Good day, ladies and gentlemen, and welcome to the LivaNova PLC Fourth Quarter and Full Year 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Matthew Dodds, LivaNova's Senior Vice President of Corporate Development.

Thank you, Leandra, and welcome to our conference call and webcast discussing LivaNova's financial results for the fourth quarter and full year 2018. Joining me on today's call are Damien McDonald, our Chief Executive Officer; Thad Huston, our Chief Financial Officer; and Melissa Farina, our Vice President of Investors Relations. Before we begin, I would like to remind you that the 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 furnish to the SEC, including today's press release is available on our website. We do not undertake to update any forward-looking statement. Also, the discussions will include certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures can be found in today's press release that 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 Relations section of our website, under News and Events, Presentations at www.investor.livanova.com. With that, I will now turn the call over to Damien.

Thanks, Matt. Well, welcome to our fourth quarter and full year 2018 conference call. This was a transformative year for LivaNova and our portfolio. In addition to closing the sale of our CRM business, we also completed the acquisitions ImThera and TandemLife. The results from this quarter and the full year reflects the success of our growth strategy as we achieve strong self-growth, expanded gross margins, increased R&D to fuel our pipeline and further integrated our recent acquisitions. I'm going to provide some highlights and then discuss our sales results by business. And after my comments, Thad will provide you with additional color on the financials, updates on Form 10-K filings and our 2019 guidance. Then I'll wrap up with closing comments before moving on the Q&A. So starting with recent events and quarterly highlights. On February 15, CMS finalized its National Coverage Determination for the use of VNS Therapy for the treatment-resistant depression or TRD. We are pleased to see that CMS meaningfully expanded the potential beneficiaries to include patients with bipolar disorder. In addition, CMS expanded its research questions to include response to treatment as a primary outcome measure. This provides a much better guide of benefit to this very ill patient population of preference shared by both us and clinicians. We're now working with CMS to finalize details of the study. And that current projection is to begin enrollment in the third quarter of 2019. We expect the study size to be approximately 500 patients and enrollment to take 18 months. This is a monumental step forward for patients with this severely debilitating disease and to have a potential treatment alternative. We'd like to thank CMS for their careful consideration of the input from all stakeholders in reaching this important decision. Perceval has received two positive outcomes…

Thank you, Damien. I'm going to discuss the fourth quarter financials in greater detail, provide our initial 2019 guidance and walk through some accounting items that occurred this quarter. As Damian mentioned, sales growth in the fourth quarter was 9.2% versus the fourth quarter of 2017, led by double digit growth in Neuromodulation, HLMs and oxygenators. Adjusted gross margin as a percent of net sales in the quarter was 69%, up 470 basis points from the fourth quarter of 2017. The margin improvement was primarily driven by price and mix. And for the fourth quarter of 2018 - sorry - for the full year of 2018, the gross margin was 68.1%, up 240 basis points versus our 2017 Investor Day goal of 100 basis points per year. Adjusted R&D expense in the fourth quarter was $36 million compared to $31 million in the fourth quarter of 2017. R&D as a percentage of net sales was 12.2% versus 11.1% in the fourth quarter of 2017. As we previously discussed, R&D is increasing behind the development of next generation products including HLM, SenTiva and TandemLife, along with clinical trials and strategic investments in TRD, TMVR, sleep apnea and heart failure. For the full year 2018, R&D expense was $136 million, up 42.8% versus the prior year and representing 12.3% of net sales. Adjusted SG&A expense for the fourth quarter was $101 million compared to $92 million in the fourth quarter of 2017 and 5 sequentially. SG&A as a percentage of net sales was 33.9%, up 80 basis points versus the fourth quarter of 2017. This increase is largely due to U.S. investments in DTC campaign for epilepsy, advanced circulatory support commercial capabilities and strengthening our commercial organization in international markets. Adjusted operating income from continuing operations was $68 million compared to $56…

Thanks, Thad. I'm very encouraged by our progress on a number of fronts in 2018. We delivered sales growth above the upper end of our guidance, while improving gross margins, repricing disciplined product mix and cost efficiencies. We're also making significant investments in our future, expanding our pipeline, innovating next generation products, and funding studies for our growth drivers and strategic portfolio initiatives, which include TRD heart failure, obstructive sleep apnea and TMVR. In Cardiovascular, we continue to drive upgrades of S5 heart-lung machines and improve growth in oxygenators and other products in the cardiopulmonary portfolio. TandemLife is off to a great start and should benefit in 2019 from both their commercial expansion and approval of our next generation pump. In Neuromodulation, we continue to see the increased demand for SenTiva VNS Therapy System in the U.S. and Europe and should see the benefits of our DTC campaign begin to kick in. We look forward to updating you on our continued progress and delivering on our commitments to drive shareholder value. And with that Leandra, we're ready for questions.

[Operator Instructions] And your first question comes from the line of Rick Wise with Stifel. Your line is open.

Good morning, Damien. Good morning, Thad.

Hi, Rick.

Good morning.

Maybe just start us off with your word, as a little more color on the TRD decision trial. And you indicate that you're hoping to get underway in the third quarter. Can you give us any you know, better sense of how many centers the U.S., OUS mix at any and thoughts just even at the roughest level about timing in terms of enrollment and to some of the big metrics that you'd want us to focus on over the next 12 to 24 months?

Yeah, sure. Thanks, Rick. We're really thrilled about this news for TRD. You know it's been a legacy campaign for a lot of people. And, you know, the team is excited about this opportunity not only us, but for patients. And if you look at the way we think this is panning out, you know 500 patients, 40 plus centers, you know, all of them are going to be in the U.S. And you think about the timeline, you know, we've got discussions with CMS just to finalize the protocol for the study that's, you know, one to three months, then we start, you know, going through the IRB process with the various clinics and negotiate the trial agreements with the studies and then we begin enrolling. So all of that leads us to you know, kicking off in Q3. And, you know, we've talked before about the living over business system and the discipline, the team have done a phenomenal job of building up the whole way we're going to track this, the accounts we've identified, the discussions we've had already. So we really like what this is opening up for us.

And two other questions, then I'll move on. Maybe just give us a little more color on the DTC campaign on the epilepsy side. You said you hope to see the benefits kick in, again a comprehensive with is you know why you are doing it now? What do you hope to see from a one of those benefits you're talking about? And just the last question. If you could talk a little bit more about the mitral valve redesign issues and how confident you are you can get after this and get this program back on track? Thanks so much.

Yeah, thanks Rick. So the DTC, the whole point of this for us is about you know, creating demand for therapy and epilepsy. We think, you know, clearly one of the issues is awareness of VNS as an opportunity in the whole treatment paradigm for epilepsy. And we think DTC is the way. We started off with director position to start talking about this and create awareness, then we started the DTC in the second half of the year. We're seeing definitely an increase in physician and patient engagement. The web metrics were tracking and definitely ramps significantly. And we've also been doing some testing. We know that it's very responsive to the campaign. You can see, you know, the metrics ramp up and down when we turn it on and off. It's really quite fascinating. And we've seen some bright spots on lead generation and conversion to therapy. So for us, this is about creating awareness. You know, a lot to do with the carers, the families of patients. And because of the way we've approached it, we've decided to you know, turn it from a pilot into you know significant campaign for 2019. On, [indiscernible] yeah, this is one of the things about being in early stage development is that you run into in the bumps and we definitely did with this one and that's why we've leaned into it. We take our responsibility to the patients and the physicians who participate in our trials very seriously. And we saw two adverse events in patients within the - in Q4. And as a result decided to stop the trial, while we understood where the issues where. We think that it's a design modification issue around the anchor system, not the valve itself, but the anchor. And that's why we press pause. And what we're going to do is reboot that design and the team of confident about getting back into the trial in 2020. They worked at a whole program to go through this and prototype and get back to the IRB process, so we can start enrolling in 2020.

Thank you very much.

Excuse me. Thank you.

Next question comes from the line of Raj Denhoy with Jefferies. Your line is open.

Hi, good morning.

Hey Raj. How are you?

Hey, pretty good, thanks. I wonder if maybe I could ask a few more on the depression progress you are seeing and congratulations on the progress in the last few months. I'm curious about a couple things. So the interim look at the data that CMS is provided in their ruling, can you maybe offer a bit more about how you think that will play out? Will it be just to look at the response end points how many patients do you think are going to be required before you can take that look, really just any thoughts around how quickly we can get to that important point?

Hey Raj, this is Melissa. The work at the study is approximately 200 patients and it will be looking at all endpoints of the studies. So primary and secondary endpoints of the study will be evaluated at that time.

Okay. So both response and remission will need it - will need to be showing some sort of efficacy on both those endpoints at that point?

Yes, so I think the movement to a longitudinal study isn't predicated on the secondary endpoints.

Okay, understood. And then the other question is around the control group, and whether it's going to be an active sham, will the patients in control receives even low level stimulation or will the device be entirely off?

So the final decision you know did leave that up to the clinician to whether this device will be on or off or at a sub-therapeutic stimulation.

And you've not yet decided which that will be or is that still being negotiated.

Yeah, the device will likely be off during the trial.

Okay. Fair enough. And then…

The final protocol.

Okay. Great. And then just wanted to ask a question on, you mentioned the ImThera, the sleep apnea trial that you're finalizing design with the FDA and you expects to start this year. Any updates on that timeline and what that trial will look like?

Yeah, one of the things that we said when we talked about the THN3 trial is the issues around the stability in the protocol for titration, what went very clear. And we've done a bunch of work over the last three, four months. We took the last cohort of patients that were coming into THN3 trial, types rather than with a different algorithm and sort of very definite change in the response. So, using that we've had discussions with the FDA about doing a confirmatory trial and going back and doing a small cohort of patients starting in 2019. We're going to meet with them in March and look at wrapping up the study design.

When you say a small cohort, so I guess I'm really just curious about when you think that trial could provide the evidence to support the approval of that technology?

Yeah. I think we've got to just get through the discussions with the FDA, but we're pushing hard to start the trial in 2019.

Okay, that's fair. Hey, just one last question, just on cash position and thoughts around M&A. So you've outlined some of the costs you anticipate around the Heater-Cooler issue, you've taken on some additional capacity for debt around that. Maybe you could offer a bit more about what you think your capacity is for further M&A over the near term and your thoughts around whether you're likely to do further M&A to build out the portfolio over the near term?

Hey, thanks, Raj. I mean, first of all, we are very strong financially and we have been improving our working capital. We've accelerated the growth and regenerating roughly 200 million in cash flow from operations every year. So, of course, having this liability behind us, I think is a prudent thing to do. As you know, M&A is always going to be part of our growth strategy. And we still have capacity to do acquisitions. We will always look at alternative financing if we find the right thing. But clearly, we have to address the current liability and that's why we were able to secure these commitments from the banks to address the 3T.

Great, that's helpful. Thank you.

Your next question comes from the line of Scott Bardo with Berenberg. Your line is open.

Yeah, thanks for taking my questions. Three questions, please. So firstly, I wonder if you could give us a little bit more understanding of the provision that you've made for 3T. What sort of inputs have led to that calculation with respect to potential claim numbers and so forth. And what gives you confidence that this will be adequate and not need to be extended some point in the future? And second question is an operational one, please. I appreciate there's a lot going on from an innovation standpoint and leaving over, but it was my feeling that management had a degree of comfort in somewhat stable operating margins in 2019 and absorbing some of these impacts. I know that in your guidance framework, you're calling for an 18% to 20% margin, so highlighting prospects of 150 basis points decline at the low end. So can you talk a little bit, I mean, is there more cost than you expected in developing the pipeline here or what are some of the moving parts from your operational cost perspective that we need to consider now that perhaps we shouldn't have considered before? And last question on Percival, please. Obviously heart valves has been the perennial disappointment for LivaNova for the last five years or so and the pretty shocking number in the fourth quarter. So within your guidance, you've highlighted expectation to double-digit growth from Percival. Can you please just add a little bit of flavor around that what underpins that confidence, what visibility do you have? Thanks.

First of all - hi Scott. Let's talk about 3T provision now, why don't you jump in on the guidance in the SG&A and I'll come back on Percival. So for 3T, we think it's important to draw a line under this issue. And if you look at the total number of cases and the provision amount, we think this is a reasonable and appropriate number for us. I think the thing for us is, we looked at the business decision, the time that this was taking the inconvenience, expensive continuing litigation, avoiding distractions from operations and also ambition of improving patient care, we really think that it's the right time to take this provision. And again, the fact that the banks - the four banks were able to provide the financial commitments was an important market for that. So this is about drawing the line under this legacy issue.

Yeah, absolutely. So thanks, Scott. You know we're super pleased with the growth of the business and the momentum that we see. And clearly, as we highlighted back in Investor Day, that we had a very clear plan to invest in R&D in 2018 and 2019 to help build out the pipeline but then use gross margin to support a lot of these investment. If you look at base, the base business excluding TRD, we are growing our business both top and bottom line in a similar margin profile. We are making incremental investments in TRD, which is basically 100 basis points on the operating margin. We think that that investment is prudent given the size of the opportunity.

And lastly, on Percival, I think is perennially. It's our Q4, it was disappointing. But overall, I think one of the bright spots for us is that overall in 2018, Percival was double-digit growth. So I like the fact that it's a double-digit growth product. I still think there's plenty of work for us to do. But the high single digits that we had in the U.S. and Europe in Q4 were you know - by international ordering patents and I'd rather us build a sustainable business than just hit a double-digit number for the sake of it. So I can identify where the issues are and we know we're working on that. But as you say, it's been a disappointment. And let me just say that the team are well aware that there's plenty of work to be done and we're expecting a significant effort in this portfolio.

Understood. Thanks very much. Just one quick follow-up. And so the program obviously, this is a complex program has been delayed several times since the inception I think of Caisson. So I wonder, could you give us some flavor of when an impairment test for your Caisson acquisition would come into effect, obviously it's been delayed further now. I just wonder what end points do you decide to write-off the asset all together or not, and if you could just give some flavor there please?

Yeah, I mean every year we have to do impairment testing on all the different things that we have in the pipeline. The value of Caisson and in the market opportunity is still significant. It is unfortunately costing more and taking longer. So we have to continually look at the net present value of that. If you recall, though also we spent I would say a relatively modest amount for Caisson given that we had owned roughly half to the business previously. So to trigger an impairment hasn't been an issue per se given the fact that we didn't actually spend that much for the asset.

And I think importantly, the fact that the team have identified the root cause, they've developed a remediation plan and we know what the timeline looks like. We believe that the program is healthy, we just need to rectify these issues we've identified.

Understood. Thanks, guys. I'll switch back in queue.

Your next question comes from the line of Matthew O'Brien with Piper Jaffray. Your line is open.

Morning. Thanks for taking the questions. Just to finish off the 3T commentary, when you say this is a reasonable estimate, is there any chance this could snowball into being much, much higher of a liability? And then when do you figure out whether or not the insurance providers are going to cover some of this liability?

So, we don't believe so. We think this is a reasonable estimate. And we are in negotiations with the insurance companies that cover us. But we've taken a provision for the whole amount that we believe is reasonable.

Got it. Thanks. And then as far as TRD goes, I'm having a little bit of a hard time reconciling the commentary on the revenue you expect this year and next year, if memory serves and please correct me if I'm wrong, I think you do about 100 replacement cases per year. And then I know you said about 500 patients in total. So either I'm getting that 100 number wrong in terms of the replacement folks per year, and the ASP is much higher than I was expecting. So which of the two of it - which of the two of those would it be?

So, it's - in that number is the replacements plus some incremental replacements, due to we are changing the final decision memo for the funding of replacement. Additionally, clinical trial units are also in there.

Okay, so sorry, Melissa. Just to put a little bit finer point on that. If you do call it 7.5 million this year in the back half, that's 300 patients at an ASP at 25,000 apiece. I think you do about 100 replacements that would be 200 enrolled this year is what you'd be expecting then?

And then you have to consider the additional replacements, due to the change in the final decision memo.

This is a combination of end-of-service plus the clinical.

Sure. I think the end-of-service number - yeah.

Yeah. Right. So we think obviously we're doing everything to accelerate, build the capabilities to ensure we get the clinical up and running, but we're also trying to provide a range around that.

Okay. Okay. Maybe we can follow-up offline, because that's 1,000 patients roughly then next year to $25,000 ASP?

That's roughly, yeah. That's roughly, what we're thinking, yeah.

Got it. Okay. And then lastly just real quick. On the guidance for the core business four to six you're coming off a pretty good Cardiopulmonary number, Neuromodulation was a monster in 2018. Where does that four to six growth come from when you net out 100 basis points in contribution from TRD this year?

Five to seven.

Right, when you net out the 100 basis point.

Yeah. So we have great momentum. And I guess to me, we could have probably characterize it differently. But it's very similar to the growth momentum that we have this year. As you may recall, we talked about this OEM, Canadian distribution agreements that were exiting. So that you have to back off 32 million there off the top line. So that's roughly 300 basis points. In addition, you have one 1% due to FX. So I would say as we go into 2019, it's a very similar kind of growth trajectory that we're seeing today.

And the bps were leaning into specifically driving international. You see the results in international continuing to improve that DTC, self-driving epilepsy in the U.S. and Europe and ICS, you know we again building heavily into TandemLife and we expect the productivity of that commercial group to really ramp. And then in the second half, launching the next generation product for ICS. So that those things excluding TRD is really what we're leaning into.

And Matt, the 5 million to 10 million for TRD is about 30 basis points up to growth.

Got it. Okay. Very helpful. Thank you.

Thank you.

Your next question comes from the line of Mark Taylor with UBS. Your line is open.

Good morning, thanks for taking the question.

Hey, good morning, Mark. How are you?

Great. Damien. How are you? First thing I wanted to ask was, it's just a follow-up on the TRD discussion. I was hoping you could - I know you're in discussions, but I was hoping you could give us some flavor for what the trial structure could look like in terms of the primary and secondary endpoints to the extent that you can reveal any of that?

For your primary - yeah, I guess so - I think right now, our focus is obviously on responses is our primary endpoint. We will look and remission as well. We've said it will be double blinded randomized controlled approximately 500 patients. You know a lot of it is laid out, and it's very consistent what we talked about in the past, which is why we feel pretty comfortable that by the end of March, we should have clarity with them on getting the trial, I guess with its final approval.

Great.

The important things there to is, the addition of the bipolar patients. That's 25% of the patient population back in the pool, which we think is a really important inclusion that CMS came to.

Thanks for that. And then on sleep apnea, could you talk about what that trial looks like and what the timeline could be if you started here in 2019?

Yeah, not yet. Just give us a couple of dates until we've met with the FDA in March. And then we'll come out and talk about it more clearly, either as a separate press release or we'll talk about it in April. But just give us a couple of dates with the FDA on that one. But we're really encouraged by what we saw in the titration improvements that we made over the last few months.

Okay. And last one I just wanted to clarify on TMVR. I guess, can you disclose what the adverse events were and more specifics on why you think the anchoring system is the right fix?

Yeah, so the two adverse events with that and we've got a significant piece of work that the team have done over the last two months looking at all of the root causes that going back and look through the cases, let's talk to the physicians, not just the physicians, the entire team at the hospital. So it's been a pretty exhaustive review of those two cases. And looking at all the imaging, we were confident that it's to do with the anchoring system, as I said not value, the value is really proven out to be very versatile. So - and that's why we're focusing our efforts on the anchoring system.

Okay. Great. Thank you very much.

Cheers, Mark.

Your next question comes from the line of Mike Matson with Needham & Company. Your line is open.

Thanks for taking my questions. I guess just wanted to start with your Neuromodulation continuing to see really strong growth outside the U.S. So you particularly in the emerging markets, so just curious what's driving the growth, is investments in the channel or is it the - you know the SenTiva products?

Yeah, so in Europe, it's SenTiva. And then you know the SenTiva generator is more than 50% of the sales of the devices for epilepsy which is just tremendous. And I put this down to sales leadership and execution, particularly in the U.K. and Nordics and Italy. In international, I will say a lot has to do with the team's focus on execution, but also changes in our channel, we went direct in Japan, we went direct in Australia. They don't have SenTiva yet in the international group. So we're working towards that and excited about the possibility of that. But it's really I would say sales force 101 you know the team being very focused on account acquisition and account penetration.

One of the reasons that we talked about our SG&A this year being both in 2018 and 2019 a bit higher is that we've been investing ahead of the curve in basically going direct in key international markets with the real focus on building out teams to sell Neuromod and we're seeing amazing growth as a result. So this past quarter, it was 76% in the Rest of World region, nearly 20% in Europe, and 10% in the United States. So we're seeing great signs with that investment in both the U.S. and in international.

Okay. Thanks. And then just curious if you could give us your thoughts on the potential threat of DBS in epilepsy I think Medtronic just announced their U.S. commercial launch about a week ago of that product?

Yeah, look, I would say a few things, especially anything that rises the awareness of drug resistant epilepsy is a good thing. And again, that's why we're leaning into the direct to consumer campaign. We think this is a large unmet need. I think you've heard me say, there's roughly 100,000 new patients identified with DRE every year. 5,000 of them roughly getting VNS therapy, 5000 of them get some other form of therapy. It leaves roughly 90,000 patients a year that are not getting a therapy other than drugs. And that's the large unmet population. And so I really think that what we've established with VNS with more than 100,000 patients implanted now, more than any other non-drug therapy. And so we think that we've got a great opportunity with VNS. We're continuing to improve the product. And DBS coming to the party and talking about drug resistant epilepsy, we think we're good with that.

Okay. And then finally, just curious if you had factored any additional R&D expense for around the European MDR changes that are happening. Are you expecting to have to go back and recertified products over there for example, I know some - there's been other companies that have specifically called out as driving higher spending, at least in the shorter term?

Yes. Yes. We have included that in our projections for 2019.

All right. Thank you.

Thought about at least in the R&D line. But we've largely absorbed that as basically a cost of doing business. And we've leaned into that, we've got a great team working on it.

All right. Thank you.

Your next question comes from the line of Jason Mills with Canaccord Genuity. Your line is open.

Hi, Damien, Thad and Matt.

Hey, Jason, how are you?

Great. Thank you for taking the question. So only I take two questions already asked and smash them together and sort of ask a question about M&A and specifically in Mitro. Regardless of the delay in Caisson. I think I've asked you in the past about your strategy in Mitro, broadly speaking in the past and clearly what we see with the Mitro valve is a need to have an argument approach, at least that's how other companies are taking it. That's when talk to physicians, it's not a one size fits all kind of like the aortic valve is. So I'm just curious that you're asked about your M&A capacity or ability. You also have talked extensively about what's going on with Caisson. So maybe talk about over the next couple of years what you would have us think about with respect your Mitro portfolio potential for augmenting at the acquisition specifically that business?

Yeah, so I would say our team largely agrees that there's going to be a lot of different ways to go after the Mitro opportunity. It's not just replacement, it's not even just repair. So the comments about toolbox and looking at other areas and other therapies, we are looking at those. That is definitely something that is on our list of areas we're focused on for now. But again, we always thought that replacement has the largest long term opportunity and that's why we started there.

And that's why we taken M&A I' say portfolio approach. I mean, clearly you're going to have and it's natural and in a more complicated space, such as a Mitro replacement that you're going to have delays, you're going to have obviously things that happened. But I think what we have built up in relatively short period of time with everything from TRD to ImThera to even heart failure program is a really unique portfolio of assets. We're going to continue to look at other things and evaluate them and see if it's the right fit for us as LivaNova.

It's Matt. I think we're talking about, it's a structural heart approach.

Makes sense. Thank you for that. And just as a follow-up on that specifically to this latest issue, Damien, reduce your comments anyway in the transseptal approach, will you look at other delivery avenues or are you committed to transseptal on this specific avenue?

Yeah, we're very committed to transseptal. We still believe that's the right approach. Again the issue for us is not about the approach, it was about the anchoring and so we're very committed. And I think the clinician field still views transseptal is very much the way to go to.

Got it. And I just - I'll just ask my two follow-ups in Tandem. I that took note of your commentary about the internal controls and so in the question, you said they were - the two issues were linked which almost made it sound like you had folks that you didn't want access to your internal systems that had access that perhaps made some changes, I didn't want to read too much into it, but certainly sounded like there was something going on there and I wanted to get your sense of confidence in the potential you do stand that and that risk is completely off the table at this point. And then definitely I'll throw it in and then get back in queue. Just on your guidance completes that obviously I'm sure you guys went through guidance with a fine tune and you're hoping to show upside to your guidance. I'm wondering if you could give us where you think you have the best opportunity to exceed your guidance whether it be maybe a little bit more leverage than you are guiding few on the gross margin line or specific revenue area. And then where you were especially cautious and wanted to make sure that you didn't see any downside, any areas on both ends would be helpful. Thanks guys.

Yeah, so only the accounting item and clearly as I mentioned in my comments, I mean we had a lot of complexity in both the CRM divestiture and implementation of our SAP program in 2018. Clearly and I want to be extremely clear, we have not identified any misstatements in our financials. It's more of a control design matter related to access and so it's more because there's more access. There was a potential, the potential but we have not identified an issue. So we're working with our authors on this and clearly we are very focused on addressing and remediating in 2019. On the financials and the guidance, I mean, look I'm super excited about the momentum that we have in the business. Clearly, we're doing great things and driving Neuromodulation globally. I think also, we're really excited about the potential with TandemLife and I think we can do better there. But we're also within the P&L showing fantastic results in gross margin. We're well above the 100 basis points that we've described an Investor Day and we're reinvesting that thing, grow the business even further. So again, I feel we could drop more to the bottom line, but while we're in this period of accelerated growth, really maximizing the opportunities that we have, particularly internationally in Neuromod and TandemLife.

Yeah, I think you're right. Look, I'm really proud about the team achieved in 2018, driving growth, the gross margin improvement. I mean basically the things we talked about with you at Investor Day two years ago now and it's starting to break through. The constant focus on execution is really what's important for us, Jason. And, you know, I think we've had a very transparent relationship with you guys, you know, clearly possible for us is, is something that's disappointing and that's what we're watching very closely. But I think the international Neuromodulation, those are the big drivers for us.

Thanks for the color.

Thanks.

There's no further questions at this time. I will now turn the call back to CEO, Damien McDonald for closing remarks.

All of you, thanks for your thoughtful questions. And on behalf of the entire team, we appreciate your support and your interest in LivaNova and thank you and we'll talk to you in a quarter if not sooner. Cheers. Thank you.

This concludes today's conference call. You may now disconnect.