to the LevaNova PLC second quarter 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. As a reminder, this conference call is being recorded. I would now like to introduce you to your host for today's conference, Ms. Briana Gotlin, LevaNova's Vice President of Investor Relations. Briana, please go ahead.

Thank you and welcome to our conference call and webcast discussing LevaNova's financial results for the second quarter of 2026. Joining me on today's call are Vladimir Makatsaria, our Chief Executive Officer and member of the Board of Directors, Alex Shvartsburg, our Chief Financial Officer, and Ahmet Tezel, our Chief Innovation Officer. Before we begin, I would like to remind you that discussions during this call will include forward-looking statements. Factors that could cause actual results to differ materially are discussed in the company's most recent filings and documents furnished to the SEC, including today's press release that is available on our website. We do not undertake to update any forward-looking statements. Also, the discussions will include certain non-GAAP financial measures with respect to our performance. including but not limited to revenue results which will be stated on a constant currency basis. Reconciliations to the most directly comparable GAAP financial measures can be found in today's press release which is available on our website. We have also posted a presentation to our website that summarizes the points of today's call. This presentation is complementary to the other call materials and should be used as an enhanced communication tool. You can find the presentation and press release in the investor section of our website under news, events, and presentations at investor.LevaNova.com. With that, I'll turn the call over to Vlad.

Thank you, Briana, and thank you everyone for joining us today. Welcome to LevaNova's conference call for the second quarter of 2026. Before reviewing our strong quarterly performance, I would like to begin by recognizing something fundamental to Livanova's long-term success. Exceptional people deliver strong results. Over the past several months, we have continued to strengthen our leadership team while also honoring leaders whose contributions helped shape the company we are today. I want to recognize Franco Poletti, who recently retired after more than 40 years with Livanova. Franco has been instrumental in building our cardiopulmonary business into a global leader with lasting contributions across innovation, operations, and culture. On behalf of the entire company, thank you, Franco, for four decades of extraordinary leadership. It is my pleasure to share that Stefano Folli has joined Livanova as president of our cardiopulmonary business. Stefano joins our experienced CP team after a distinguished career with Philips, where he most recently served as executive vice president, global president, ambulatory monitoring, and diagnostics. He brings deep industry expertise and strong commitment to advancing our strategy for customers and patients worldwide. Over the past few months, Franco and Stefano have been working closely together on a smooth transition, ensuring our continued momentum into the next chapter of our cardiopulmonary business. I'd also like to welcome Anne Liddy, our new chief legal officer, who joins us from Hologic, where she most recently served as general counsel. Anne is an accomplished global executive with extensive We look forward to her joining us later this month. For the remainder of the call, I will discuss our second quarter results and provide updated top line guidance for 2026. After my comments, Ahmet will discuss key innovation updates, and Alex will then provide additional details on our results and updated 2026 guidance. I will wrap up with closing remarks before moving to Q&A. We delivered a strong quarter of double-digit reported revenue growth with strength across all regions driven by robust performance in our cardiopulmonary and epilepsy businesses. We're pleased to report record quarterly revenue and earnings per share on a dollar basis, while also continuing to expand margins and drive profitable growth. For the cardiopulmonary segment, revenue was $222 million in the quarter, an increase of 10% versus the second quarter of 2025, led by strength in Europe. Heart-lung machine revenue, grew in the mid-teens in the quarter, driven by an increase in essence placements in both a sequential and year-over-year basis, and sustained favorable price premiums. Cardiopulmonary consumables revenue encompasses all products in our cardiopulmonary portfolio, excluding HLM. Consumables grew in the high single digits in the quarter. Driven by low double-digit growth in oxygenators and perfusion tubing kits, partially offset by lower growth in outer transfusion systems and cannula. Improvements in third-party component availability combined with internal manufacturing optimization have driven meaningful year-over-year increases in oxygenator output, supporting our performance year-to-date. I'd now like to provide an update on our strategy to expand Oxygenator output and continue gaining market share. Demand continues to exceed the market's ability to supply, and we believe this creates a significant opportunity to expand our market position. Our operational strategy to capitalize on that opportunity is built on three key components. Over the past several years, we have gained share by increasing our output through internal manufacturing process improvements. Second, we have invested in expanding our internal manufacturing capacity with a new production line on track to go live in the second half of this year. Third, our strategy is to further increase long-term manufacturing output by partnering with suppliers to address critical component constraints, which have been the primary factor limiting faster market share expansion. Recently, we advanced that strategy by entering into a long-term agreement with Thermo Fisher Scientific, securing access to a critical oxygenator component. Together, our internal capacity expansion and this agreement position us to increase output, capture underserved demand, and consistently supply our customers, all of which contribute to a meaningful competitive advantage. The Thermo Fisher Agreement builds on our existing 2026 expansion plans. We expect its benefits to build over the medium to long term, further strengthening the growth outlook for our oxygenator business. For the full year 2026, we now expect cardiopulmonary revenue to grow 9.5% to 10.5%, up from 8.5% to 9.5% previously. We continue to expect Essence to represent approximately 80% of annual HLM units placements in 2026, up from 55% in 2025. This forecast assumes continued market share gains in consumables as we execute on our manufacturing expansion plans. Turning to epilepsy. Revenue increased 10% versus the second quarter of 2025. Epilepsy revenue in the Europe and rest of world regions increased a combined 15% versus the prior year period. while U.S. epilepsy revenue increased 8% year-over-year. Performance was driven by favorable realized price and volume, supported by impactful clinical evidence, improved reimbursement, and sustained commercial excellence. Improved realized pricing in the second quarter was driven by reduced volume discounting in addition to our standard annual list price increase. We are encouraged by CMS's preliminary recommendation to maintain VNS therapy new patient implants in the new tech ambulatory payment classification, as well as the proposed additional increase in the end-of-service APC reimbursement in 2027. We believe this increase, if implemented, will be a positive development for patients and providers that expands access to care and supports long-term VNS therapy growth. At the same time, the core data continue to drive meaningful changes in physician behavior. The growing body of real world evidence is accelerating referrals, strengthening clinicians' confidence, and supporting early adoption of VNS therapy in the treatment pathway. Core is not only strengthening The combination of improved reimbursement, expanding market access, a strengthening patient funnel, and the growing influence of core gives us increasing confidence in the trajectory of the business. As a result, We're raising our full year 2026 epilepsy revenue growth outlook to 7% to 8%, up from 6% to 7% previously. In summary, we delivered strong second quarter growth driven by the Essence upgrade cycle and market share gains in oxygenators and cardiopulmonary, as well as improved US reimbursement and compelling clinical data in epilepsy. Looking ahead, we expect these drivers to sustain through 2026 and beyond. As a result, we're now guiding full-year 2026 revenue growth between 8 and 9 percent, up from 7 to 8 percent previously. The stop-loss guidance implies 2026 performance at the high end of the 2025 to 2028 and the growth framework we outlined at Invest Today. Alex will provide additional details on our 2026 guidance later in the call. With that, I'll hand the call over to Ahmet to cover key innovation updates across the portfolio.

Thank you, Vlad. Innovation is fueling our growth today while positioning us for sustained long-term value creation. Starting with CardioPulmonary, We're excited about the long term agreement with Thermo Fisher and look forward to partnering with them. This agreement will supply a critical component for both our current oxygenated portfolio and our clinically differentiated next generation oxygenator. Our next generation oxygenator is designed to deliver best in class performance through enhanced gas transfer efficiency, We believe these attributes represent a meaningful advancement in oxygenator technology and further reinforce our commitment to reliability and supply continuity. We are in the manufacturing scale-up phase with facility expansion and a new dedicated production line both underway. Importantly, this new line will operate separately from the lines currently used for our INSPIRE product and will not require any trade-off in manufacturing space or floor capacity. We continue to expect launch in 2028. In epilepsy, The limited market release of our cloud-based clinician portal and application continues to progress well, with excellent clinician feedback from early users. The US sales force is working to expand adoption across the next wave of accounts ahead of our full launch. As a reminder, the financial impact from the portal is expected to be limited this year. The digital health platform is already delivering meaningful workflow And connectivity benefits for patients and clinicians while establishing the foundation for future capabilities. This includes remote titration with our next generation IPG that we continue to expect to launch in 2027. More broadly, this is a strategic investment in connected care and epilepsy is just the first step. Importantly, it also establishes a single shared cloud platform across the entire portfolio. That means the same digital infrastructure we're building for epilepsy can be leveraged across OSA, depression, and cardiopulmonary, accelerating the cadence of our software and digital health innovation and supporting a connected ecosystem approach. We believe we're at the forefront in leveraging agentic AI in product development and cloud-connected platforms in the medtech space and look forward to better serving our patients and clinicians with this platform. Turning to OSA, we continue to advance our next generation MRI compatible system designed to support commercialization with digital features. Based on the current status of our program, we now expect to submit the PMA supplement between the second half of 2026 and the first half of 2027. The timing adjustment does not impact our long-term commercial opportunity. The $200 to $400 million 2030 revenue target remains unchanged from what we outlined at investor day. Our differentiated clinical data supports our entry and competitive position in this underserved market. In June, we shared new data showing that the use of polysync algorithm increased the cumulative AHI response rate to approximately 85% in patients with moderate to severe OSA treated with our PHGNS technology. These results underscore the strength of our therapy in a challenging patient population, including those with higher BMI, more severe OSA, and complete concentric collapse, or CCC, and highlight a meaningful opportunity to drive even better outcomes As a reminder, Polysync builds on our differentiated PHGNS technology, which utilizes a six-contact electrode positioned on the proximal hypoglossal nerve to enable broader muscle recruitment and flexible therapy optimization. Importantly, Polysync demonstrated the ability to convert non-responders into responders further strengthening our competitive profile and expanding the potential addressable patient population. Feedback from our physicians has been overwhelmingly positive. During our recent advisory board discussions, clinicians highlighted the potential for PoliSync to further improve patient outcomes. The original Osprey data without PoliSync delivered competitive clinical outcomes. in line with the current HGNS alternatives. With PoliSync, the number of non-responders is significantly reduced to just roughly one in seven patients compared to the current standard of care of approximately one in three. This represents a substantial improvement in successful clinical outcomes. This has the potential to expand penetration in a broader range of patients which significantly strengthens our competitive positioning versus existing HGNS therapy. As we continue to generate clinical evidence and advance innovation, our objective remains clear. To improve outcomes for patients, enhance the experience for physicians, and further differentiate our therapy in a large and under-penetrated market. Now turning to difficult to treat depression. We remain in active engagement and live dialogue with CMS. As part of our ongoing engagement efforts, our 36-month data from the RECOVER trial has been submitted to preprint list server in advance of the peer-reviewed publication. We expect the preprint will be available this month. The data further validates the long-term benefits of BNS therapy. Patients in the active treatment arm continue to demonstrate sustained improvements through the three years, including ongoing benefits in depressive symptoms, as well as durable gains in function and quality of life. Importantly, patients in the control arm experience meaningful improvements after initiating active therapy, ultimately following a trajectory similar to that observed in the original treatment group. Taken together, these findings further strengthen the growing body of evidence supporting the durability and long-term impact of VNS therapy for depression. We continue to believe VNS therapy is a differentiated option for this patient population. We will continue to keep investors updated on material developments as appropriate. In summary, we're encouraged by our recent progress across the portfolio. Collectively, these milestones underscore the depth of our innovation pipeline and the opportunity to continue raising the standard of care. With that, I will turn the call over to Alex to discuss additional details on our results and updated 2026 guidance.

Thanks Ahmet. During my portion of the call, I'll share a brief recap of the second quarter results and provide commentary on our updated full year 2026 guidance, which reflects strong performance year to date and improved business outlook. Turning to results, revenue in the quarter was $391 million, an increase of 9.8% on a constant currency basis versus the prior year. Foreign exchange in the quarter had a favorable year over year impact on revenue of approximately $3 million or 1%. Adjusted gross margin as a percent of net revenue was 71% compared to 69% in the second quarter of 2025. In the quarter, we received a $6 million net tariff benefit from previously paid IEPA tariffs. The refund had a benefit of approximately 150 basis points on gross margin in the quarter. The benefit from the tariff refund and improved pricing were partially offset by unfavorable currency. We do not expect the IEPA tariff refund benefit to occur in future periods. Adjusted SG&A expense for the second quarter was $137 million compared to $121 million in the second quarter of 2025. SG&A as a percent of net revenue was 35% as compared to 34% in the second quarter of 2025. On the year-over-year basis, the increase as a percent of net revenue was driven by planned IT infrastructure spent. Adjusted R&D expense in the second quarter was $50 million, compared to $44 million in the second quarter of 2025, which reflects planned increase OSA R&D investment. R&D as a percentage of net revenue was 13% in line with the prior year. Adjusted operating income was $91 million compared to $77 million in the second quarter of 2025. Adjusted operating income margin was 23% as compared to 22% in the second quarter of 2025. Compared to the prior year, the increase reflects higher revenue and the benefit of the tariff refund, partially offset by planned investments I referenced earlier. Adjusted diluted earnings per share was $1.26 compared to $1.05 in the second quarter of 2025. The increase was primarily driven by higher revenue reflecting strong growth across both the cardiopulmonary and epilepsy businesses, as well as the one-time tariff refund benefit. Adjusted diluted EPS benefited from $0.08 of tariff refunds year over year. Moving to our cash balance at June 30th, cash was $517 million compared to $636 million at year-end 2025. Total debt at June 30th was $293 million compared to $377 million at year-end 2025. The reduction in both cash and total debt was a result of the early repayment of the outstanding term facilities of $98 million inclusive of accrued interest. Adjusted free cash flow for the quarter was $46 million compared to $48 million in the prior year period. The modest year over year decline reflects increased capital spend and higher working capital requirements associated with revenue growth. Capital spend in the first half was $46 million compared to $26 million in the prior year period. The year over year increase was driven by cardiopulmonary capacity expansion initiatives, the next generation oxygenator manufacturing scale up, as well as investments in IT infrastructure. Now turning to our updated 2026 guidance. As Vlad mentioned, based on performance to date, we're raising full year 2026 revenue and adjusted earnings per share guidance At the same time, we're lowering adjusted free cash flow guidance to reflect strategic investments in innovation, IT infrastructure, and cardiopulmonary capacity expansion to support the company's growth strategy. We now forecast 2026 revenue growth between 8% and 9% on a constant currency basis, up from 7% to 8% previously. We continue to expect the impact of foreign currency to be a tailwind of approximately 1% Based on current exchange rates. Consistent with our prior guidance, we estimate a tariff net impact of less than $5 million on full-year adjusted operating income, inclusive of current and anticipated future tariffs, excluding IEPA-related tariffs. We continue to expect full-year adjusted operating income margin to be in the range of 20% to 21%. Adjusted effective tax rate is still forecasted at approximately 23%. To reflect stronger operational performance, we now project adjusted diluted earnings per share in the range of $4.30 to $4.40, with adjusted diluted weighted average shares outstanding to be approximately $56 million for the full year. The CPS range represents approximately 11.5% growth at midpoint. The strength of our execution continues to provide flexibility in how we allocate capital, enabling us to raise our earnings outlook while increasing investments to support growth and long-term value creation. We're increasing our capital spending to $135 million from $120 million previously. The change primarily reflects increased capital investments to support cardiopulmonary capacity expansion The Next Generation Oxygenator Manufacturing Scale-Up, and IT Infrastructure Investments. That said, adjusted free cash flow is now expected to be in the range of $140 to $160 million, compared to our prior guidance of $160 to $180 million. The decrease reflects higher capex, as well as the funding associated with the Thermo Fisher Agreement, partially offset by the Tariff Refund Benefit and operational improvements. In summary, we're pleased with the record revenue and earnings achieved in the second quarter. Our updated 2026 guidance aligns with the 2025 to 2028 framework presented at our investor day and reflects top line performance at the high end of our targeted mid to high single digit revenue CAGR. With that, I'll turn the call back over to Vlad for his closing remarks.

Thank you, Alex. In closing, I want to reiterate how encouraged we are by the performance of our business. We delivered record quarterly revenue and earnings per share, raised our full year outlook on the top and bottom line, and continued to execute against our strategic priorities. These results reflect the dedication of the global Livanova team and our unwavering focus on improving outcomes for patients. Our focus on talent, execution, and innovation will continue to drive value for all our key stakeholders. With that, we're ready to open the call for questions.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Matthew Taylor with Jefferies. Your line is open. Please go ahead.

Hey, good morning. This is Mike Sorcona for Matt. Thanks for taking the question. I just wanted to start off on the CP side and the Thermo Fisher partnership. Can you maybe just give us some background for how long that's been in the works? And now that you have that supply or that component, how does that affect your thinking for CP growth going forward?

Yeah. Matt, good morning. Thank you for the question. So maybe just to step back. And if you look at our market share progression over the last couple of years, we're very pleased with our progress. We moved market share in oxygenators from around 30% a couple of years ago to about 40% today. And we believe that we can continue to drive the share gain kind of via two channels. One is delivering innovation. So we have a new generation oxygenator coming up. in the next couple of years and then we are continuing to expand the second one is that you know we continue to expand our manufacturing output so and then if you then zoom in on the manufacturing output if you look at our strategy there we have three key components there so one is improved processes within our current network and and that has driven the improvement in our manufacturing output to date so then the second one is we are installing a new manufacturing line and that is expecting to go live in the second half of this year and this will have material impact on increase of output in 2027. And then the third one is this securing reliable critical component supply kind of which will lead to increased output long term and basically removes supply constraints as a governor of growth. So that being said, so we signed an agreement with Thermo Fisher. We've been working on it for some time. And that agreement basically ensures that mid to long term, we will have reliable supply of the critical component and kind of completely remove the bottleneck from manufacturing output. I think obviously from the business point of view, we have more confidence in our ability to gain share moving forward. But I think more importantly is This is a life-saving, non-elective procedure. And from a public health point of view, this just ensures that patients will have products available for this very important surgical procedure. So I think from a public health point of view, it's a critical step forward as well. So in summary, we're very pleased with this partnership. And already, Thermo Fisher have been a really fantastic partner You know, to date for our manufacturing work.

That's helpful. Thank you. And then just second question, switch over to epilepsy. You talked about higher ASP due to reduced volume discounting. I know you've been benefiting from more favorable reimbursement this year. I guess, can you speak to your thoughts on pricing and how you'll use that as a lever for growth going forward?

Yeah, thank you. obviously another very important area. Again, let me step back and maybe I'll talk both price and volume. So we're pleased with the tailwinds in epilepsy business and the recent momentum in the business. And they're kind of two key drivers that are impacting this recent momentum. So one is the strong core VNS clinical outcomes, which are accelerating referrals, they're strengthening clinician confidence in the procedure and they're supporting early adoption of VNS therapy into the treatment pathway. And then the second one is this increased Medicare reimbursement as of 2026. So as a reminder, it was nearly 50% increase in both new patients and end of service procedures versus 2025 rates. And so we're seeing the improvements in both price and volume. On the price side, and with the respect of, it's connected to the reimbursement, but in Q2 we saw realized price improve roughly twofold versus what we would normally expect from our annual price increases. And that's basically driven by less discounting. On the volume side, we're seeing an increase in NPI in existing accounts. and that's again that's driven by the improved clinical data that was showing for VNS study but also the improved reimbursement is giving us ability to open new accounts so we see some new account activation as well so I mean both reimbursement and the strong clinical data I mean ultimately will increase access to patients to this procedure but again I think price and volume are both contributing to our improved growth momentum.

Great. Thank you.

Your next question comes from the line of Adam Mader with Piper Sandler. Your line is open. Please go ahead.

Hi. Good morning. Thank you for taking the questions and congrats on the quarter. I wanted to start on CP. You know, global CP had a very solid quarter. US was, you know, maybe a little bit softer. So wanted to ask about, you know, that segment in particular, you know, any one timers in the quarter, any changes to kind of, you know, CapEx behavior from customers or just kind of like a general maturation of the essence rollout in that region. And then I also heard you mention lower, there's an offset to growth from the auto transfusion systems and cannula. So would love to kind of understand that dynamic and kind of the impact that it had. And then I'd follow up. Thanks.

Hey, Adam. Yeah, look, our growth drivers remain firmly intact. The U.S. growth was very much in line with our forecast. The drivers continue as we've seen and Vlad has mentioned. So the essence upgrade cycle continues. From a consumables perspective, we continue to gain market share, and price continues to be a growth driver. It was in the first half, and we expect to see that moving forward. So from a regional perspective, we don't see any outages there. I think it was kind of planned along with our expectations. With regard to your question on the other components, yeah, autotransfusion, cannula are the other elements of our consumables portfolio and perhaps they grew at a slower pace than our oxygenator business and our HLM business. But there's nothing, there's no glitches there either, it's just expected sort of phasing of and we're right on track with our plans.

Okay, perfect. Thanks for the color. And then if I could flip to OSA, you know, obviously very encouraging data, you know, regarding Polysync at the SLEEP meeting earlier this summer, but actually wanted to ask a little bit just around kind of timelines. I think you talked about the submission of the PMA supplement for the second gen technology in the back half of this year or first half 27. It feels like maybe a slight wiggle there. So maybe just kind of what's driving that and how do we think about any kind of potential ramifications or impact to revenue and even OPEC spend? Thank you so much.

Thank you, this is Ahmet. So we are in the final stages of product development and now we expect the PMA supplement submission to be between the second half of 26 and the first half of 2027 versus our prior expectation of second half of this year. Now our updated timing reflects the work we need to do for the final design verification and validation process. But I want to be very clear, the updated timeline does not relate to efficacy or safety of the device. We continue to be very excited about the new design and its future sets. Now, we do have high standards for our patients and the company. And we want to uphold those in our development process. And that's why we updated the timeline. But this really doesn't change the conviction we have for our OSA program and the opportunity We have long term. OSA for us still remains a large underserved market where we believe we have the right to win with our clinical outcomes. And we believe we will set a new standard of care for HNS therapy with the PolySync technology. And given the strength of that data, given the strength of PolySync, our conviction actually increased over the last several months. in our ability to win in this market. And you asked about revenue. We continue to commit to the $200 to $400 million 2030 target in terms of our revenue with OSA.

Thanks, Ahmet.

Your next question comes from the line of Michael Polark with Wolf Research. Your line is open. Please go ahead.

Hey, good morning. Oxygenator question. I hear all the updates on capacity expansion. Appreciate that. As I look at the updated cardiopulmonary guide, what's implied for growth in the second half, you know, 7%-ish in 3Q, 4Q after, you know, low doubles in the first half. So I want to understand, is there something about the oxy supply-demand situation such that Capacity is super tight right now, and 2H might be a little lighter on your ability to fill, and that's what's reflected in this slower guidance. Or no, you're comfortable that this kind of double-digit oxygenator growth trend has a chance to continue before the new capacity comes online next year. I just want to understand the timing a little bit better. Thank you.

Hey, Mike. So from an Oxy perspective, We have a strong growth trajectory for the full year, and obviously part of the reason we've increased our guidance this quarter is because of the strong performance we saw in the first half, which gives us confidence that we'll be able to deliver for the full year. I wouldn't read anything into the deceleration of our forecast there. I think it's in line with our philosophy to continue to guide to what we see today and the opportunities in front of us. So we feel confident in the portfolio. All of the improvements that we're making in terms of our operational gains and manufacturing output continue right on track.

As a follow up, I have a question on Canula as well. There was news last week or earlier this of a major recall from what I think is one of your major competitors in that category. But my feel for Canula category is not super great. So I'm just wondering if you could help us understand those underlying market dynamics and whether a competitor disruption is a good guy for you or no, that's not something we should look forward to. Thank you.

Mike, it's a relatively small part of our portfolio. Obviously, we're going to step in and support the market as needed. It is an important part of all cardiac procedures, so we want to be there for our customers when there's a market void.

Your next question comes from the line of David Rescott with Baird. Your line is open. Please go ahead.

David Rescott Great. Thanks for taking the questions and congrats on the results here. I want to ask you a two-part question on the epilepsy side. I think you previously had talked about This volume-based discounting, removing that kind of phasing through the year, and I think the comment was pricing is twice as much as what you historically have seen so so I guess you know is it fair uh trying to get a sense for um you know where you are in in that phasing process meaning you know would it be fair to assume that um that that 2x uh normal uh pricing contribution rate can continue to expand um through the year or you primarily uh through through that at this point and then I think you also mentioned that there's definitively some New accounts coming on online for VNS. And just wondering if you could expand a little bit maybe on what some of those types of accounts look like relative to that core comprehensive epilepsy base you've had in the past.

Hey, David. Yeah, so on pricing, we saw the contract renegotiations that... contributed to the growth in the first half. That was a big contributor to growth, and we expect that to continue for the balance of the year. As Vlad mentioned, our realized price, our normal inflationary price increase is 1% to 2%. Historically, we saw our realized price nearly double in the first half of the year, and we expect that to continue. There are contracts that we haven't been able to capture those renegotiations in the window for this year. So those will be residual renegotiations that will continue into 2027 and should provide a tailwind for that cohort of accounts. With regard to account activation, as we said earlier in the year, Our commercial team was focused on driving penetration in our existing accounts in terms of driving new patient implant volumes, opening accounts that had previously closed due to economic challenges. We're seeing that read through. There's been some success in the first half, and we expect that to continue in the second half as well.

Okay, that's helpful. Maybe on the HLM side, I think the commentary for Essence to represent 80% of sales or placements in 2026 has been fairly consistent, not only this year, but I think you had outlined that in the prior year as well. and this better than expected growth maybe implies that you're seeing the benefits from price, but sales or underlying placements are doing better than expected. I guess, is that a fair way to characterize it? And when you think about that essence, The percentage of placements expanding may be closer to nearly all sales in the 2027 timeframe. Can you give us, I guess, a state of affairs on where you are in that cumulative penetration level and the potential upgrades that are out there and how you would expect that growth in the HLM bucket? Thank you, David. So let me start with HLM first. So to your question, we are confident in our ability to get to 80% this year in terms of placement penetration.

And then, as we said, we expect in 2027 to get to 100% of placement penetration. However, there's still many S5s or previous generation devices in the market and it will take us a few years to get to a kind of full market upgrade. So this will continue over the next few years. But if I step back for a second and just look holistically at the CP business, we have Four key drivers of our growth. One is the essence upgrade. The second one is market share gains in consumables. The third one is kind of next generation products. So this would include oxygenators, air manager, heater, cooler as kind of key products that are coming up to the market relatively soon. And then we have price improvements across the portfolio. And so, you know, as As we look into kind of beyond 2027, you will see a shift in the composition of growth where oxygenator and consumables will play a bigger part in the growth of the portfolio. And that is, I mean, first of all, it's majority of our business. And second, we have two major events coming. One is the launch of new oxygenator that is clinically differentiated versus anything on the market today. And that's coming in 2028. And then on top of that, all of our efforts to improve output on the manufacturing side. So those two will contribute to acceleration of growth and oxygenators. So kind of when I look at the holistic portfolio, it gives me confidence because we have multiple growth drivers there. And the last thing I'll say on HLM specifically, Because we have such a significant fleet out there of the equipment, we have 70% market share approximately on equipment, it gives us an opportunity to drive additional revenue through partial equipment upgrade, through software upgrade, through launch of, like I said, heat a cooler, for example, or air manager. That gives us kind of this additional opportunity to drive growth in HLM itself.

Your next question comes from the line of Anthony Petrone with Mizuho Group. Your line is open. Please go ahead.

Thanks, and good morning, everyone. Congrats on another clean print here. Maybe one on depression and one on sleep. You have the 36-month data from RECOVER, I guess, getting ready to be submitted for publication. Just wanted, you know, does CMS have the 36-month data for their consideration? Last quarter you announced I think there was going to be a couple of meetings in the post-1Q timeframe, and that would decide on what the submission has to look like, and maybe it would give you more color on timing. So anything more substance on the 36-month data being submitted to CMS and timing, and I'll have a quick follow-up on sleep. Sure.

So we just submitted the Publications for review on a journal, but it is available online in a website. It's a preprint website called MedArchive. So the rules for CMS is that your data needs to be published before they would consider it. So that is why they are aware that this data is coming and they actually asked about it to us. But they will not take it as a formal consideration until the data is published. But as I mentioned, you can actually see it online now. It's available. Now, why we're excited about that data is that it shows that at three years, the treatment arm continues to get better. So from symptoms, functionality, quality of life, As you know, in neuromodulation, the longer the treatment is, the better the outcomes are, and we see this with our treatment arm at three years, so that's very exciting. And also the control arm, which was a sham arm in the first one year, but is now active for the last two years, also shows, aligned with what we expected, that those patients are also seeing very positive benefits from the treatment. So the data is very strong. We're very excited. CMS has asked us about this data, but they will not formally consider until it's published. So it will be part of our submission. We continue to engage with CMS very closely. We continue to have active dialogue with them. They are still asking us questions about the data, including this one, the three-year arm study. So we are progressing. and I think if there's any material updates, we will certainly share it.

Helpful. And then on sleep, a competitor out there earlier this week announced that, you know, they're submitting for a category one CPT code to the CPT editorial board. You now have the polysync data out there. Are you part of that submission? Is polysync part of that effort? And if a CPT cat one code were secured, I mean, how, What do you think the impact would be just on the backdrop and hypoglossal nerve stimulation and sleep? Thanks.

Yeah, I mean, we're still continuing to work with the societies in terms of how we're going to get the reimbursement. And our position hasn't changed. At the time of launch, whatever are the prevalent CPT codes, that are the ones that we're going to use. In terms of the actual procedure, the two systems are similar and that is why we have the confidence that whatever is the appropriate CPT code at that time, Leave-on-Ovo will be able to use it.

Thank you.

Your next question comes from the line of Mike Mattson with Needham. Your line is open. Please go ahead.

yeah thanks um so just a few questions on the on the oxygenator business so with the the new oxygenator that you're developing um it sounds like you're going to be kind of producing that at the same time as the the prior generation um are you going to be selling them kind of side by side and um will they be sort of like a tiered strategy where the new ones uh got a price premium And will you eventually phase out the old one or will you continue to offer both of them over the longer term?

Good morning. So our current approach is that we will have both oxygenators on the market and we will manage it as a portfolio. We are working right now on our pricing strategy. And in terms of your question, will we phase out the previous generation? We haven't made that decision yet. We want to see how the market reacts to it. And we'll have opportunity to decide to make that decision in the future. Right now, the focus is getting it to the market by 2028. And the key thing when we said it is differentiated, what we've seen in the preclinical studies is that from the performance and how it impacts blood performance It is significantly better than anything on the market today. And that gives us confidence in the ability to launch it successfully. But it will be a portfolio strategy.

Okay, got it. And then just in cardiopulmonary, I know you already addressed the floor growth in the US, but I was just wondering, you know, with Essence, I think you said it's going to be 80% of your heart-lung machine sales this year or units this year. So I would assume it's higher than that in the U.S. So is it already at 100% in the U.S.? And is that part of the reason that you're seeing a bit slower growth there?

Yes, you're correct. In the U.S., we phased out the previous generation, so we're only placing essence in the U.S. and then some other developed markets around the world as well.

Okay. I mean, is that causing growth to be, is that a, Thank you. Your next question comes from the line of Brett Fishpin with KeyBank.

Your line is open. Please go ahead.

Good morning, Brett. So let me start by saying that

The volume is positively impacted by both the clinical evidence that we saw in the poor VNS study. As a reminder, it's the largest real-world evidence study to date with epilepsy treatment with medical devices. And then the second one is the reimbursement increase. So both reimbursement and clinical data are impacting volumes positively. I can tell you that our new patient funnel is at the strongest levels it's ever been. And it's coming both from an increase of procedures in the current accounts, but also opening new accounts. And I promise that we will give more color and data to the market with time, but at this point we want to have A couple of more quarters behind us so we see more evidence on the market performance, and then we will give a little bit more flavor to the lagging indicators. But the leading indicators right now are very strong.

All right, fair enough. And then our second question, just a follow-up on the OSA update. You know, clearly reiterating the long-term revenue guidance, but just curious you know how you think about launch timing you know given the implied like zero to six month delay three months being the midpoint like how does that impact your thoughts on the limited market release timing and then eventually full market release timing thank you yeah we're look we're still confident in the long-term uh opportunity here um obviously the the timing is not it's not linear in terms of how you get to um you know our

We have commercial levers that we could pull to drive the ramp. We're still bullish on the opportunity here. I think that overall, our confidence is still strong with LSA.

Your last question comes from the line of Keith Hinton with Freedom Capital Market. Your line is open. Please go ahead.

Great. Just two quick questions on epilepsy. Starting off with if you could just speak a little bit to if you're seeing particular strengths in certain subsegments of DRE and kind of any updates on the penetration of VNS into the surgery eligible population and kind of the competitive landscape on both the device side as well as the pharma side and then I have a follow-up.

Keith, this is Alex. So, look, we're pleased with our progress to date. The momentum that we continue to build in our patient funnel is continuing and, you know, in terms of Any specific segment, there's really nothing to comment there. You know, our strong results in the first half expected to continue in terms of our new patient implant funnel in the second half. But I just want to remind everyone that, you know, we did have overlapping prior years field safety notice in the first half of the year. So we do expect A tougher comp in the second half. But as far as our trajectory with the new patient funnel, I think it continues to be a strength for us.

Great, thanks. And then just on the ASP side, can you talk a little bit about payer mix within epilepsy and whether you're seeing the benefit from the increase Are you seeing that carried over into the commercial segment as well?

So the CMS reimbursement improvements are reading through. So about 80% of our payer mix is government payers, so about 40% Medicare, 40% Medicaid. The rest is commercial payers. So we do expect We have reached the end of the Q&A session.

I will now turn the call back to Vladimir Makatsaria for closing remarks.

Thank you very much and thank you everyone for joining us today and for the thoughtful questions. And on behalf of our team We appreciate your support and interest in Livanova and have a great day ahead.

This concludes today's call. Thank you for attending. You may now disconnect.