortization of debt discount and issuance costs for the 2025 Notes was $0.8 million and $4.2 million for the three and six months ended June 30, 2024, respectively, and $3.9 million and $7.7 million for the three and six months ended June 30, 2023, respectively, and is included in interest expense on the condensed consolidated statements of income (loss). The unamortized discount related to the 2025 Notes as of June 30, 2024 and December 31, 2023 was $5.4 million and $32.0 million, respectively.

Holders of the 2025 Notes are entitled to exchange the 2025 Notes at any time during specified periods, at their option. This includes the right to exchange the 2025 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 June 30, 2024. As a result, the Company has included its obligations from the 2025 Notes and the associated embedded derivative as a long-term liability on the condensed consolidated balance sheet as of June 30, 2024. The 2025 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 2025 Notes is 16.3980 ordinary shares per $1,000 principal amount of 2025 Notes (equivalent to an initial exchange price of $60.98 per share). The exchange rate is subject to adjustment in certain circumstances, as set forth in the indenture governing the 2025 Notes.

There have been no changes to the initial exchange price of the 2025 Notes since issuance. During the three months ended June 30, 2024, the conditions for exchange were not met. Therefore, the 2025 Notes are not exchangeable during the three months ending September 30, 2024.

The Company may redeem the 2025 Notes at its option prior to the 51st 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, or $79.27 per share, 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 2025 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. Additionally, the Company may redeem the 2025 Notes at its option, prior to their stated maturity, in whole but not in part, in connection with certain tax-related events.

2025 Notes Embedded Derivative

The embedded derivative of the 2025 Notes requires bifurcation from the 2025 Notes and is accounted for as a derivative liability. The fair value of the 2025 Notes embedded derivative at the time of issuance was $75.0 million and was recorded as a debt discount. The debt discount is amortized as interest expense using the effective interest method over the term of the 2025 Notes, together with other debt issuance costs and discounts. The 2025 Notes embedded derivative liability is carried on the condensed 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 in foreign exchange and other income/(expense) in the condensed consolidated statements of income (loss). The fair value of the 2025 Notes embedded derivative liability was $10.0 million and $45.6 million as of June 30, 2024 and December 31, 2023, respectively.

2025 Capped Calls

In connection with the pricing of the 2025 Notes, the Company entered into privately-negotiated capped call transactions with certain financial institutions. The 2025 Capped Calls cover, subject to anti-dilution adjustments substantially similar to those applicable to the 2025 Notes, the number of LivaNova’s ordinary shares underlying the 2025 Notes and are generally expected to offset any cash payments the Company is required to make upon exchange of the 2025 Notes in excess of the principal amount thereof in the event that the market value per ordinary share, as measured under the 2025 Capped Calls, is greater than the strike price of the 2025 Capped Calls, 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 at the time of valuation in respect of an exchange, the proceeds under the 2025 Capped Calls would not fully offset the excess principal amount due to the holders of the 2025 Notes. The 2025 Capped Calls expire on December 15, 2025 and must be settled in cash. If the 2025 Capped Calls are early terminated, settlement occurs at their termination value, which is equal to their fair value at the time of the early termination. The 2025 Capped Calls are carried on the condensed 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 in foreign exchange and other income/(expense) in the condensed consolidated statements of income (loss). In connection with the issuance of the 2029 Notes, the Company repurchased an aggregate principal amount of $230.0 million of the 2025 Notes and unwound a corresponding portion of the 2025 Capped Calls at the fair value of such portion of the 2025 Capped Calls. The fair value of the 2025 Capped Calls then in existence was $7.4 million and $38.5 million as of June 30, 2024 and December 31, 2023, respectively. As of June 30, 2024, the 2025 Capped Calls were classified as long-term assets.