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Fair Value Measurements
 9 Months Ended
Sep. 30, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Note 4. 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 during the nine months ended September 30, 2024 and 2023.
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):
Balance Sheet LocationSeptember 30, 2024Fair Value Measurements Using Inputs Considered as:
Level 1Level 2Level 3
Assets:
Derivative assets - capped call derivatives (2025 Notes)Long-term derivative assets$5,771 $— $— $5,771 
Derivative assets - capped call derivatives (2029 Notes)Long-term derivative assets29,597 — — 29,597 
$35,368 $— $— $35,368 
Liabilities:
Derivative liabilities - freestanding instruments (FX) Accrued liabilities and other$2,245 $— $2,245 $— 
Derivative liabilities - embedded derivative (2025 Notes)Long-term derivative liabilities7,188 — — 7,188 
Derivative liabilities - embedded derivative (2029 Notes)Long-term derivative liabilities76,969 — — 76,969 
Contingent consideration arrangementContingent consideration81,240 — — 81,240 
$167,642 $— $2,245 $165,397 
Balance Sheet LocationDecember 31, 2023
Fair Value Measurements Using Inputs Considered as:
Level 1Level 2Level 3
Assets:
Derivative assets - capped call derivatives (2025 Notes)Long-term derivative assets$38,496 $— $— $38,496 
Convertible notes receivableOther assets275 — — 275 
$38,771 $— $— $38,771 
Liabilities:
Derivative liabilities - freestanding instruments (FX)Accrued liabilities and other$3,883 $— $3,883 $— 
Derivative liabilities - embedded derivative (2025 Notes)Long-term derivative liabilities45,569 — — 45,569 
Contingent consideration arrangementContingent consideration80,902 — — 80,902 
Contingent consideration arrangementAccrued liabilities and other13,750 — — 13,750 
$144,104 $— $3,883 $140,221 
Reconciliation of Level 3 Assets and Liabilities
The following tables present reconciliations of recurring fair value measurements that use significant unobservable inputs (Level 3) (in thousands):
Three Months Ended September 30, 2024
Capped Call Derivative Assets
(2025 Notes)		Capped Call Derivative Assets
(2029 Notes)		Convertible Notes ReceivableEmbedded Derivative Liability
(2025 Notes)		Embedded Derivative Liability
(2029 Notes)		Contingent Consideration Liability Arrangement
June 30, 2024$7,439 $32,114 $275 $10,017 $95,392 $81,174 
Changes in fair value(1,668)(2,517)(275)(2,829)(18,423)66 
September 30, 2024$5,771 $29,597 $— $7,188 $76,969 $81,240 
Three Months Ended September 30, 2023
Capped Call Derivative Assets
(2025 Notes)		Convertible Notes ReceivableEmbedded Derivative Liability
(2025 Notes)		Contingent Consideration Liability Arrangements
June 30, 2023$42,034 $275 $53,705 $92,626 
Changes in fair value1,635 — (402)(2,818)
September 30, 2023$43,669 $275 $53,303 $89,808 
Nine Months Ended September 30, 2024
Capped Call Derivative Assets
(2025 Notes)		Capped Call Derivative Assets
(2029 Notes)		Convertible Notes ReceivableEmbedded Derivative Liability
(2025 Notes)		Embedded Derivative Liability
(2029 Notes)		Contingent Consideration Liability Arrangements
December 31, 2023
$38,496 $— $275 $45,569 $— $94,652 
Additions— 31,637 — — 87,457 — 
Cash receipt(22,524)— — — — — 
Payment— — — (36,915)— (13,750)
Changes in fair value(10,201)(2,040)(275)(1,466)(10,488)338 
September 30, 2024$5,771 $29,597 $— $7,188 $76,969 $81,240 
Nine Months Ended September 30, 2023
Capped Call Derivative Assets
(2025 Notes)		Convertible Notes ReceivableEmbedded Derivative Liability
(2025 Notes)		Contingent Consideration Liability Arrangements
December 31, 2022$54,393 $285 $85,675 $85,292 
Changes in fair value(10,724)(10)(32,372)4,516 
September 30, 2023$43,669 $275 $53,303 $89,808 
Stock Price Volatility
The following table presents the stock price volatility utilized in determining the fair value of LivaNova’s capped call derivative assets and embedded derivative liabilities:
September 30, 2024Capped Call Derivative Assets
(2025 Notes)		Capped Call Derivative Assets
(2029 Notes)		Embedded Derivative Liability
(2025 Notes)		Embedded Derivative Liability
(2029 Notes)
Stock price volatility (1)
40 %37 %40 %37 %
(1)    The Embedded Derivatives and Capped Call Transactions are classified as Level 3 because the Company uses historical volatility and implied volatility from actual options traded to determine expected stock price volatility, an unobservable input that is significant to the valuation. In general, an increase in LivaNova’s stock price or stock price volatility would increase the fair value of the Embedded Derivatives and Capped Call Transactions 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 depends on how significant inputs such as stock price, stock price volatility, and time to the expiration of the derivatives change in relation to other inputs.
Contingent Consideration Arrangements
The following table presents the fair value of LivaNova’s Level 3 contingent consideration arrangements by acquisition (in thousands):
September 30, 2024December 31, 2023
ImThera$81,240 $80,902 
ALung— 13,750 
$81,240 $94,652 
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 included the following significant unobservable inputs as of September 30, 2024:
ImThera AcquisitionValuation TechniqueUnobservable InputInputs
Regulatory milestone-based paymentDiscounted cash flowDiscount rate7.7%
Probability of payment85%
Projected payment year2026
Sales-based earnoutMonte-Carlo simulationRisk-adjusted discount rate
14.6% - 14.7%
Credit risk discount rate
7.8% - 8.2%
Revenue volatility27.1%
Probability of payment85%
Projected years of earnout
2027 - 2030