Item 7. Management’sDiscussion and Analysis of Financial Condition andResults of Operations

The following discussion and analysis should be read in conjunction with the consolidated financial statements and the corresponding notes included elsewhere in this Annual Report on Form 10-K. Certain percentages presented in this discussion and analysis are calculated from the underlying whole-dollar amounts and therefore may not be recalculated from the rounded numbers used for disclosure purposes. The following discussion, analysis and comparisons generally focus on the operating results for the years ended December 31, 2022 (“2022”), December 31, 2021 (“2021”) and December 31, 2020 (“2020”).

We have elected to omit certain discussions on the earliest of the three years covered in this Annual Report on Form 10-K. Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations located in our Form 10-K for the year ended December 31, 2021, filed on March 1, 2022, for reference to discussion of the fiscal year ended December 31, 2020, the earliest of the three fiscal years presented.

Macroeconomic Environment

The current macroeconomic environment, including foreign exchange volatility, supply chain challenges, rising inflation, and geopolitical instability, has impacted and may continue to impact our business. In 2022, our net revenue and profitability were negatively affected by the unfavorable foreign currency exchange impact of the strengthened United States (“U.S.”) dollar against a number of currencies. Furthermore, we continue to experience supply chain delays and interruptions, labor shortages, inflationary pressures and logistical issues in the wake of COVID-19. Though, to date, our supply of raw materials and the production and distribution of finished products have not been materially affected, demand and low capacity worldwide have caused longer lead times and put price pressure on key raw materials. Moreover, freight and labor costs at our manufacturing facilities have increased substantially due to COVID-related disruptions and in the wake of inflation globally. The Company continues to respond to such challenges, and while we have business continuity plans in place, the impact of the ongoing challenges we are experiencing, along with their potential escalation, may adversely affect our business. The future impact of pandemic-related developments remains uncertain.

In February 2022, Russia launched an invasion in Ukraine which caused us to assess our ability to sell in the market due to international sanctions, to consider the potential impact of raw material sourced from the region, and to determine whether we are able to transact in a compliant fashion. Although the region represented only 1.0% of our total net revenue for 2022, the Russian invasion of Ukraine has increased economic uncertainties, and a significant escalation or continuation of the conflict could have a material, global impact on our operating results. In addition, our Russian employees and local subsidiary are subject to evolving laws and regulations imposed by the Russian authorities in response to international sanctions. For further discussion on these macroeconomic pressures and potential implications, refer to “Item 1A. Risk Factors” of this Annual Report on Form 10-K.

Description of the Business

We are a public limited company organized under the laws of England and Wales and headquartered in London, England. We are a global medical device company. We design, develop, manufacture and sell products and therapies that are consistent with our mission to provide hope for patients and their families through innovative medical technologies, delivering life-changing improvements for both the Head and Heart.

Background

We were organized under the laws of England and Wales on February 20, 2015 for the purpose of facilitating the business combination of Cyberonics, Inc., a Delaware corporation, and Sorin S.p.A. (“Sorin”), a joint stock company organized under the laws of Italy. The business combination became effective in October 2015. LivaNova’s ordinary shares are listed for trading on the Nasdaq Global Market under the symbol “LIVN.”

Business Segments

LivaNova is comprised of three reportable segments: Cardiopulmonary, Neuromodulation and Advanced Circulatory Support, corresponding to our primary business units. Other includes corporate shared service expenses for finance, legal, human resources, information technology and corporate business development. For the years ended December 31, 2021 and 2020, Other also includes the results of our Heart Valve business, which was divested on June 1, 2021.

Cardiopulmonary

Our Cardiopulmonary segment is engaged in the development, production and sale of cardiopulmonary products, including heart-lung machines (“HLM”), oxygenators, autotransfusion systems, perfusion tubing systems, cannulae and other related accessories. It includes the development of the Essenz Perfusion System, our next-generation HLM and a patient monitor that delivers a patient-tailored approach, supporting data-driven decisions during cardiopulmonary bypass procedures. In the fourth quarter of 2022, we completed the first clinical cases using Essenz in two major centers in Europe.

Information on Cardiopulmonary that could potentially impact our consolidated financial statements and related disclosures is incorporated by reference to “Note 14. Commitments and Contingencies: FDA Warning Letter” and “Note 14. Commitments and Contingencies: Product Liability Litigation” in the consolidated financial statements in this Annual Report on Form 10-K.

Neuromodulation

Our Neuromodulation segment is engaged in the design, development and marketing of devices that deliver neuromodulation therapy for treating drug-resistant epilepsy (“DRE”) and difficult-to-treat depression (“DTD”). It also encompasses the development and management of clinical testing of our aura6000 System for treating obstructive sleep apnea (“OSA”) and, until recently, our VITARIA System which was intended to treat heart failure.

Epilepsy

We continue to make significant investments in R&D focused on improving the Vagus Nerve Stimulation Therapy (“VNS Therapy”) System with an enhanced pulse generator, lead and programming software, and we are developing new products that provide additional features and functionality. We also support studies for our product development efforts and to build clinical evidence for the VNS Therapy System.

Peer reviewed evidence published in 2021 and 2022 continues to confirm the safety, efficacy and cost effectiveness of VNS Therapy in both the adult and pediatric patient population. In January 2022, the Journal of Neurology published a meta-analysis and systematic review that demonstrated benefits of VNS Therapy in adults with DRE that demonstrates that seizure frequency improves without an increase in the rate of serious adverse events or discontinuations. These data further support consideration of VNS Therapy for people who are not responding to anti-seizure medications (“ASMs”) and those unsuitable or unwilling to undergo surgery.

Depression, Obstructive Sleep Apnea and Heart Failure

A discussion of LivaNova’s strategic portfolio initiatives, including Depression, Obstructive Sleep Apnea and Heart Failure, are incorporated by reference to the sections titled “Depression,” “Obstructive Sleep Apnea” and “Heart Failure,” respectively, included within “Part I., Item 1. Business” in this Annual Report on Form 10-K.

Advanced Circulatory Support

Our Advanced Circulatory Support (“ACS”) segment is engaged in the development, production and sale of leading-edge temporary life support products. Our ACS products, which comprise the LifeSPARC platform and ProtekDuo cannula, simplify temporary extracorporeal cardiopulmonary life support solutions for critically ill patients. The LifeSPARC platform includes a common compact console and pump that provides temporary support for emergent rescue patients in a variety of settings. Designed for ease of use, the system offers power and versatility for multi-disciplinary programs to support more patients in more places. The platform is accompanied by four specialized and ready-to-deploy kits, each designed to support diverse cannulation strategies. In November 2022, the FDA approved our LifeSPARC platform for extracorporeal membrane oxygenation (“ECMO”). This approval allows for our LifeSPARC platform to be used for ECMO beyond six hours for patients in acute respiratory failure or acute cardiopulmonary failure, including but not limited to those receiving treatment for COVID-19.

We previously owned a 3% equity interest in ALung Technologies, Inc. (“ALung”), a privately-held medical device company focused on creating advanced medical devices for treating respiratory failure. In May 2022, we acquired the remaining 97% of equity interests for a purchase price of up to $110.0 million, consisting of $10.0 million paid at closing, subject to customary adjustments, and contingent considerations of up to $100.0 million payable upon achievement of certain sales-based milestones beginning in 2023 and ending in 2027. Due to synergies anticipated between ALung and our existing ACS business, the assets acquired, including goodwill, are recognized in our ACS segment. The goodwill for the ACS reporting unit was fully impaired during the third quarter of 2022. The fair value of the contingent consideration liability as of May 2, 2022, the acquisition date, and December 31, 2022 was $16.8 million and $15.9 million, respectively. For additional information, please refer to “Note 4. Business Combinations” and “Note 8. Goodwill and Intangible Assets” in our consolidated financial statements and accompanying notes beginning on page F-1 of this Annual Report on Form 10-K. As a result of the ALung transaction, our ACS segment also includes the Hemolung Respiratory Assist System (“Hemolung RAS”), which is the only FDA-cleared platform designed specifically for low-flow extracorporeal carbon dioxide removal for acute respiratory failure.

In August 2022, the Centers for Medicare & Medicaid Services (“CMS”) approved a New Technology Add-on Payment (“NTAP”) for our Hemolung RAS for in-patient care. The NTAP designation is awarded to novel medical technologies and services supported by clinical evidence that are expected to substantially improve the diagnosis or treatment of Medicare beneficiaries.

Divestiture of Heart Valve Business

On December 2, 2020, LivaNova entered into a Purchase Agreement with Mitral Holdco S.à r.l. (“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 the Purchaser entered into an Amended & Restated Purchase Agreement to, among other things, defer the closing of the sale and purchase of LSM by up to two years and include or amend certain additional terms relating to such deferral, including certain amendments relating to the potential hazardous substances liabilities of LSM and the related expense reimbursement provisions.

The sale of the Heart Valve business closed on June 1, 2021. We received $45.5 million in 2021 and the remaining deferred purchase price of $9.5 million in 2022. Also, in 2022, we 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, we 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).

Results of Operations

The following table summarizes our consolidated results for the years ended December 31, 2022, 2021 and 2020 (in thousands):

Operating expenses:

Impairment of disposal group — — 180,160

Loss on debt extinguishment — (60,238) (1,407)

Losses from equity method investments (53) (148) (264)

Net loss from discontinued operations, net of tax — — (1,493)

Net Revenue by Segment and Geographic Area:

The following table presents net revenue by operating segment and geographic region for the years ended December 31, 2022, 2021 and 2020 (in thousands, except for percentages):

% Change

Cardiopulmonary

Neuromodulation

Advanced Circulatory Support

Other (2)

Totals

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

(2)For the years ended December 31, 2021 and 2020, Other primarily includes the net revenue of the Company’s Heart Valve business, which was divested on June 1, 2021.

The following table presents segment (loss) income from continuing operations for the years ended December 31, 2022, 2021 and 2020 (in thousands):

% Change

(1)Other includes corporate shared service expenses for finance, legal, human resources, information technology and corporate business development. For the years ended December 31, 2021 and 2020, Other also includes the results of the Company’s Heart Valve business, which was divested on June 1, 2021.

(2)Results for the year ended December 31, 2020 include $180.2 million and $21.3 million in impairments of the Heart Valves disposal group and allocated goodwill, respectively. Additionally, the results for the year ended December 31, 2020 include a $42.2 million decommissioning provision at our Saluggia site. Refer to “Note 5. Divestiture of Heart Valve Business” and “Note 14. Commitments and Contingencies,” respectively, in our consolidated financial statements and accompanying notes, beginning on page F-1 of this Annual Report on Form 10-K for additional information.

(3)For a reconciliation of segment (loss) income from continuing operations to our consolidated loss from continuing operations before tax, refer to “Note 20. Geographic and Segment Information” in our consolidated financial statements and accompanying notes, beginning on page F-1 of this Annual Report on Form 10-K.

Cardiopulmonary

Cardiopulmonary net revenue for the year ended December 31, 2022, increased 3.6% to $500.3 million compared to the year ended December 31, 2021, primarily due to growth in the U.S. and Rest of World regions. This growth was primarily driven by oxygenators due to an increase in cardiac surgery procedures and strength in heart-lung machine placements in the Rest of World region. These increases were partially offset by unfavorable foreign currency fluctuations of approximately $33.5 million.

Cardiopulmonary segment income for the year ended December 31, 2022, was $11.2 million, compared to segment loss of $6.4 million for the year ended December 31, 2021. The increase in segment income was primarily due to a decrease in the litigation provision and legal costs related to our 3T Heater-Cooler device totaling $16.8 million, as well as an increase in net revenue, as discussed above, partially offset by an increase in SG&A expenses.

Cardiopulmonary net revenue for the year ended December 31, 2021, compared to the year ended December 31, 2020, increased 8.1% to $483.0 million primarily due to growth in oxygenator sales resulting from an increase in procedure volumes, across all regions, growth in HLM sales in the U.S. region, as well as the favorable impact of foreign currency fluctuations, partially offset by a reduction in capital equipment purchases in the Rest of World region.

Cardiopulmonary segment loss for the year ended December 31, 2021, was $6.4 million compared to segment income for the year ended December 31, 2020, of $35.7 million. The decrease in segment income was primarily due to an increase in the litigation provision related to our 3T Heater-Cooler device and related legal costs of $37.8 million, as well as an increase in sales and marketing expenses due to lower 2020 commercial related variable and discretionary spending as a result of COVID-19 during the year ended December 31, 2020 and an increase in R&D expenses due to the upcoming launch of our next-generation HLM. These increases in expenses were partially offset by an increase in net revenue, as discussed above.

Neuromodulation

Neuromodulation net revenue for the year ended December 31, 2022, increased 4.6% to $477.0 million compared to the year ended December 31, 2021, primarily due to growth across all regions driven by replacement implants as well as improving market dynamics, partially offset by unfavorable foreign currency fluctuations of approximately $9.7 million.

Neuromodulation segment income for the year ended December 31, 2022, was $172.8 million compared to $169.5 million for the year ended December 31, 2021. The increase in segment income was primarily due to an increase in net revenue, as discussed above, as well as the net favorable impact of the change in fair value of the sales-based and milestone-based contingent consideration arrangement associated with the acquisition of ImThera of $13.8 million. The increase in segment income was partially offset by increases in R&D expenses for the year ended December 31, 2022 compared to the year ended December 31, 2021 totaling $13.8 million associated with the Company’s RECOVER study and ANTHEM-HFrEF and Obstructive Sleep Apnea using Targeted Hypoglossal Neurostimulation (“OSPREY”) clinical trials, as well as an increase in SG&A expenses.

Neuromodulation net revenue for the year ended December 31, 2021, compared to the year ended December 31, 2020, increased 28.7% to $456.2 million primarily due to improving market dynamics across all regions resulting from increased hospital access and patient willingness to return to clinics.

Neuromodulation segment income increased 55.1% for the year ended December 31, 2021, compared to the year ended December 31, 2020, primarily from an increase in net revenue, as discussed above. This increase was partially offset by the net impact of the change in fair value of the sales-based and milestone-based contingent consideration arrangement associated with the acquisition of ImThera of $21.5 million, as well as an increase in sales and marketing expenses due to lower 2020 commercial related variable and discretionary spending as a result of COVID-19 during the year ended December 31, 2020 and an increase in R&D expenses due to our DTD and heart failure clinical trials.

Advanced Circulatory Support

ACS net revenue for the year ended December 31, 2022, decreased 29.1% to $39.3 million compared to the year ended December 31, 2021, primarily due to a reduction in patients treated with ECMO related to fewer severe COVID-19 cases, product mix and hospital-related challenges, partially offset by growth in non-COVID-19 cases.

ACS segment loss for the year ended December 31, 2022, was $142.6 million compared to segment income of $2.2 million for the year ended December 31, 2021. Segment loss was predominantly attributed to the impairment of the goodwill associated with our ACS segment of $129.4 million. For additional information, please refer to “Note 8. Goodwill and Intangible Assets” in the consolidated financial statements in this Annual Report on Form 10-K. Segment loss was also negatively impacted by the declines in net revenue, as discussed above. These negative impacts were partially offset by the net favorable impact of the change in fair value of a regulatory milestone-based contingent consideration arrangement associated with the TandemLife acquisition of $14.3 million.

ACS net revenue for the year ended December 31, 2021, compared to the year ended December 31, 2020, increased 31.0% to $55.5 million, resulting from continued adoption and utilization of LifeSPARC in the U.S. and an increase in procedure volumes.

ACS segment income increased 481.7% for the year ended December 31, 2021, compared to the year ended December 31, 2020, primarily from an increase in sales, as discussed above. This increase was partially offset by an increase in sales and marketing expenses due to lower commercial related variable and discretionary spending as a result of COVID-19 during the year ended December 31, 2020.

Costs and Expenses

The following table presents costs and expenses as a percentage of net revenue for the years ended December 31, 2022, 2021 and 2020:

Selling, general and administrative 45.9 % 45.6 % 47.8 %

Impairment of disposal group — % — % 19.3 %

Impairment of goodwill 12.7 % — % 2.3 %

Other operating expenses 2.9 % 5.0 % 7.3 %

Cost of Sales

Cost of sales consisted primarily of direct labor, allocated manufacturing overhead, the acquisition cost of raw materials and components.

Cost of sales as a percentage of net revenue was 30.8% for the year ended December 31, 2022, a decrease of 1.0% compared to the year ended December 31, 2021. The decrease was primarily due to favorable product mix, partially resulting from the sale of the Company’s Heart Valve business during the second quarter of 2021, as well as the net impact of the change in fair value of sales-based contingent consideration arrangements. These decreases in cost of sales were partially offset by increased costs driven by supply chain delays and interruptions, labor shortages, inflationary pressures and logistical issues in the wake of COVID-19.

Cost of sales as a percentage of net revenue was 31.8% for the year ended December 31, 2021, a decrease of 4.5% compared to the year ended December 31, 2020. The decrease was primarily due to favorable product mix, partially due to the sale of the Heart Valve business during the second quarter of 2021, unfavorable manufacturing variances during the year ended December 31, 2020, as well as a decline in product remediation expenses associated with our 3T Heater-Cooler device of $7.0 million. These decreases were partially offset by the net impact of the change in fair value of a sales-based contingent consideration arrangement of $4.5 million for the year ended December 31, 2021 compared to the year ended December 31, 2020.

Selling, General and Administrative (“SG&A”) Expenses

SG&A expenses are comprised of sales, marketing, general and administrative activities.

SG&A expenses as a percentage of net revenue was 45.9% for the year ended December 31, 2022, an increase of 0.3% compared to the year ended December 31, 2021, primarily due to increased costs resulting from inflationary pressures and logistical issues, partially offset by foreign currency fluctuations.

SG&A expenses as a percentage of net revenue decreased for the year ended December 31, 2021, compared to the year ended December 31, 2020, primarily due to an increase in sales which resulted in favorable operating leverage, partially offset by an increase in sales and marketing expenses due to lower commercial related variable and discretionary spending as a result of COVID-19 during the year ended December 31, 2020.

Research and Development Expenses

R&D expenses consist of product design and development efforts, clinical study programs and regulatory activities, which are essential to our strategic portfolio initiatives, including DTD, OSA and, until recently, heart failure.

R&D expenses as a percentage of net revenue was 15.2% for the year ended December 31, 2022, a decrease of 2.5% compared to the year ended December 31, 2021. The decrease was primarily due to a decrease in R&D expense resulting from the net impact of changes in fair value of milestone-based contingent consideration arrangements of $28.5 million. The aforementioned decrease in R&D expense was partially offset by increases associated with the Company’s RECOVER study and ANTHEM-HFrEF and OSPREY clinical trials totaling $13.8 million.

R&D expenses as a percentage of net revenue increased for the year ended December 31, 2021, compared to the year ended December 31, 2020, primarily due to an increase in R&D expense resulting from the net impact of changes in fair value of milestone-based contingent consideration arrangements of $16.6 million as well as an increase in R&D expenses due to the upcoming launch of our next-generation HLM and due to our DTD and heart failure clinical trials.

Impairments of Disposal Group and Goodwill

We test goodwill for impairment on an annual basis on October 1 or when events or changes in circumstances indicate that a potential impairment exists.

As part of our third-quarter 2022 assessment, we considered that revenue for our 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. Furthermore, future revenue projections were reduced. Based on these circumstances, we concluded it was more likely than not that the goodwill of our ACS reporting unit was impaired, and we 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, we 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.

During the year ended December 31, 2020, we recognized an impairment of $180.2 million to record the Heart Valves disposal group at fair value less estimated cost to sell. Additionally, during the year ended December 31, 2020, we recorded a $21.3 million impairment to the goodwill allocated to the Heart Valves disposal group based upon the relative fair values of the businesses. For further information refer to “Note 5. Divestiture of Heart Valve Business” in our consolidated financial statements and accompanying notes, beginning on page F-1 of this Annual Report on Form 10-K.

Other Operating Expenses

Other operating expenses consists primarily of the provision for litigation involving our 3T Heater-Cooler device, the provision for the decommissioning of hazardous substances at our site in Saluggia, Italy, merger and integration expense, restructuring expense, and the loss on the on sale of our Heart Valve business.

Other operating expenses as a percentage of net revenue was 2.9% for the year ended December 31, 2022, a decrease of 2.1% compared to the year ended December 31, 2021. The decrease was primarily due to a decrease in the litigation provision related to our 3T Heater-Cooler device of $16.3 million.

Other operating expenses as a percentage of net revenue for the year ended December 31, 2021, compared to the year ended December 31, 2020, decreased primarily due to a $42.2 million provision recognized in 2020 for our obligation to clean and dismantle contaminated buildings and equipment at our Saluggia, Italy campus as well as to deliver hazardous substances to a national repository. For further information, refer to “Note 14. Commitments and Contingencies” in our consolidated financial statements and accompanying notes, beginning on page F-1 of this Annual Report on Form 10-K. This decrease was partially offset by an increase in the litigation provision related to our 3T Heater-Cooler device of $34.2 million.

Interest Expense

We incurred interest expense of $48.3 million for the year ended December 31, 2022, compared to $50.2 million and $40.8 million for the years ended December 31, 2021 and 2020, respectively. The decrease for the year ended December 31, 2022, compared to the year ended December 31, 2021, was primarily due to the repayment of the Company’s 2020 senior secured term loan during the third quarter of 2021, partially offset by interest expense associated with the February 2022 Bridge Loan

Facility and the Initial Term Facility. The increase for the year ended December 31, 2021, compared to the year ended December 31, 2020 was primarily due to $10.5 million in increased interest expense in 2021 from the 2020 Cash Exchangeable Senior Notes (the “Notes”) that were entered into in June 2020. For further information on our debt refer to “Note 11. Financing Arrangements” in our consolidated financial statements and accompanying notes, beginning on page F-1 of this Annual Report on Form 10-K.

Loss on Debt Extinguishment

Loss on debt extinguishment for the year ended December 31, 2021, resulted from the early repayment and termination of the Company’s 2020 senior secured term loan and revolving credit facility with ACF FINCO I LP totaling $60.2 million. For further details on the loss on debt extinguishment, refer to “Note 11. Financing Arrangements” in our consolidated financial statements and accompanying notes, beginning on page F-1 of this Annual Report on Form 10-K.

Foreign Exchange and Other Income/(Expense)

Foreign exchange and other income/(expense) consist primarily of gains and losses arising from transactions denominated in a currency different from an entity’s functional currency, foreign currency exchange rate derivative gains and losses and changes in the fair value of embedded and capped call derivatives.

Foreign exchange and other income/(expense) was income of $49.9 million for the year ended December 31, 2022, compared to losses of $13.3 million and $31.9 million for 2021 and 2020, respectively. For further details, refer to “Note 21. Supplemental Financial Information” in our consolidated financial statements and accompanying notes, beginning on page F-1 of this Annual Report on Form 10-K.

Income Taxes

LivaNova PLC is resident in the UK. Our 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 our subsidiaries conduct operations vary. As a result of the changes in the overall level of our income, the earnings mix in various jurisdictions, changes in valuation allowances, and the changes in tax laws, our consolidated effective income tax rate may vary substantially from one reporting period to another.

Our effective income tax rate from continuing operations was (14.7%), (9.0)% and 0.3% for the years ended December 31, 2022, 2021 and 2020, respectively.

Compared with the year ended December 31, 2021, the decrease in the effective tax rate for 2022 was primarily attributable to changes in valuation allowances offset by other discrete items including the goodwill impairment of ACS reporting unit.

Compared with the year ended December 31, 2020, the decrease in the effective tax rate for 2021 was primarily attributable to changes in valuation allowances, the tax impact of the sale of the Heart Valve business and the early repayment and termination of the Company’s 2020 senior secured term loan. Comparatively, the effective tax rate for 2020 included the tax benefits related to the Coronavirus Aid, Relief and Economic Security (“CARES”) Act, the release of the uncertain tax positions upon the settlement of tax litigation in Italy and other items, offset by an increase to the valuation allowance of the UK and other jurisdictions.

Critical Accounting Estimates

We have adopted various accounting policies to prepare the consolidated financial statements in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”). Our most significant accounting policies are disclosed in “Note 2. Basis of Presentation, Use of Accounting Estimates and Significant Accounting Policies” and “Note 3. Revenue Recognition” in our consolidated financial statements and accompanying notes, beginning on page F-1 of this Annual Report on Form 10-K.

To prepare our consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that may affect the reported amounts of our assets and liabilities, the disclosure of contingent liabilities as of the date of our consolidated financial statements and the reported amounts of our revenue and expenses during the reporting period. Our actual results may differ from these estimates. We consider estimates to be critical if we are required to make assumptions about material matters that are uncertain at the time of estimation, or if materially different estimates could have been made or it is reasonably likely that the accounting estimate will change from period to period. The following are areas requiring management’s judgment that we consider critical:

Goodwill and Long-Lived Assets

We allocate the purchase price consideration for an acquisition to the assets we acquire and liabilities we assume 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. We allocate any excess purchase price over the fair value of the net tangible and identifiable intangible assets acquired to goodwill. We base 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.

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, trade names and customer relationships. Customer relationships consist of relationships with hospitals and surgeons in the countries where we operate. Indefinite-lived intangible assets other than goodwill are composed of IPR&D assets acquired in acquisitions.

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

We estimate the useful lives of our finite-lived intangible assets, which requires significant management judgment. We evaluate our intangible assets each reporting period to determine whether events and circumstances indicate a different useful life.

We evaluate the goodwill and indefinite-lived intangible assets for impairment annually on October 1st and whenever other facts and circumstances indicate that the carrying amounts of goodwill and other indefinite-lived intangible assets may not be recoverable. Estimating the fair value of goodwill requires various assumptions, including revenue growth rates. We performed a sensitivity analysis of the revenue growth rate for our Cardiopulmonary and Neuromodulation reporting units, as of October 1, 2022, and determined that a decrease of 0.5% in the expected revenue growth rate would not result in an impairment of goodwill. Estimating the fair value of indefinite-lived intangible assets requires various assumptions, including revenue growth rates, timing and probability of commercialization, and discount rates. We performed a sensitivity analysis, as of October 1, 2022, for each of these assumptions and determined that an increase of 0.5% in the discount rate, or a decrease of 0.5% in the expected revenue growth rate would not result in an impairment of our indefinite-lived intangible asset.

Income Taxes

We are a UK corporation, and we operate through our various subsidiaries in a number of countries throughout the world. Our provision for income taxes is based on the tax laws and rates applicable in the jurisdictions in which we operate and earn income. We use significant judgment and estimates in accounting for our income taxes. We recognize deferred tax assets and liabilities for the anticipated future tax effects of temporary differences between the financial statements basis and the tax basis of our 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.

supported, tax authorities may disagree with certain positions we have taken and assess additional taxes, and as a result, we may establish reserves for uncertain tax positions, which require a significant degree of management judgment. We regularly assess the likely outcomes of our tax positions in order to determine the appropriateness of our reserves; however, the actual outcome of an audit can be significantly different than our expectations, which could have a material impact on our tax provision. The total amount of unrecognized tax benefit, as of December 31, 2022, if recognized, would reduce our income tax expense by approximately $1.6 million.

We periodically assess the recoverability of our 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, we establish a valuation allowance. We periodically review the adequacy and necessity of the valuation allowance by considering significant positive and negative evidence relative to our 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 forecasts for the current and next two future years; size 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 our net operating losses due to ownership changes, pursuant to Internal Revenue Code (“IRC”) Section 382; and the implementation of prudent and feasible tax planning strategies, if any.

For additional information, please refer to “Note 18. Income Taxes” in the consolidated financial statements in this Annual report on Form 10-K.

Legal and Other Contingencies

Provisions for legal contingencies are recognized when the Company determines it is probable that a loss has been incurred and the amount is reasonably estimable, the determination of which requires significant judgment. Estimates are used in assessing the likelihood of a loss being incurred and when determining a reasonable estimate of the loss for each claim. Final settlement amounts may be materially different from the provision recorded. For additional information, please refer to “Note 14. Commitments and Contingencies” in the consolidated financial statements in this Annual report on Form 10-K.

Contingent Consideration Liabilities

Embedded Exchange Feature and Capped Call Derivatives

In June 2020, the Company issued cash exchangeable senior notes and entered into related capped call transactions. The cash exchangeable senior notes include an embedded exchange feature that is bifurcated from the cash exchangeable senior notes. The embedded exchange feature derivative is measured at fair value using a binomial lattice model and 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 Company uses historical volatility and implied volatility from options traded to determine expected stock price volatility which is an unobservable input that is significant to the valuation. For additional information, please refer to “Note 10. Fair Value Measurements” and “Note 11. Financing Arrangements” in the consolidated financial statements in this Annual report on Form 10-K.

Liquidity and Capital Resources

Based on our current business plan, we believe that our sources of liquidity, which primarily consist of cash and cash equivalents, future cash generated from operations and available borrowings under our current debt facilities, will be sufficient to fund our uses of liquidity, primarily consisting of purchase obligations for expected operating, working capital, capital expenditures, and debt service requirements over the twelve-month period beginning from the issuance date of this Annual Report on Form 10-K. From time to time, we may decide to access debt and/or equity markets to optimize our capital structure, raise additional capital or increase liquidity as necessary. Our liquidity could be adversely affected by the factors affecting future operating results, including those referred to in “Item 1A. Risk Factors” above and by the contingencies referred to in “Note 14. Commitments and Contingencies” in the consolidated financial statements in this Annual report on Form 10-K.

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

The following table presents selected financial information related to our liquidity as of December 31, 2022 and 2021 (in thousands):

Short-term Liquidity

Availability under the Delayed Draw Term Facility 50,000 —

Working Capital

Debt Obligations

Short-term unsecured borrowing arrangements 2,542 2,727

Debt and Capital

Our capital structure consists of debt and equity. As of December 31, 2022, our total debt of $541.5 million was 44.8% of total equity of $1,207.6 million. As of December 31, 2021, our total debt of $239.5 million was 18.5% of total equity of $1,294.6 million.

During the year ended December 31, 2022, we received $507.5 million in proceeds from the issuance of long-term debt and repaid $223.5 million in long-term debt.

During the year ended December 31, 2021, we repaid $452.3 million in long-term debt and paid $35.6 million for the make-whole premium associated with the early retirement of long-term debt. We received $322.6 million in net proceeds from the issuance of ordinary shares. Additionally, we reduced our short-term unsecured revolving credit agreements and other agreements with various banks by $2.0 million.

On June 17, 2020, our wholly-owned subsidiary, LivaNova USA, issued $287.5 million in aggregate principal amount of the 2020 Cash Exchangeable Senior Notes (the “Notes”). 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, 2022. As a result, we have included our obligations from the Notes and the associated embedded exchange feature derivative as a long-term liability on the consolidated balance sheet as of December 31, 2022. 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. If holders elect to exchange their Notes during any future periods in the event an exchange condition is met, we would be required to settle our exchange obligation through the payment of cash, which could adversely affect our liquidity.

The Company has also entered into privately negotiated capped call transactions with terms substantially similar to those applicable to the Notes. The capped call transactions 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. 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 redemption. The capped call transactions are included at their estimated fair value as of December 31, 2022 within long-term derivative assets on the consolidated balance sheet.

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.

On August 13, 2021, LivaNova PLC and its wholly-owned subsidiary, LivaNova USA (the “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 (the “2021 First Lien Credit Agreement”). 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. There were no outstanding borrowings under the 2021 First Lien Credit Agreement as of December 31, 2022.

On February 21, 2022, the Court of Appeal in Milan (“Court of Appeal”) notified the Company that it granted the Company a suspension with respect to the payment of damages in the amount of €453.6 million (approximately $484.9 million at December 31, 2022) in the SNIA litigation until a decision has been reached on our appeal to the Italian Supreme Court. This suspension was subject to providing a first demand bank guarantee of €270.0 million (approximately $288.6 million at December 31, 2022) (the “SNIA Litigation Guarantee”) within 30 calendar days.

On February 24, 2022, LivaNova PLC and its wholly-owned subsidiary, LivaNova USA, entered into an Incremental Facility Amendment No. 1 to the 2021 First Lien Credit Agreement, relating to a €200 million bridge loan facility (the “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 $220.0 million and converted the EURIBOR rate in the 2021 First Lien Credit Agreement to SOFR. LivaNova delivered a borrowing notice for $220.0 million in connection with the Bridge Loan Facility, which was funded on March 17, 2022. LivaNova used the proceeds of the Bridge Loan Facility to post a portion of the cash collateral supporting the SNIA Litigation Guarantee.

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 €270.0 million 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. At December 31, 2022, the cash collateral classified as restricted cash on the consolidated balance sheet was $301.4 million.

On March 21, 2022, LivaNova delivered the SNIA Litigation Guarantee as required by the Court of Appeal, thereby satisfying the condition to obtain the suspension for the payment of damages in connection with the SNIA litigation until review of such judgment by the Italian Supreme Court.

On July 6, 2022, LivaNova and its wholly-owned subsidiary, LivaNova USA, entered into a new incremental facility amendment to its 2021 First Lien Credit Agreement. The Incremental Amendment No. 2 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) an initial term loan facility in an aggregate principal amount of $300 million (the “Initial Term Facility”) and (ii) a delayed draw term loan facility in an additional aggregate principal amount of $50 million, which are available in one single drawing on or after July 6 until the date that is nine months after such date (the “Delayed Draw Term Facility” and, together with the Initial Term Facility, the “Term Facilities”). As of December 31, 2022, availability under the Delayed Draw Term Facility was $50 million.

Proceeds of the Initial Term Facility were used to repay in full the Bridge Loan Facility on July 6, 2022, with the remainder to be 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 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.

For additional information on our debt and debt transactions, please refer to “Note 11. Financing Arrangements” in the consolidated financial statements in this Annual report on Form 10-K.

Cash Flows

The following table presents net cash and cash equivalents provided by (used in) operating, investing and financing activities and the net increase (decrease) in the balance of cash and cash equivalents for the years ended December 31, 2022, 2021 and 2020 (in thousands):

Operating Activities

Cash provided by operating activities for the year ended December 31, 2022 decreased $32.6 million compared to the prior year. The decrease was primarily due to the net change in working capital largely associated with an increase in inventory to mitigate supply chain risk and increased payments under the Company’s short-term incentive plan. These decreases were partially offset by an increase in net income adjusted for non-cash items of $28.3 million, primarily driven by an increase in Neuromodulation and Cardiopulmonary net revenue.

Cash provided by operating activities for the year ended December 31, 2021 increased $182.0 million compared to the prior year. The increase was primarily due to a decrease in 3T litigation settlement payments of $103.4 million, the receipt of a CARES Act tax refund of $24.5 million during the year ended December 31, 2021, and an increase in net revenue.

Investing Activities

Cash provided by investing activities during the year ended December 31, 2022 decreased $75.3 million compared to the prior year largely due to proceeds received during the year ended December 31, 2021, including $42.9 million from the sale of the Company’s Heart Valve business as well as proceeds from the sale of LivaNova’s investment in and loan to Respicardia totaling $23.1 million.

Cash provided by investing activities during the year ended December 31, 2021 increased $78.7 million compared to the prior year. The increase was primarily due to proceeds from the sale of Heart Valves of $42.9 million, proceeds from the sale of our investment in and loan to Respicardia totaling $23.1 million, as well as a decrease in purchases in property, plant and equipment of $9.5 million.

Financing Activities

Cash provided by financing activities during the year ended December 31, 2022 increased $461.6 million compared to the prior year. The increase was primarily due to net borrowings during the year ended December 31, 2022 of $280.2 million compared to net repayments of borrowings of $456.7 million, as well as a payment of $35.6 million for the make-whole premium on long-term debt obligations, during the year ended December 31, 2021. These increases were partially offset by net proceeds from the issuance of ordinary shares of $322.6 million during the year ended December 31, 2021.

Cash used in financing activities during the year ended December 31, 2021 increased $492.2 million compared to the same prior year period. The increase was primarily due to a net repayment of borrowings during the year ended December 31, 2021 of $456.7 million compared to net proceeds from borrowings of $382.4 million in the prior year, as well as a payment of $35.6 million for the make-whole premium on long-term debt obligations made during the year ended December 31, 2021. These increases were partially offset by the net proceeds from the issuance of ordinary shares of $322.6 million during the year ended December 31, 2021, as well as the purchase of a capped call associated with our Notes of $43.1 million and a closing adjustment payment for the sale of our former Cardiac Rhythm Management (“CRM”) business of $14.9 million made during the year ended December 31, 2020.

Market Risk

We are exposed to certain market risks as part of our ongoing business operations, including risks from foreign currency exchange rates, interest rate risks and concentration of procurement suppliers, that could adversely affect our consolidated financial position, results of operations or cash flows.

We manage these risks through regular operating and financing activities and, at certain times, derivative financial instruments.

Foreign Currency Exchange Rate Risk

Due to the global nature of our operations, we are exposed to foreign currency exchange rate fluctuations. Historically, we have maintained a foreign currency exchange rate risk management strategy that utilizes cash flow hedges and freestanding foreign currency derivatives to reduce our exposure to unanticipated fluctuations in forecasted revenue and costs, inter-company debt, deposits and accounts receivable caused by changes in foreign currency exchange rates. Upon the settlement of our foreign currency cash flow hedges in the fourth quarter of 2022 and following an in-depth analysis of the utility of our cash flow hedging program, we discontinued our foreign currency cash flow hedging program. We continue 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.

We mitigate our credit risk relating to counterparties of our derivatives through a variety of techniques, including transacting with multiple, high-quality financial institutions, thereby limiting our exposure to individual counterparties and by entering into International Swaps and Derivatives Association, Inc. (“ISDA”) Master Agreements, which include provisions for a legally enforceable master netting agreement, with almost all of our derivative counterparties. The terms of the ISDA agreements may also include credit support requirements, cross default provisions, termination events, and set-off provisions. Legally enforceable master netting agreements reduce credit risk by providing protection in bankruptcy in certain circumstances and generally permitting the closeout and netting of transactions with the same counterparty upon the occurrence of certain events.

Interest Rate Risk

We are subject to interest rate risk on our investments and debt. We currently use interest rate derivative instruments designated as cash flow hedges to manage a portion of our 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, we agree to exchange, at specific intervals, the difference between fixed and floating interest amounts calculated by reference to agreed-upon notional principal amounts. The interest rate swaps are structured to mirror the payments terms of the underlying loan. If interest rates were to increase / (decrease) by 100 basis points, the effect on interest expense within our consolidated statement of income (loss) would be an increase / (decrease) of approximately $3 million, respectively.

Concentration of Credit Risk

Our trade accounts receivable represent potential concentrations of credit risk. This risk is limited due to the large number of customers and their dispersion across a number of geographic areas, as well as our efforts to control our exposure to credit risk by monitoring our receivables and the use of credit approvals and credit limits. In addition, we have historically had strong collections and minimal write-offs. While we believe that our reserves for credit losses are adequate, essentially all of our trade receivables are concentrated in the hospital and healthcare sectors worldwide, and accordingly, we are exposed to their respective business, economic and country-specific variables. Although we do not currently foresee a concentrated credit risk associated with these receivables, repayment is dependent on the financial stability of these industry sectors and the respective countries’ national economies and healthcare systems.

Factors Affecting Future Operating Results and Share Price

The material factors affecting our future operating results and share prices are disclosed in “Item 1A. Risk Factors” of this Annual Report on Form 10-K.

Item 7A. Quantitativeand Qualitative Disclosures About Market Risk

The information required under 7A. has been incorporated by reference to the information contained in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K under the section entitled “Market Risk.”

Item 8. FinancialStatements and Supplementary Data

Our audited consolidated financial statements and notes thereto included in “Item 15. Exhibits, Financial Statement Schedules” of this Annual Report on Form 10-K, beginning on page F-1 of this Annual Report on Form 10-K, are incorporated herein by reference.

Item 9. Changesin and Disagreements with Accountants on Accounting andFinancial Disclosure

None.

Item 9A. Controlsand Procedures

Disclosure Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

We maintain a system of disclosure controls and procedures, as defined in Rule 13a-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information is accumulated and communicated to management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure. Our management, under the supervision and with the participation of our CEO and CFO, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of December 31, 2022.

(b) Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022 using the criteria set forth in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, we concluded that the Company’s internal control over financial reporting was effective as of December 31, 2022.

The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm. Their report is included after “Item 16. Form 10-K Summary” in this Annual Report on Form 10-K.

During the fourth quarter of 2022, there were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. OtherInformation

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required for this Item 10 is incorporated by reference from our definitive Proxy Statement for the annual meeting of stockholders to be held on June 12, 2023 (the “2023 Proxy Statement”).

We have adopted a Code of Business Conduct and Ethics (the “Code of Conduct”) that applies to all employees, officers and directors of the Company. A copy of the Code of Conduct is publicly available on our website, www.livanova.com. We intend to post any amendments to the Code of Conduct or any grant of a waiver from a provision of the Code of Conduct requiring disclosure under applicable SEC rules on our website.

Item 11. ExecutiveCompensation

The information required for this Item 11 is incorporated by reference from our 2023 Proxy Statement except as to information required pursuant to Item 402(v) of the SEC Regulation S-K relating to pay versus performance.

Item 12. SecurityOwnership of Certain Beneficial Owners and Managementand Related Stockholder Matters

The information required for this Item 12 is incorporated by reference from our 2023 Proxy Statement.

Item 13. CertainRelationships and Related Transactions, and DirectorIndependence

The information required for this Item 13 is incorporated by reference from our 2023 Proxy Statement.

Item 14. PrincipalAccounting Fees and Services

The information required for this Item 14 is incorporated by reference from our 2023 Proxy Statement.

PART IV

Item 15. Exhibits, Financial Statement Schedules

(1) Financial Statements

The Consolidated Financial Statements of LivaNova PLC and its subsidiaries and the Report of Independent Registered Public Accounting Firms are included in this Annual Report on Form 10-K beginning on page F-1:

Description Page No.

Report of Independent Registered Public Accounting Firm (PCAOB ID: 238) F-1

Consolidated Balance Sheets as of December 31, 2022 and December 31, 2021 F-4

Notes to Consolidated Financial Statements F-7

(2) Financial Statement Schedules

All schedules required by Regulation S-X have been omitted as not applicable or not required, or the information required has been included in the notes to the consolidated financial statements.

(3) Index to Exhibits

The exhibits marked with the asterisk symbol (*) are filed or furnished (in the case of Exhibit 32.1) with this Form 10-K. The exhibits marked with the cross symbol (†) are management contracts or compensatory plans or arrangements filed pursuant to Item 601(b)(10)(iii) of Regulation S-K.

ExhibitNumber Document Description

21.1* List of Subsidiaries of LivaNova PLC

23.1* Consent of PricewaterhouseCoopers LLP

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

LIVANOVA PLC

By: /s/ DAMIEN MCDONALD

Damien McDonald

Chief Executive Officer

(Principal Executive Officer)

LIVANOVA PLC

By: /s/ ALEX SHVARTSBURG

Alex Shvartsburg

Chief Financial Officer

(Principal Accounting and Financial Officer)

Date: February 27, 2023

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Signature Title Date

/s/ WILLIAM A. KOZY Chair of the Board of Directors February 27, 2023

William A. Kozy

Damien McDonald

Alex Shvartsburg

/s/ FRANCESCO BIANCHI Director February 27, 2023

Francesco Bianchi

/s/ STACY ENXING SENG Director February 27, 2023

Stacy Enxing Seng

/s/ DANIEL J. MOORE Director February 27, 2023

Daniel J. Moore

/s/ SHARON O'KANE Director February 27, 2023

Sharon O'Kane, Ph.D.

/s/ ANDREA L. SAIA Director February 27, 2023

Andrea L. Saia

/s/ TODD C. SCHERMERHORN Director February 27, 2023

Todd C. Schermerhorn

/s/ BROOKE STORY Director February 27, 2023

Brooke Story

/s/ PETER WILVER Director February 27, 2023

Peter Wilver

Item 16. Form 10-K Summary

None.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of LivaNova PLC

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of LivaNova PLC and its subsidiaries(the “Company”) as of December 31, 2022and 2021and the related consolidated statements of income (loss), of comprehensive income (loss), of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the “consolidated financial statements”).We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework(2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidatedfinancial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022and 2021,and the results of itsoperations and itscash flows for each of the three years in the period ended December 31, 2022in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework(2013)issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included inManagement's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidatedfinancial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidatedfinancial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the

consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that

controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to theconsolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidatedfinancial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill Impairment Assessment – Cardiopulmonary (CP) Reporting Unit

As described in Notes2and8 to the consolidated financial statements, the Company’s consolidated goodwill balance was $768.8 million as of December 31, 2022, and the amount of goodwill associated with the CP reporting unit was $370.0 million. Management conducts impairment testing of goodwill on October 1st each year. Management 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. Fair value refers to the price that would be received if management were to sell the unit as a whole in an orderly transaction. 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. Fair value is estimated using a discounted cash flow model and requires various assumptions, including revenue growth rates.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the CP reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value of the reporting unit; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumption relating to revenue growth rates for CP; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment.These procedures alsoincluded, among others (i) testing management’s process for developing the fair value of the CP reporting unit; (ii) evaluating the appropriateness of the discounted cash flow model; (iii) testing the completeness and accuracy of underlying data used in the model; and (iv) evaluating the reasonableness of the significant assumption used by management related to the revenue growth rates for CP. Evaluating management’s assumption related to the revenue growth rates involved evaluating whether the assumption used by management was reasonable considering (i) the current and past performance of the reporting unit; (ii) the consistency with external market and industry data; and (iii) whether this assumption was consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s discounted cash flow model.

/s/ PricewaterhouseCoopers LLP

Houston, Texas

February 27, 2023

We have served as the Company’s auditor since 2018.

F-1

LIVANOVA PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(In thousands, except per share amounts)

Year Ended December 31,

Operating expenses:

Impairment of disposal group — — 180,160

Loss on debt extinguishment — (60,238) (1,407)

Losses from equity method investments (53) (148) (264)

Net loss from discontinued operations, net of tax — — (1,493)

Basic net loss per share:

Continuing operations $ (1.61) $ (2.68) $ (7.15)

Discontinued operations — — (0.03)

Diluted net loss per share:

Continuing operations $ (1.61) $ (2.68) $ (7.15)

Discontinued operations — — (0.03)

Weighted average shares used in computing net loss per share:

See accompanying notes to the consolidated financial statements

F-2

LIVANOVA PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

Year Ended December 31,

Other comprehensive (loss) income:

Net change in unrealized (loss) gain on derivatives 1,911 (3,997) 2,379

Foreign currency translation adjustment, net of tax (42,853) (31,722) 45,395

See accompanying notes to the consolidated financial statements

F-3

LIVANOVA PLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2022 and 2021

(In thousands, except share data)

Current Assets:

Prepaid expenses and other current assets 24,988 35,745

Long-term derivative assets 54,393 —

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Current litigation provision liability 29,481 32,845

Accrued employee compensation and related benefits 72,187 79,266

Long-term operating lease liabilities 29,548 35,919

Long-term employee compensation and related benefits 16,804 19,105

Long-term derivative liabilities 85,675 —

Commitments and contingencies (Note 14)

Stockholders’ Equity:

Accumulated other comprehensive (loss) income (48,119) (7,177)

See accompanying notes to the consolidated financial statements

F-4

LIVANOVA PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

Cancellation of shares (73) (97) 97 — — — —

Other comprehensive loss — — — — (34,986) — (34,986)

Other comprehensive loss — — — — (40,942) — (40,942)

See accompanying notes to the consolidated financial statements

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LIVANOVA PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OFCASH FLOWS

(In thousands)

Year Ended December 31,

Non-cash items included in net loss:

Remeasurement of contingent consideration to fair value (29,881) 564 (20,463)

Impairment of long-lived assets — — 6,762

Impairment of disposal group and loss on sale — 1,942 180,160

Changes in operating assets and liabilities:

Investing Activities:

Proceeds from sale of Heart Valves, net of cash disposed — 42,945 —

Proceeds from sale of Respicardia investment and loan — 23,057 —

Net cash (used in) provided by investing activities (38,414) 36,904 (41,844)

Financing Activities:

Proceeds from issuance of ordinary shares, net — 322,557 —

Payment of make-whole premium on long-term debt obligations — (35,594) —

Payment of contingent consideration — (5,249) (12,018)

Proceeds from short term borrowings (maturities greater than 90 days) — — 47,053

Purchase of capped call — — (43,096)

Closing adjustment payment for sale of CRM business — — (14,891)

Supplementary Disclosures of Cash Flow Information:

See accompanying notes to the consolidated financial statements

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LIVANOVA PLC AND SUBSIDIARIES’

NOTESTO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Note 1. Nature of Operations

Description of the Business

LivaNova PLC, headquartered in London, (collectively with its subsidiaries, the “Company,” “LivaNova,” “we” or “our”) is a global medical device company. We design, develop, manufacture and sell products and therapies that are consistent with our mission to provide hope for patients and their families through innovative medical technologies, delivering life-changing improvements for both the Head and Heart. We are a public limited company organized under the laws of England and Wales, and headquartered in London, England.

Business Segments

LivaNova is comprised of three reportable segments: Cardiopulmonary, Neuromodulation and Advanced Circulatory Support, corresponding to our primary business units.

Macroeconomic Environment

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 accounting principles generally accepted in the U.S. (“U.S. GAAP”).

Consolidation

The accompanying consolidated financial statements for LivaNova include LivaNova’s wholly owned subsidiaries and the LivaNova PLC Employee Benefit Trust (“the Trust”). All intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of our consolidated financial statements in conformity with U.S. 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 we may undertake in the future. Estimates are used in accounting for, among other items, valuation and amortization of intangible assets, goodwill, 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.

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Reclassifications

We have reclassified certain prior period amounts on the consolidated statements of income (loss) and the consolidated statements of cash flows for comparative purposes. These reclassifications did not have a material effect on our financial condition, results of operations or cash flows.

Cash and Cash Equivalents

We consider 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 sheet 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 sheet. As of December 31, 2022, our restricted cash balance totaled $301.4 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 14. Commitments and Contingencies.”

Accounts Receivable

Our accounts receivable consisted of trade receivables from direct customers and distributors. We maintain an allowance for doubtful accounts for potential credit losses based on our estimates of the ability of customers to make required payments, historical credit experience, existing economic conditions and expected future trends. We write off uncollectible accounts against the allowance when all reasonable collection efforts have been exhausted.

Inventories

We state our inventories at the lower of cost, using the first-in first-out (“FIFO”) method, or net realizable value. Our calculation of cost includes the acquisition cost of raw materials and components, direct labor and overhead, including depreciation of manufacturing related assets. We reduce 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.

Property, Plant and Equipment (“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. We compute 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

We allocate the amounts we pay for an acquisition to the assets we acquire and liabilities we assume 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. We base 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. We allocate 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 selling, general and administrative on the consolidated statements of income (loss). We recognize 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

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intangible assets consist primarily of developed technology and technical capabilities, including patents, related know-how and licensed patent rights, trade names and customer relationships. Customer relationships consist of relationships with hospitals and surgeons in the countries where we operate. Indefinite-lived intangible assets other than goodwill are composed of IPR&D assets acquired in acquisitions. We estimate the useful lives of our intangible assets, which requires significant management judgment. We amortize our finite-lived intangible assets over their useful lives using the straight-line method.

Amortization expense is included on our consolidated statements of income (loss) within cost of sales or selling, general and administrative (“SG&A”) based on the nature of the underlying intangible asset. We evaluate our intangible assets each reporting period to determine whether events and circumstances indicate either a different useful life or impairment. If we change our estimate of the useful life of an asset, we amortize the carrying amount over the revised remaining useful life.

Impairments of Long-lived Assets and Goodwill

Long-lived Assets Impairment

Assets Held and Used

We evaluate the carrying value of our 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 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 we operate and (iv) operating or cash flow losses.

For PP&E and intangible assets used in our 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 (asset group) is not recoverable, the amount of impairment loss is measured as the difference between the carrying value of the asset (asset group) 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 cash flows generated upon disposition. We measure fair value as the price that would be received if we 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.

We conduct impairment testing of our indefinite-lived intangible assets on October 1st each year. We test 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.

Assets Held for Sale

We classify long-lived assets as held for sale in the period in which we commit to a plan to sell the asset, the asset is available for immediate sale, the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value and the sale of the asset is probable within the next twelve months and when actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. A long-lived asset classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell and depreciation is discontinued. We recognize an impairment for any excess of carrying value over the fair value less cost to sell.

When an impairment of a disposal group is deemed necessary and the amount of the impairment exceeds the carrying value of the long-lived assets, we record the impairment to the disposal group rather than long-lived assets.We also allocate goodwill of the associated reporting unit to the disposal group based upon the relative fair value of the businesses within the reporting unit.The goodwill allocated to the disposal group is then tested for impairment.

Goodwill Impairment

We conduct impairment testing of our 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. Our operating segments are deemed to be our reporting units for purposes of goodwill impairment testing. We test 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 we determine that goodwill is more-likely-than-not impaired, we compare the fair value of the reporting unit to its carrying amount, including goodwill. Fair value refers to the price that would be received if we 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. If the carrying amount of our 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

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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 our reporting units exceeds our market capitalization, we evaluate the reasonableness of the implied control premium which includes a comparison to implied control premiums from recent market transactions within our industry or other relevant benchmark data.

Goodwill impairment evaluations are highly subjective. In most instances, they involve expectations of future cash flows that reflect our judgments and assumptions regarding future industry conditions and operations. The estimates, judgments and assumptions used in the application of our 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 would likely result in materially different asset carrying values and operating results.

Quantitative factors used to determine the fair value of the reporting units reflect our best estimates, and we believe they are reasonable. Future declines in the reporting units’ operating performance or our anticipated business outlook may reduce the estimated fair value of our reporting units and result in an impairment. 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 our sales force to effectively market and promote our products;

•increased competition, patent expirations or new technologies or treatments;

•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 Weighted Average Cost of Capital (“WACC”).

Derivatives and Risk Management

U.S. 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 other comprehensive income (“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. We evaluate hedge effectiveness at inception. Cash flows from derivative contracts are reported as operating activities on the consolidated statements of cash flows.

We use 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. We do 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 accumulated other comprehensive income (“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 our foreign currency cash flow hedges in the fourth quarter of 2022 and following an in-depth analysis of the utility of our cash flow hedging program, we discontinued our foreign currency cash flow hedging program. We continue 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.

We currently use 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, we agree to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to agreed-upon notional principal amounts. The 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

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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.

Fair Value Measurements

We follow 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 us. Unobservable inputs are inputs that reflect our 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.

Our 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.

Our 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 are from arrangements resulting from acquisitions that involve potential future payment of consideration that is contingent upon the achievement of performance milestones and 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 our Level 3 contingent consideration liability arrangements, please refer to “Note 10. Fair Value Measurements.” For further information on our Level 3 derivative and embedded derivative instruments, please refer to “Note 11. Financing Arrangements” and “Note 10. Fair Value Measurements.” For further information on our Level 3 convertible notes receivable, please refer to “Note 9. Investments.”

Investments in Equity Securities

Our investments in equity securities, and related loans, are investments in affiliates that are in varied stages of development and not publicly traded. Our equity investments are reported in investments, and related loans in other assets, on the consolidated balance sheets.

We elect 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.

Our investments in affiliates in which we have significant influence but not control are accounted for using the equity method. Our share of net income or loss is reflected as one line item on our consolidated statements of income (loss) under losses from losses from equity-method investments and will increase or decrease, as applicable, the carrying value of our equity method investments reported under investments on the consolidated balance sheets. We regularly review our investments for changes in circumstance or the occurrence of events that suggest our investment may not be recoverable, and if an impairment

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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

We offer a warranty on various products. We estimate the costs that may be incurred under warranties and record 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 net costs to repair or otherwise satisfy the claim. We include the warranty obligation in accrued liabilities and other on the consolidated balance sheets. Warranty expense is recorded to cost of goods sold on our consolidated statements of income (loss).

Retirement Benefit Plan Assumptions

We sponsor various retirement benefit plans, including defined benefit pension plans (pension benefits), defined contribution savings plans and termination indemnity plans, covering substantially all U.S. employees and employees outside the U.S. 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

We determine if an arrangement is or contains a lease at its inception. For operating leases with a term greater than 12 months, we recognize 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 our lease standard adoption date of January 1, 2019, or the lease commencement date. We do not record an operating lease asset and corresponding liability for leases with terms of 12 months or less. We recognize 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. The operating lease asset also includes any lease payments made in advance and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

As most of our leases do not provide a readily determinable implicit rate, we use our incremental borrowing rate (“IBR”) based on the information available at the lease commencement date in determining the present value of future payments. Our IBR represents an estimate of the interest rate we 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. We used the IBR available nearest to our adoption date for leases that commenced prior to that date.

Additionally, we monitor for events or changes in circumstances that may require a reassessment of our leases and determine if a remeasurement is required. For additional information, refer to “Note 13. Leases.”

Stock-Based Compensation

Stock-Based Awards

We may grant stock-based awards to directors, officers and key employees. We measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair market value of the award. We recognize equity-based compensation expense ratably over the period that an employee is required to provide service in exchange for the entire award (all vesting periods). We issue new shares upon stock option exercises, otherwise issuance of stock for vesting

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of restricted stock units or exercises of stock appreciation rights are issued from treasury shares. We have the right to elect to pay the cash value of vested restricted stock units in lieu of the issuance of new shares.

Stock Appreciation Rights (“SARs”)

A SAR confers upon an employee 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 an award’s grant date to the exercise date. SARs may be exercised at the employee’s discretion during the exercise period and do not give the employee an ownership right in the underlying stock. SARs do not involve payment of an exercise price. We use 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. We determine the expected volatility of the awards based on historical volatility. Calculation of compensation for stock awards requires estimation of volatility, employee turnover and forfeiture rates.

Restricted Stock Units (“RSUs”)

We may grant RSUs at no purchase cost to the grantee. The grantees of unvested RSUs 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 stock awards requires estimation of employee turnover and forfeiture rates.

Market Performance-Based RSU’s

We may grant market performance-based RSUs at no purchase cost to the grantee. The grantees of the units have no voting rights or rights to dividends. 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 expensed ratably over the service period. Calculation of compensation for market performance-based stock awards requires estimation of employee turnover, historical volatility and forfeiture rates.

Operating Performance-Based Awards RSU’s

We may grant operating performance-based RSUs at no purchase cost to the grantee. The grantees of the units have no voting rights or rights to dividends. 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 achievement of certain thresholds 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 adjusted based upon the percent achievement of cumulative adjusted free cash flow. Calculation of compensation expense for operating performance-based stock awards requires estimation of employee turnover, adjusted free cash flow, adjusted return on invested capital and forfeiture rates.

Income Taxes

We file federal and local tax returns in many jurisdictions throughout the world and are subject to income tax examinations for our fiscal year 2015 and subsequent years, with certain exceptions. While we believe that our tax return positions are fully supported, tax authorities may disagree with certain positions we have taken and assess additional taxes and as a result, we may

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establish reserves for uncertain tax positions, which require a significant degree of management judgment. We regularly assess the likely outcomes of our tax positions in order to determine the appropriateness of our reserves; however, the actual outcome of an audit can be significantly different than our expectations, which could have a material impact on our tax provision. Our 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. We recognize interest and penalties associated with unrecognized tax benefits and record interest in interest expense, and penalties in selling, general and administrative expense, on our consolidated statements of income (loss).

Foreign Currency

Our functional currency is the U.S. dollar; however, a portion of the revenues earned and expenses incurred by certain of our subsidiaries are denominated in currencies other than the U.S. dollar. We determine the functional currency of our 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. Our significant foreign subsidiaries are located in Europe and the U.S. The functional currency of our significant European subsidiaries is the Euro, and the functional currency of our significant U.S. subsidiaries is the U.S. dollar.

Assets and liabilities of subsidiaries whose functional currency is not the U.S. dollar are translated into U.S. dollars based on a combination of both current and historical exchange rates, while their revenues earned and expenses incurred are translated into U.S. dollars at average period exchange rates. Translation adjustments are included as AOCI on the 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 our 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

We are 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 selling, general and administrative expenses on our consolidated statements of income (loss). Contingent liabilities are recorded when we determine that a loss is both probable and reasonably estimable. Due to the fact that legal proceedings and other contingencies are inherently unpredictable, our assessments involve significant judgment regarding future events.

Note 3. Revenue Recognition

We generate our revenue through contracts with customers that primarily consist of hospitals, healthcare institutions, distributors and other organizations. Revenue is measured based on consideration specified in a contract with a customer, and excludes amounts collected on behalf of third parties. We measure the consideration based upon the estimated amount to be received. The amount of consideration we ultimately receive varies depending upon the return terms, sales rebates, discounts, and other incentives that we 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.

We have historically experienced a low rate of product returns, and the total dollar value of product returns has not been significant to our consolidated financial statements.

We recognize revenue when a performance obligation is satisfied by transferring the control of a product or providing service to a customer. Some of our contracts include the purchase of multiple products and/or services. In such cases, we allocate the transaction price based upon the relative estimated stand-alone price of each product and/or service sold. We record state and local sales taxes net; that is, we exclude sales tax from revenue. Typically, our contracts do not have a significant financing component.

We incur incremental commission fees paid to the sales force associated with the sale of products. We apply the practical expedient within ASC 606-10-50-22 and have 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 we generate our revenue. For more detailed information about our reportable segments including disaggregated revenue results by major product line and primary geographic markets, see “Note 20. Geographic and Segment Information.”

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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, we allocate a portion of the sales prices to installation obligations and recognize that revenue when the service is provided. We recognize 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 drug-resistant epilepsy (“DRE”) and difficult-to-treat depression (“DTD”). Our Neuromodulation product line includes the Vagus Nerve Stimulation Therapy (“VNS Therapy”) System, which consists of an implantable pulse generator, a lead that connects the generator to the vagus nerve, and other accessories. We recognize revenue for Neuromodulation product sales when control passes to the customer.

Advanced Circulatory Support Products

Advanced Circulatory Support (“ACS”) products are comprised of the LifeSPARC platform, ProtekDuo cannula kits and the Hemolung Respiratory Assist System (“Hemolung RAS”). The LifeSPARC platform includes a common compact console and pump that provides temporary support for emergent rescue patients in a variety of settings. The platform is accompanied by four specialized ProtekDuo cannula kits designed to support diverse cannulation strategies. The Hemolung RAS, which was acquired in May 2022 as part of the acquisition of ALung, is the only FDA-cleared platform designed specifically for low-flow extracorporeal carbon dioxide removal for acute respiratory failure. Advanced Circulatory Support revenue is recognized when control passes to the customer, usually at the point of shipment.

Contract Balances

Due to the nature of our 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, 2022 and 2021. As of December 31, 2022 and 2021, contract liabilities of $14.1 million and $9.8 million, respectively, were included within accrued liabilities and other and other long-term liabilities on the consolidated balance sheets.

Note 4. Business Combinations

As of December 31, 2021, LivaNova owned a 3% equity interest in ALung Technologies, Inc. (“ALung”), a medical device company focused on creating advanced medical devices for treating respiratory failure. In May 2022, we 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.

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

Cash and other considerations $ 15,586 $ — $ 15,586

(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 following table presents the preliminary purchase price allocation at fair value for the ALung 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.

Goodwill arising from the ALung acquisition, which is not deductible for tax purposes, primarily represents the synergies anticipated between ALung and our ACS business. The assets acquired, including goodwill, are recognized in our ACS segment. The goodwill for the ACS reporting unit was fully impaired during the third quarter of 2022. Please refer to “Note 8. Goodwill and Intangible Assets” for further details.

We recognized ALung acquisition-related expenses of approximately $5.1 million during the year ended December 31, 2022, within “Selling, general and administrative” expenses on our consolidated statement 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 for disclosure purposes.

The 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 our internal strategic plan and is a Level 3 fair value measurement, which includes the following significant unobservable inputs (in thousands):

Credit risk discount rate 6.4% - 8.0%

Revenue volatility 25.7%

For a reconciliation of the beginning and ending balance of contingent consideration liabilities refer to “Note 10. Fair Value Measurements.”

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Note 5. Divestiture of Heart Valve Business

As a result of entering into the Purchase Agreement, during the fourth quarter of 2020 the Company concluded that the assets and liabilities of the Heart Valve business being sold met the criteria to be classified as held for sale. As a result, we recognized an impairment of $180.2 million during the fourth quarter of 2020 to record the Heart Valves disposal group at fair value less estimated cost to sell. Additionally, we recorded a $21.3 million impairment to the goodwill allocated to the Heart Valves disposal group based upon the relative fair values of the businesses within Other.

The sale of the Heart Valve business closed on June 1, 2021. We received $45.5 million in 2021, and the remaining deferred purchase price of $9.5 million in 2022. Also, in 2022, we 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, we 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, we 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, we 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

We initiate 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, we initiated a reorganization plan (the “2020 Plan”) to reduce our cost structure. We incurred restructuring expenses of $5.3 million during the year ended December 31, 2020 primarily associated with severance costs for 54 employees, and $9.7 million during 2021, primarily associated with severance costs for 27 additional employees during 2021 under the 2020 Plan and lease abandonment costs. The 2020 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 includes a workforce reduction to be completed by mid-2023. We recognized restructuring expense of $6.6 million during the year ended December 31, 2022. The total estimated restructuring costs associated with the plan are approximately $10.0 million including employee termination benefits, consulting fees and contract termination costs.

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The following table presents a reconciliation of the beginning and ending balance of the accruals and other reserves recorded in connection with our restructuring plans included within accrued liabilities and other long-term liabilities on the consolidated balance sheet for the years ended December 31, 2022, 2021 and 2020 (in thousands):

Employee Severance and Other Termination Costs Other Total

(1)Cumulative restructuring expense, inclusive of discontinued operations, since the merger of Cyberonics, Inc. and Sorin S.p.A. (“Sorin”) in October 2015 totaled $135.4 million as of December 31, 2022.

The following table presents restructuring expense by reportable segment for the years ended December 31, 2022, 2021 and 2020 (in thousands):

Advanced Circulatory Support 1,999 — —

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

Note 7. Product Remediation Liability

On December 29, 2015, we received an FDA Warning Letter (the “Warning Letter”) alleging certain violations of FDA regulations applicable to medical device manufacturing at our Munich, Germany and Arvada, Colorado facilities. On October 13, 2016, the CDC and FDA separately released safety notifications regarding 3T Heater-Cooler devices in response to which we issued a Field Safety Notice Update for U.S. users of our 3T Heater-Cooler devices to proactively and voluntarily contact facilities to facilitate implementation of the CDC and FDA recommendations.

On December 31, 2016, we recognized a liability for a product remediation plan related to our 3T device. The remediation plan consisted primarily of a modification of the 3T device design to include internal sealing and the addition of a vacuum system to new and existing devices to address regulatory actions and to reduce further the risk of possible dispersion of aerosols from 3T devices in the operating room. We concluded that it was probable that a liability had been incurred upon management’s approval of the plan and the commitments made by management to various regulatory authorities globally in November and December 2016, and furthermore, the cost associated with the plan was reasonably estimable.

In April 2017, we obtained CE Mark in Europe for the design change of the 3T device, and in October 2018, the FDA concluded that we could commence the vacuum canister and internal sealing upgrade program in the U.S. On February 25, 2020, LivaNova received clearance for K191402, a 510(k) for the 3T devices that addressed issues contained in the 2015 Warning Letter along with design changes that further mitigate the potential risk of aerosolization. Concurrent with this clearance, (1) 3T devices manufactured in accordance with K191402 will not be subjected to the import alert and (2) LivaNova initiated a correction to distribute the updated Operating Instructions cleared under K191402. In December 2022, we received a close-out letter from the FDA for the Warning Letter the Company received on December 29, 2015. Closure of the 2015 Warning Letter represents the culmination of LivaNova’s corrective actions implemented at its Munich manufacturing facility and to the 3T Heater-Cooler device design.

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The following table presents the changes in the product remediation liability for the years ended December 31, 2022, 2021 and 2020 (in thousands):

Remediation activity (5,743)

Effect of changes in foreign currency exchange rates 349

Remediation activity (880)

Effect of changes in foreign currency exchange rates (81)

Remediation activity (15)

Effect of changes in foreign currency exchange rates (47)

We recognized product remediation expenses during the years ended December 31, 2022, 2021 and 2020 of nil, $0.8 million and $7.9 million, respectively. In addition to changes to the estimated product remediation liability, product remediation expenses include internal labor costs, costs to remediate certain inspectional observations made by the FDA at our Munich facility and costs associated with the incorporation of the modification of the 3T device design into the next generation 3T device. These costs and related legal costs are expensed as incurred and are not included within the product remediation liability presented above. As of December 31, 2022, the liability related to the litigation involving the 3T device was $32.5 million. Our related legal costs are expensed as incurred. For further information, please refer to “Note 14. Commitments and Contingencies.”

Note 8. Goodwill and Intangible Assets

The following table presents our finite-lived and indefinite-lived intangible assets as of December 31, 2022 and 2021 (in thousands):

Finite-lived intangible assets:

Other intangible assets 756 616

Accumulated amortization - Customer relationships 72,820 65,106

Accumulated amortization - Developed technology 80,219 68,488

Accumulated amortization - Trade names 16,483 16,500

Accumulated amortization - Other intangible assets 651 506

Indefinite-lived intangible assets:

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The following table presents the amortization periods for our finite-lived intangible assets as of December 31, 2022:

Minimum Life in years Maximum Life in years

Customer relationships 8 18

Developed technology 14 17

The following table presents the estimated future amortization expense based on our finite-lived intangible assets as of December 31, 2022 (in thousands):

Goodwill

The following table presents the changes in the carrying amount of goodwill by reportable segment for the years ended December 31, 2022, 2021 and 2020 (in thousands):

Cardiopulmonary Neuromodulation Advanced Circulatory Support Other (1) Total

Foreign currency adjustments (22,793) — — — (22,793)

Goodwill as a result of acquisition (3) — — 25,893 — 25,893

Measurement period adjustments — — 977 — 977

Foreign currency adjustments (28,212) — — — (28,212)

(1)Other includes goodwill associated the Company’s Heart Valve business, which was divested on June 1, 2021.

(2)During the year ended December 31, 2020, the Company recognized a $21.3 million impairment of goodwill allocated to Heart Valves. Refer to “Note 5. Divestiture of Heart Valve Business” for additional information.

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

(4)During the year ended December 31, 2022, the Company recognized a $129.4 million impairment of goodwill associated with the Company’s ACS business.

On December 2, 2020, LivaNova entered into a Purchase Agreement 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. We performed a quantitative assessment as of December 2, 2020 of the goodwill associated with the previously reported Cardiovascular reporting unit and concluded that the goodwill was not impaired. We then allocated $21.3 million of the previously reported Cardiovascular goodwill to the Heart Valves disposal group based on the relative fair values of the businesses within the previously reported Cardiovascular reporting unit and recognized a $21.3 million impairment to the allocated goodwill. For additional information refer to “Note 5. Divestiture of Heart Valve Business.”

As part of our third-quarter 2022 goodwill impairment assessment, we considered that revenue for our ACS reporting unit during the nine months ended September 30, 2022, had declined by approximately 29% compared to the prior year period,

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primarily as a result of a reduction in severe COVID-19 cases, hospital-related challenges and product mix. Furthermore, future revenue projections were reduced. Based on these circumstances, we concluded it was more likely than not that the goodwill of our ACS reporting unit was impaired, and we 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, we 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 our consolidated statements of income (loss) during the year ended December 31, 2022.

We performed a quantitative assessment for our Cardiopulmonary and Neuromodulation reporting units as of October 1, 2022. The quantitative impairment assessment was performed using management’s current estimate of future cash flows. We concluded that the fair value of our Cardiopulmonary and Neuromodulation reporting units exceeded the carrying value of the respective reporting units by 32% and 467%, respectively. Therefore, we concluded that our Cardiopulmonary and Neuromodulation reporting units’ goodwill was not impaired on the October 1, 2022 test date.

Cumulative goodwill impairments from continuing operations since the merger of Cyberonics, Inc. and Sorin in October 2015 totaled $193.1 million as of December 31, 2022.

Note 9. Investments

The following table presents the carrying value of our 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. These below equity investments are included in investments on the consolidated balance sheets as of December 31, 2022 and 2021 (in thousands):

ALung Technologies, Inc. (2) — 3,000

(1)During the second quarter of 2021 the Company received a cash dividend from its investment in MD Start II of $3.1 million, which is included in “Foreign exchange and other income/(expense)” on the consolidated statements of income (loss) for the year ended December 31, 2022.

LIVN US Equity

LIVN · 10-K · period ended 2022-12-31

Item 7. Management’sDiscussion and Analysis of Financial Condition andResults of Operations

Item 7A. Quantitativeand Qualitative Disclosures About Market Risk

Item 8. FinancialStatements and Supplementary Data

Item 9. Changesin and Disagreements with Accountants on Accounting andFinancial Disclosure

Item 9A. Controlsand Procedures

Item 9B. OtherInformation

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. ExecutiveCompensation

Item 12. SecurityOwnership of Certain Beneficial Owners and Managementand Related Stockholder Matters

Item 13. CertainRelationships and Related Transactions, and DirectorIndependence

Item 14. PrincipalAccounting Fees and Services

Item 15. Exhibits, Financial Statement Schedules

Item 16. Form 10-K Summary

LIVN US Equity☆

LIVN · 10-K · period ended 2022-12-31

Item 7. Management’sDiscussion and Analysis of Financial Condition andResults of Operations

Item 7A. Quantitativeand Qualitative Disclosures About Market Risk

Item 8. FinancialStatements and Supplementary Data

Item 9. Changesin and Disagreements with Accountants on Accounting andFinancial Disclosure

Item 9A. Controlsand Procedures

Item 9B. OtherInformation

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. ExecutiveCompensation

Item 12. SecurityOwnership of Certain Beneficial Owners and Managementand Related Stockholder Matters

Item 13. CertainRelationships and Related Transactions, and DirectorIndependence

Item 14. PrincipalAccounting Fees and Services

Item 15. Exhibits, Financial Statement Schedules

Item 16. Form 10-K Summary

LIVN US Equity