LivaNova Posts Strong Q3, but Neuromodulation Bears Brunt of Delta Variant; No Change to Our FVE

LivaNova delivered strong third-quarter results that slightly outpaced our expectations, however, our adjustments for the near term weren’t material enough to shift our fair value estimate. Our more optimistic revenue growth expectations for 2021 and 2022, as well as lower interest expense, were generally offset by the increased share count and higher weighted average cost of capital, reflecting the late-summer capital raise that was partially used to pay down debt. Overall, we think these latest moves put LivaNova on stronger financial footing, with debt-to-EBITDA less than 1 time, by our estimates (compared with 3.6 times previously). Nonetheless, we do not see much in the latest quarter to change our thinking on the firm’s narrow economic moat.