v3.26.1
Fair Value Measurements
 3 Months Ended
Mar. 31, 2026
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Note 3. Fair Value Measurements
LivaNova reviews its fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain securities in the fair value hierarchy. There were no transfers between Level 1, Level 2, or Level 3 for the three months ended March 31, 2026 and 2025.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following tables present the level in the fair value hierarchy at which the Company’s assets and liabilities are measured on a recurring basis (in thousands):
TotalFair Value Measurements Using Inputs Considered as:
March 31, 2026Level 1Level 2Level 3
Assets:
Derivative assets - 2029 Capped Calls
$38,277 $— $— $38,277 
Investment in convertible notes receivable
3,000 — — 3,000 
$41,277 $— $— $41,277 
Liabilities:
Derivative liabilities - freestanding instruments (FX) $613 $— $613 $— 
Derivative liabilities - 2029 Embedded Derivative
93,254 — — 93,254 
ImThera contingent consideration arrangements
102,730 — — 102,730 
$196,597 $— $613 $195,984 
Total
Fair Value Measurements Using Inputs Considered as:
December 31, 2025Level 1Level 2Level 3
Assets
Derivative assets - freestanding instruments (FX)$165 $— $165 $— 
Derivative assets - 2029 Capped Calls
36,551 — — 36,551 
Investment in convertible notes receivable
3,000 — — 3,000 
$39,716 $— $165 $39,551 
Liabilities
Derivative liabilities - freestanding instruments (FX)
$99 $— $99 $— 
Derivative liabilities - 2029 Embedded Derivative
83,904 — — 83,904 
ImThera contingent consideration arrangements
92,075 — — 92,075 
$176,078 $— $99 $175,979 
Reconciliation of Level 3 Assets and Liabilities
The tables below present reconciliations of recurring fair value measurements that use significant unobservable inputs (Level 3) (in thousands):
Derivative Assets - 2029 Capped Calls (1)
Investment in Convertible Notes Receivable
Derivative Liabilities - 2029 Embedded Derivative (1)
ImThera Contingent Consideration Arrangements Liability
December 31, 2025$36,551 $3,000 $83,904 $92,075 
Changes in fair value (2)
1,726 — 9,350 10,655 
March 31, 2026$38,277 $3,000 $93,254 $102,730 
Derivative Assets - 2025 Capped Calls (1)
Derivative Assets - 2029 Capped Calls (1)
Derivative Liabilities - 2025 Embedded Derivative (1)
Derivative Liabilities - 2029 Embedded Derivative (1)
ImThera Contingent Consideration Arrangements Liability
December 31, 2024$2,624 $23,735 $2,915 $51,819 $84,218 
Changes in fair value (2)
(1,819)(6,545)(2,041)(14,593)922 
March 31, 2025$805 $17,190 $874 $37,226 $85,140 
(1)Gains and losses are recorded in foreign exchange and other income/(expense) in the condensed consolidated statements of income (loss).
(2)For the three months ended March 31, 2026, the contingent consideration change in fair value resulted in an increase of $1.1 million recorded to cost of sales and an increase of $9.6 million recorded to R&D. For the three months ended March 31, 2025, the contingent consideration change in fair value was primarily recorded to R&D.
Share Price Volatility
The share price volatility utilized in determining the fair value of LivaNova’s 2029 Capped Call derivative assets and 2029 Embedded Derivative liability as of March 31, 2026 was 39%. In general, an increase in LivaNova’s share price or share price volatility would increase the fair value of the embedded and capped call derivatives, which would result in an increase in net expense. As the remaining time to the expiration of the derivatives decreases, the fair value of the derivatives decreases. The future impact of the derivatives on net income (loss) depends on how significant inputs, such as share price volatility, and time to the expiration of the derivatives, change in relation to other inputs.
Contingent Consideration Arrangements
The ImThera business combination involved contingent consideration arrangements comprised of potential cash payments upon the achievement of a certain regulatory milestone and a sales-based earnout associated with sales of products. The sales-based
earnouts are valued using projected sales from LivaNova’s internal strategic plan. These arrangements are Level 3 fair value measurements and include the following significant unobservable inputs as of March 31, 2026:
ImThera AcquisitionValuation TechniqueUnobservable InputInputs
Regulatory milestone-based paymentDiscounted cash flowDiscount rate6.9%
Probability of payment (1)
100%
Projected payment year2026
Sales-based earnoutMonte-Carlo simulationRisk-adjusted discount rate
11.7%
Credit risk discount rate
7.4% - 7.7%
Revenue volatility22.8%
Probability of payment95%
Projected payment years
2028 - 2029
(1)In March 2026, the Company achieved the regulatory milestone upon PMA by the FDA. As a result, the probability of payment was increased to 100% and will be paid within 90 days of milestone achievement.
Other
The carrying value of LivaNova’s long-term debt including the current portion as of March 31, 2026 and December 31, 2025 was $285.3 million and $376.1 million, respectively. The fair value of the 2029 Notes, excluding the conversion feature, as of March 31, 2026 and December 31, 2025 was $306.0 million and $315.2 million, respectively. The fair value was estimated using a discounted cash flow model and is classified as Level 2 within the fair value hierarchy. For all other long-term debt obligations, LivaNova believes the carrying value approximates fair value. The fair values and principal values consider the terms of the related debt and exclude the impacts of debt discounts and hedging activity.