LivaNova PLCLIVN
LivaNova PLC Stock Compensation Disclosure
Note 13. Share-Based Incentive Plans
Share-Based Plans
For the year ended December 31, 2025, LivaNova issued share-based compensatory awards to its employees with terms approved by the Compensation and Human Capital Management Committee of the Company’s Board of Directors and issued share-based compensatory awards to its directors with terms approved by the Board of Directors. The employee awards with service conditions generally vest ratably over three years for RSUs and four years for SARs, and are subject to forfeiture unless service conditions are met. The employee market performance-based awards that were issued generally cliff vest after three years, subject to the rank of LivaNova’s total shareholder return for the three-year period ending December 31, 2027 relative to the total shareholder returns of the S&P 500 Health Care Equipment index. The employee adjusted free cash flow and return on invested capital operating performance-based awards that were issued generally cliff vest after three years, subject to the achievement of certain thresholds of cumulative results for the three-year period ending December 31, 2027. The Board of Director RSU awards with service conditions generally cliff vest at one year.
Prior to June 11, 2025, share-based awards could be granted under the 2015 Plan and the A&R 2022 Plan in the form of stock options, SARs, RSUs, and other share-based and cash-based awards. On June 11, 2025, the Company’s shareholders approved the 2025 Director Incentive Plan and the Second A&R 2022 Plan. The 2025 Director Incentive Plan provides equity-based compensation to non-executive directors by making available a total of 300,000 shares for awards granted on or after the date on which the 2025 Director Incentive Plan was approved by the Company’s shareholders. The 2025 Director Incentive Plan is intended to be the successor to the 2015 Plan. No further awards may be made under the 2015 Plan, although any outstanding awards under the 2015 Plan will continue to remain in full force and effect. The Second A&R 2022 Plan provides for an aggregate of 2,200,000 shares that can be issued pursuant to awards granted on or after the date on which the Second A&R 2022 Plan was approved by the Company’s shareholders. Additionally, forfeited and expired shares granted under the prior
A&R 2022 Plan are applied to the Second A&R 2022 Plan. The other terms of the Second A&R 2022 Plan, including its expiration date, remain unchanged from the A&R 2022 Plan. As of December 31, 2025, under the 2025 Director Incentive Plan, there were 259,423 shares available for future grants to LivaNova’s non-executive directors, and under the Second A&R 2022 Plan, there were 2,377,127 shares available for future grants to LivaNova’s employees.
The Company also provides an ESPP.
Share-Based Compensation Expense
The following table presents the amounts of share-based compensation expense recognized in LivaNova’s consolidated statements of income (loss), by expense category (in thousands):
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Cost of sales | $ | 1,708 | $ | 1,210 | $ | 967 | ||||||||||||||
| Selling, general, and administrative | 27,731 | 26,349 | 29,421 | |||||||||||||||||
| Research and development | 6,853 | 6,374 | 5,964 | |||||||||||||||||
Total share-based compensation expense | 36,292 | 33,933 | 36,352 | |||||||||||||||||
| Income tax benefit | 2,811 | 2,632 | 1,845 | |||||||||||||||||
| Total expense, net of income tax benefit | $ | 33,481 | $ | 31,301 | $ | 34,507 | ||||||||||||||
The following table presents the amounts of share-based compensation expense recognized in LivaNova’s consolidated statements of income (loss) by type of arrangement (in thousands):
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Service-based RSUs | $ | 17,320 | $ | 17,383 | $ | 20,493 | ||||||||||||||
| Service-based SARs | 12,865 | 12,650 | 13,710 | |||||||||||||||||
| Market performance-based RSUs | 2,118 | 1,402 | 866 | |||||||||||||||||
| Operating performance-based RSUs | 2,801 | 1,323 | 162 | |||||||||||||||||
ESPP | 1,188 | 1,175 | 1,121 | |||||||||||||||||
| $ | 36,292 | $ | 33,933 | $ | 36,352 | |||||||||||||||
Unrecognized Share-Based Compensation
The following table presents the amounts of unrecognized share-based compensation cost related to non-vested awards, including awards issued as of December 31, 2025 (in thousands):
Unrecognized Share-based Compensation Cost | Weighted-Average Remaining Vesting Period (in years) | |||||||||||||
| Service-based SARs | $ | 27,260 | 2.61 | |||||||||||
| Service-based RSUs | 30,631 | 2.06 | ||||||||||||
| Performance-based RSUs | 12,153 | 1.83 | ||||||||||||
| $ | 70,044 | 2.23 | ||||||||||||
Stock Appreciation Rights and Stock Options
LivaNova uses the Black-Scholes option pricing methodology to calculate the grant date fair market value of SARs. The following table lists the assumptions LivaNova utilized as inputs to the Black-Scholes model:
| 2025 | 2024 | 2023 | ||||||||||||||||||
Dividend yield (1) | — | — | — | |||||||||||||||||
Risk-free interest rate (2) | 3.9% | 3.4% | 3.7% | |||||||||||||||||
Expected option term - in years (3) | 5.5 | 5.3 | 5.3 | |||||||||||||||||
Expected volatility at grant date (4) | 43.4% | 43.1% | 45.1% | |||||||||||||||||
(1)LivaNova has not paid dividends, and no future dividends have been approved.
(2)LivaNova uses yield rates on U.S. Treasury securities for a period that approximates the expected term of the awards granted to estimate the risk-free interest rate.
(3)LivaNova estimated the expected term of the awards granted using historic data of actual time elapsed between the date of grant and the exercise or forfeiture of options or SARs for employees.
(4)LivaNova determines the expected volatility of the awards based on historical volatility.
The following tables present the activity for service-based SARs and stock option awards:
| SARs and Stock Options | Number of Optioned Shares | Wtd.-Avg. Exercise Price per Share | Wtd.-Avg. Remaining Contractual Term (years) | Aggregate Intrinsic Value (in thousands) (1) | ||||||||||||||||||||||
Outstanding — as of December 31, 2024 | 3,045,532 | $ | 61.70 | |||||||||||||||||||||||
| Granted | 957,734 | 36.88 | ||||||||||||||||||||||||
| Exercised | (145,479) | 45.05 | ||||||||||||||||||||||||
| Forfeited | (109,429) | 45.76 | ||||||||||||||||||||||||
| Expired | (78,096) | 79.49 | ||||||||||||||||||||||||
Outstanding — as of December 31, 2025 | 3,670,262 | 55.98 | 6.67 | $ | 43,269 | |||||||||||||||||||||
| Fully vested and exercisable — end of year | (1,846,208) | 66.10 | 4.83 | 12,820 | ||||||||||||||||||||||
Fully vested and expected to vest — end of year (2) | (3,445,871) | 56.94 | 6.52 | 38,706 | ||||||||||||||||||||||
(1)The aggregate intrinsic value of SARs and stock options is based on the difference between the fair market value of the underlying share as of December 31, 2025, using the market closing share price, and the exercise price for awards where the market closing share price exceeds the exercise price.
(2)Includes the impact of expected future forfeitures.
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Weighted-average grant date fair value of SARs granted during the year (per share) | $ | 17.31 | $ | 26.28 | $ | 19.44 | ||||||||||||||
| Aggregate intrinsic value of SARs and stock options exercised during the year (in thousands) | 1,458 | 2,828 | 1,905 | |||||||||||||||||
Restricted Stock Units Awards
The following tables present the activity for service-based RSU awards:
| Service-based RSUs | Number of Shares | Wtd.-Avg. Grant Date Fair Value | ||||||||||||
Non-vested shares as of December 31, 2024 | 762,312 | $ | 54.32 | |||||||||||
| Granted | 555,277 | 39.37 | ||||||||||||
| Vested | (286,587) | 56.05 | ||||||||||||
| Forfeited | (58,986) | 46.35 | ||||||||||||
Non-vested shares as of December 31, 2025 | 972,016 | 45.75 | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Weighted-average grant date fair value of service-based RSUs issued during the year (per share) | $ | 39.37 | $ | 55.06 | $ | 43.31 | ||||||||||||||
| Aggregate fair value of RSUs that vested during the year (in thousands) | 12,023 | 18,119 | 14,853 | |||||||||||||||||
The following tables present the activity for performance-based RSU awards:
| Performance-based RSUs | Number of Shares | Wtd.-Avg. Grant Date Fair Value | ||||||||||||
Non-vested shares as of December 31, 2024 | 225,224 | $ | 63.42 | |||||||||||
| Granted | 185,265 | 41.67 | ||||||||||||
| Vested | (30,551) | 89.56 | ||||||||||||
| Forfeited | (5,361) | 65.54 | ||||||||||||
Performance adjustments (1) | (12,709) | 95.14 | ||||||||||||
Non-vested shares as of December 31, 2025 | 361,868 | 48.93 | ||||||||||||
(1)Represents the difference between the target units granted and the actual units awarded based upon the attainment of performance goals for the Company.
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Weighted-average grant date fair value of performance-based RSUs granted during the year (per share) | $ | 41.67 | $ | 64.83 | $ | 40.63 | ||||||||||||||
| Aggregate fair value of performance-based RSUs that vested during the year (in thousands) | 1,195 | 4,460 | 3,641 | |||||||||||||||||
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.