Good day, ladies and gentlemen, and welcome to the LivaNova PLC first quarter 2020 earnings conference call. At this time, all participant lines are in listen-only mode. After the speakers' presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star-one on your telephone. As a reminder, this conference call is being recorded. I would now like to introduce the host for today's conference, Mr. Matthew Dodds, LivaNova's Senior Vice President of Corporate Development. You may begin, sir.
Thank you, Demetrius, and welcome to our conference call and webcast discussing LivaNova's financial results for the first quarter of 2020. 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 Investor 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 furnished to the SEC, including today's press release that 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 & Events, Presentations at investor.livanova.com. With that, I will now turn the call over to Damien.
Thank you, Matt, and thank you for joining us, and I hope you and your families are all safe and well. Before we discuss our first quarter results and updated guidance, I'd like to make a few comments in light of the pandemic. Since the outbreak of COVID-19, our priority has been to continue to support patients, healthcare professionals, and our employees. We remain focused on providing life-saving technologies and supporting our customers. We are still in the early days of assessing the impact of COVID-19 and the impact that it's had, and is expected to have on our business. I would like to take this moment to thank all our associates worldwide who have shown remarkable resilience through this crisis, particularly those on the front line and in our manufacturing facilities who have maintained our supply chain.
As Thad and I will outline during the call, in the first quarter of 2020, COVID-19 started to impact the rest of world region in mid-February, followed by Europe in early March and the U.S. in mid-March. I'm going to start off by discussing some recent highlights and our sales results by business. After my comments, Thad will provide you with additional detail on the financials and our revised 2020 guidance, then I will wrap up with closing comments before moving on to Q&A. In late February, we entered into a research collaboration with Verily as part of our RECOVER depression study. This will allow us to capture biomarkers of depression and data on patient behavior using technology and analytics provided by Verily. These data will provide further insights into depressive episodes and a patient's response to VNS Therapy and its impact on DTD.
At the ACC and World Congress of Cardiology meeting in March, we presented two posters. The posters reviewed the benefits of Autonomic Regulation Therapy, or ART, and further support for the rationale for the ANTHEM-HFrEF heart failure pivotal study by reporting the long-term improvement in autonomic tone, baroreceptor sensitivity, and cardiac electrical stability produced by VNS. In April, we received FDA Emergency Use Authorization, or EUA, for several cardiovascular products for ECMO therapy. The EUA temporarily expands the application of devices for ECMO therapy to greater than six hours in response to COVID-19. Product indications for use have been modified accordingly for many products within our cardiopulmonary and ACS portfolios. We also received CE mark approval for the Bi-Flow ECMO cannula. This cannula is designed to reduce the risk of limb ischemia, a significant and all too common complication from ECMO therapy.
Earlier this week, we announced the conclusion of a series of debt covenant amendments, which materially modify the status of our current credit agreements. These amendments include adjustments to covenant calculations and temporary updates for certain limits on financial ratios. These amended agreements provide us additional assurance and flexibility to better manage the business through the pandemic. I'll discuss our three growth drivers, epilepsy, advanced circulatory support, and the rest of world region. All net sales results will be stated on a constant currency basis. U.S. epilepsy sales declined in the mid-single digits versus the first quarter of 2019. This decrease is attributable to the impact on new patient implants because of COVID-19. Our U.S. business was tracking well until mid-March when we saw a steep drop in new patient implants and some impact to replacement implants.
In 2020, we now expect our U.S. epilepsy business, excluding DTD sales, to decline in the mid-teens due to the impact of COVID-19 on elective surgery. We currently expect the second quarter to see the largest impact, with the business recovering as we move through the year. We are forecasting sales to return to near pre-COVID levels in the fourth quarter. Advanced circulatory support sales were $11 million in the quarter, an increase of nearly 30% from the first quarter of 2019. The growth was driven by deeper penetration of existing accounts with ProtekDuo kits used for right ventricular recovery, and TandemLung respiratory support kits also saw an acceleration in the quarter. The limited rollout of LifeSPARC is going well, and we are on track to start the U.S. commercial release at the end of this quarter. We now expect our ACS business to grow above 30% in 2020.
Rest of World sales were $64 million in the quarter, growing 1% versus the first quarter of 2019. The region was primarily impacted by COVID-19, with some execution issues in Japan and the Middle East. Turning now to Difficult-to-Treat Depression, sales in the quarter were $1.4 million, up more than 70% versus the first quarter of 2019. Our current estimate is that the enrollment in the RECOVER depression study will be impacted by COVID-19 for six months, and we now expect DTD sales of approximately $5 million-$10 million for the year. We currently expect to enroll our 250th patient by the end of the second quarter of 2021. In heart failure, our ANTHEM-HFrEF U.S. pivotal trial has enrolled more than 200 patients. We have temporarily paused enrollment in accordance with site restrictions due to COVID-19, though we are supporting patients and physicians by using remote technology to remain engaged.
We now expect to reach 300 patients in the second quarter of 2021. I'll now turn the call over to Thad for an overview of our financial results. Thad?
Thank you, Damien. I'm going to discuss the first quarter results in greater detail and then provide an update on our 2020 guidance. Sales for the first quarter were $242 million, a decline of 1.8% compared to the same quarter of prior year. Cardiovascular sales were $152 million, down 0.2% from the first quarter of 2019. Cardiopulmonary sales were $116 million in the quarter, a decline of 2.2% versus the first quarter of 2019. Heart-lung machines sales declined in the mid-single digits, primarily due to difficult year-over-year comparisons globally. Oxygenator sales grew in the low single digits related to strong performance in the Rest of World region, including Southeast Asia, Eastern Europe, and Brazil. Turning to Heart Valves. Sales for heart valves were $25 million in the quarter, an increase of 1% versus the first quarter of 2019.
Heart valves benefited from an easier comparison related to our transition to direct sales that occurred in certain markets in the Rest of World region in the second half of 2019. Let's turn to Neuromodulation. Sales were $90 million, which is a decline of 4.6% versus the first quarter of 2019. Until mid-March, U.S. neuromodulation had been tracking to a mid to high single-digit growth rate for the quarter. Neuromodulation sales in Europe grew in the mid-single digits, led by the U.K. and Germany. The Rest of World region declined in the mid-teens, in part due to softness in the Middle East. Adjusted gross margin as a percent of net sales in the quarter was 68.3%, down 100 basis points from the first quarter of 2019. The margin decline was primarily driven by mix from lower neuromodulation sales.
Adjusted R&D expense in the first quarter was $41 million, compared to $37 million in the first quarter of 2019. R&D as a percentage of net sales was 16.9% versus 14.7% in the first quarter of 2019. The R&D increase is due to higher costs associated with the continued enrollment of the ANTHEM-HFrEF heart failure pivotal trial and progress in the RECOVER depression study. Adjusted SG&A expense for the first quarter was $104 million, compared to $105 million in the first quarter of 2019. SG&A as a percentage of net sales was 42.8%, up from 41.6% for the first quarter of 2019. Adjusted operating income from continuing operations was $21 million, compared to $33 million in the first quarter of last year. Adjusted operating income margin from continuing operations was 8.7%, compared to 12.9% in the first quarter of 2019.
Our adjusted effective tax rate in the quarter was 8.2%, an improvement from 15.5% in the first quarter of 2019. The lower tax rate is related to previous tax planning initiatives. Finally, adjusted diluted EPS from continuing operations in the quarter was $0.33, compared to $0.54 for the first quarter of 2019. Moving to cash flow. Our cash flow from operations, excluding payments for one-time integration restructuring costs through the first quarter of 2020 was $25 million, compared to $24 million in the same quarter the previous year. Capital spending for the first quarter of 2020 was $9 million, which is $3 million higher than the first quarter of 2019. Our cash balance at March 31st, 2020 was $126 million, up from $61 million at December 31st, 2019.
Our net debt at quarter end was $400 million, up from $272 million at year-end 2019, as we had an additional $115 million in 3T legal costs this quarter. As Damien highlighted previously, in light of recent market developments, we have implemented a number of actions designed to strengthen our liquidity position and promote financial resiliency. Among these actions, we have secured amendments to certain covenants prior to December 31, 2020. These amendments include adjustments on covenant calculations and an update for certain ratios on calculations of debt to EBITDA and EBITDA to net interest payable. In addition, we are in the process of evaluating strategic financing alternatives to fund our short and medium-term capital needs. Among these alternatives, we have been analyzing a potential offering of equity-linked or debt securities.
Discussions concerning these potential transactions are ongoing and no assurance can be given that a transaction will be consummated or as to the ultimate terms of any transaction. Now, turning to our updated 2020 guidance. Given the current COVID-19 challenges, we are providing revised guidance for the second quarter and the full year. We believe it is important to provide updated guidance as we are in a period of additional uncertainty, and we've expanded our sales and EPS ranges to address this. For the full year, we are now expecting 2020 sales to decline between 7% and 17% on a constant currency basis. If current exchange rates remain unchanged, the company's full year revenue guidance will be negatively impacted by one to two percentage points. We now expect our global epilepsy business to decline in the range of 10% to 15% due to the COVID-19's impact on elective procedures.
The largest impact is expected to occur in the second quarter, with a gradual recovery occurring in the back half of the year, and a return to growth in the fourth quarter. DTD sales are now expected to fall in a range of $5 million-$10 million. Sales in our cardiovascular portfolio are estimated to decline in the mid-single digits, with strong growth coming from ACS, largely offset by the late-stage replacement cycle of HLMs and the impact of lower cardiac surgery procedure volumes in heart valves in particular. On the expense side, we have executed actions to offset some of the expected sales impact. Specifically, we've instituted a hiring freeze and are participating in government-sponsored work programs. We have reduced spend related to travel, marketing events, field presence, and we've shifted to working with our customers and stakeholders using remote methods.
We've reduced our discretionary spend related to consulting and contingency staffing. Finally, we've balanced our manufacturing output to coincide with demand. Now, turning back to the rest of the P&L. Adjusted gross margin is projected to be in the range of 66%-68%. We expect adjusted R&D to be in the range of 14.5%-15.5% of sales and adjusted SG&A to be in the range of 40%-41% of sales, driven in large part due to our decline in revenue, spending reductions, and investments in DTD. We are projecting adjusted operating margin from continuing operations to be in the 10.5%-12.5% range. Our adjusted effective tax rate is expected to be in the range of 10%-12%. We are estimating adjusted diluted earnings per share for continuing operations in the range of $1.40-$1.70.
The share count is expected to be approximately 49 million. Our adjusted cash flow from operations, excluding integration, restructuring, 3T product remediation and litigation payments, is projected to be in the range of $80 million-$100 million. De-integration or restructuring expenses are expected to be in the range of $10 million-$20 million compared to $44 million in 2019. Capital spending is projected to range between $20 million and $25 million, and depreciation and amortization expense is expected to be approximately $28 million. For the second quarter, we are expecting sales to decline in the range of 30%-45%, and the loss per share to be in the range of $0.25-$0.35. With that, I'll turn the call back to Damien for some final comments.
Thanks, Thad. I'd like to finish by acknowledging the selfless dedication of healthcare professionals around the world. Their extraordinary efforts continue, and we wish health and safety for them and their families. We look forward to updating you on our continued progress and delivering on our commitments to drive shareholder value. With that, Demetrius, we're open for questions.
Thank you. As a reminder, to ask a question, you need to press star one on your telephone. To withdraw your question, please press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from Raj Denhoy with Jefferies. You may proceed.
Hey, Raj.
Hello. I wonder if maybe we could start with the trajectory of the business here as you move through April. Appreciate it's been tough for most companies. Is there anything you can offer in terms of how things have trended here just in the first month of the second quarter?
Yeah, Raj, good question. I would say that I characterize this as modest signs of light. We've seen our monitoring of hospital by hospital, state by state, in our weekly calls internally. We've seen modest improvements in some hospitals, some areas, some states. Little green shoots in a few countries in Europe, as they've changed their regulations around what they consider essential and elective. Similarly, some smart signs of growth in China. Again, early days, but we are seeing small, modest signs of light.
Understood. I guess, I'm just trying to reconcile that with the guidance cut, which is pretty substantial on the top line. Also, I guess, the commentary in terms of a resumption, particularly in VNS by the fourth quarter, back to kind of pre-COVID levels. I guess the question is really around your confidence in the current outlook, right? Because things are very fluid at this point, so just trying to gauge kind of the error bands around what you offered in terms of guidance at this point.
Yeah, I would just add, I think to me, the way we think about the guidance and the range is it's highly fluid and there's a level of uncertainty. We purposely put some fairly broad ranges for the quarter and then also for the full year. Again, we're monitoring it weekly. We're studying the market. We're even looking at kind of a state-by-state and country-by-country view. Again, we're going to continue to monitor, but we're increasing in terms of some of the confidence, again, around just seeing some modest progress, as Damien described.
Okay, maybe just one last one on kind of the operating expenses. Again, everybody's models are slightly different, but in ours, it looks like the combination of R&D and SG&A is coming down by about $100 million from where we were previously. I'm trying to get at where that is coming from. If those cuts are sort of how deep that is, in a sense. When things do come back, how much of this cost reduction you've embarked on is going to be sort of difficult to recover from or how quickly can it kind of snap back?
I think to me, I described a number of the things that we are doing to protect income, but at the same time, it's really important that we continue to invest in the long term. We are continuing to support our trials, of course. Enrollment is obviously going to be affected because of just delays and the challenges of just getting clinical trials up and running. We're working and taking advantage of headcount freezes, travel restrictions, and obviously any government support to help us protect, again, some of the expense cuts. We are trying to balance short and long term, of course.
To that end, Raj, we've ring-fenced studies that are critical to our long-term value creation, like the RECOVER and ANTHEM-HFrEF trials. We've ring-fenced new product development around key things like LifeSPARC and Polaris and Iris. Other things that are less critical, less urgent, we've put those on hold.
Understood. I'll leave it there. Thank you.
Thank you.
Thanks, Raj.
Our next question comes from Rick Wise with Stifel. You may proceed.
Hi, Rick.
If you have your telephone.
We lost Rick.
Please unmute your line.
Can you hear me?
There you go.
Yes.
Okay, great. Sorry about that. Start off with LifeSPARC. I mean, clearly you have some optimistic thoughts about recovery there, expected to deliver at least 30% ACS growth for 2020. Maybe just update us on where you are with your ability to supply the product on the manufacturing side. Does COVID-19 accelerate LifeSPARC demand, pull forward demand? Just some more color and support of that particular positive piece of your outlook.
Yeah. Two things there. First, on the supply and manufacture, I will tell you, I think the team's made great progress there in our weekly Friday call with that team. I continue to be impressed with how they've run the project management of that and our component supply that we talked about at the end of last quarter, is moving well. We still expect to be able to execute the commercial release in the second half as we announced earlier. I'm really pleased with that progress. On the demand overall, look, I think we've seen great demand from our existing accounts. We are in an account penetration play here. It's existing accounts that are using more ProtekDuo, more TandemLung. That's the respiratory support product.
Interestingly, the right ventricle also needs to be supported when you have these events, and it's respiratory distress. That's why I think we're seeing this uptick in ProtekDuo. I think the teams continue to execute well there, and we see strong performance from that group in the U.S. and in a few countries internationally. I think that's why we're a bit more bullish on the full-year results. You want to say something?
Rick, it's Matt also. We talked about before, one of the keys of LifeSPARC is getting more controllers, also the ease of use of this controller. We can expand the footprint. Today, we're in less than 200 centers in the U.S. There's room to go to 500 or more. ECMO is a very valuable device, respiratory distress, as you've heard. That's a key component. The back half of the year is expanding, not just going deeper into accounts, as Damien said, but this will give us the ability to expand into a lot of new accounts who will find this product very easy to use and will then embrace an ECMO practice.
Okay. Thank you, Matt. Turning to the DTD trial, if I heard you correctly, correct me if I'm wrong, you had 250 patients enrolled by the end of the second quarter. I think you talked about the $5 million-$10 million contribution impact as well. Maybe if you could expand on your comments there. Talk about restarting the trial as things recover. What should we expect? What are you expecting? Damien, how does the timeline shift? How do the timelines that you've articulated in the recent past shift now in light of this pause in enrollment?
To get to that last part of that question, we think a shift of about six months is what we're forecasting. What happens? It's really about patient enrollment and the implant sequence. That what's slowing down. What's not slowing down is this team's work on the infrastructure of setting up the trial. They've continued to work diligently on site activation, and we've been doing a number of remote site activations, I think, which is a fairly novel process. We've also continued to work on patient identification and patient awareness of the study and done a number of digital activities to engage with people in that DTD community to push them to be aware of the trial.
Related to that, we're also continuing our work on how to engage with the private payers, and a recent hire of a specialist for health economics and reimbursement in that area is a really important key step. This guy has experience in this space and patient advocacy from pharma. I'm expecting a lot of engagement there as we continue that process. Infrastructure, it's still progressing. It's really about patient enrollment and implant that's the slowing step here, and that's why we're saying plus six months for the target that we previously talked about.
Great. Just last from me, obviously on the debt and financing side, you've made some important and critical progress with your covenants and some of the details you've announced. Can you expand on your comments? What kind of funding do you feel like you need? When is it needed? Maybe you can give us more concrete input about what to expect, how you're approaching this, and just how you're thinking about, does the lower end of the guidance, maybe another way to say it, drive the need for financing? If you hit the upper end, do you need less? I'm not sure how to put it all in context.
Sure.
Thank you.
I think as we stated, we've amended the covenants of all of our facilities to give us enough room for, let's call it, the next 15 months, which is usually the period that you want to test from an audit perspective. That, of course, going beyond that is ultimately what we're looking at. I think that gives us a lot of flexibility, and we continue to look at other facilities. For example, we had ended the quarter with $126 million in cash. We added recently another facility for Barclays last week. We're just going to continue to look at what else could we do.
We feel that even with the downsides, that we have a number of different levers that we could pull on the expense side to protect income and cash flow, and with the facilities that we have, is sufficient to meet our liquidity and our debt obligations. I think this has taught us all lessons, is to just evaluate different strategic financing alternatives and to have additional capacity. We are looking at the offerings of potentially equity, debt, just looking at what else could we do just to firm up and have more additional headroom. I don't have major concerns. It's just been, obviously, we've had to address what was a really strong balance sheet. Two years ago, our leverage was well below one time net debt to EBITDA. Given the 3T liability and the payments that we've made, our debt levels went a bit higher.
Of course, we needed some additional headroom with covenants, but we're looking at just additional instruments.
Just to follow up quickly on that. You're saying this is more thinking long-term, and this is something that when you talk about the additional financing, that you very much want to have, nice to have, important to have, but not so critical, not necessarily anxiety-provoking for the next 6-12 months. I'm not sure exactly what you're saying, Thad. Thank you.
Yeah. No, I think it's both, right? To me, there's a level of uncertainty, Rick, in this environment. We want that to cover short term, right? At the same time, we've been in a process of looking at restructuring our current facilities. If you look at the details of what we have, we have a repayment schedule of our $350 million facility in Q3 and Q1 next year of $70 million in those two time periods. We also look at other instruments to try to balance debt and equity, depending on the scenario. It's kind of a short term, creating more headroom, but then also taking longer term steps just to recapitalize the company's structure. Is that clear?
Yeah. Thank you for the thorough detail. Thank you.
Sure. Absolutely.
Our next question comes from Scott Bardo with Berenberg. You may proceed.
Hey, Scott. How are you?
Hi, Damien. Just a little bit more understanding, please, of the guidance framework, obviously appreciate you taking a stab at this guidance framework. Just to understand it fully, I think you said that you would anticipate cardiovascular to be down about mid-single digit for the full year. Was that right? That's your base case assumption?
Yeah. Mid to high single digit for the full year. Yeah.
Just to understand that a bit further, with respect to the cardiopulmonary business, which has been largely for CABG procedures and so forth, in a normalized world, not considered deferrable or less likelihood to defer. Have you seen or are you seeing signals that that should decline? What is the compensatory effect, you think, from the additional ECMO provision that you now have? Does that confer a degree of stability to that business that wasn't there before? Just really want to understand those moving parts a bit more, please.
Yeah, I think obviously, what we've talked about here is we expect the biggest decline in Q2, with elective procedures being down, and that's going to impact oxygenators largely. Our ECMO business, so the TandemLife business plus the small ECMO business we had in our cardiopulmonary portfolio is up. We've seen a small increase there, but not to offset the Oxygenator and HLM business. The business is growing. It's an important part of this, but it's also a very complex part of the procedures. You don't always go straight from ventilator to ECMO. We're pleased to see the uptick, but we're not banking on that being a full compensatory effect for all the cardiopulmonary portfolio.
Yeah. Scott, it's Matt. I would say, because I know you like to go into detail on this. Probably if there's one area to think about of being under pressure in cardiovascular, it's going to be capital equipment in the U.S. and Europe. Right? HLMs, ATS, that's where we're forecasting to see a big hit on that business. That's not truly procedures, that's more of a capital component.
Okay. That's helpful. Again, the walkthrough is significant impact in Q2, still declines in Q3, more normalization in the fourth quarter. Is that how you think about it? Any recent noises from hospitals about reactivating elective procedures or at least starting as early as now, soon? Have you baked in a relatively conservative negative assumption here? That's what I'm trying to understand.
Your opening statement is how we've modeled it. Again, what we've tried to explain is that we are looking at this weekly with our commercial teams, in Europe and international, country by country, in the U.S., hospital by hospital, state by state. Again, I think everyone's aware that the state differences in the U.S. are very compelling. That's where we've tried to be a bit more granular on the state-level differences. Our model broadly is how you summarized it.
Okay, thank you. Same nature of the question for neuromodulation, please. I clearly understand you're expecting some sharp declines. Just to understand this further, is it your expectation that you see a relatively stable replacement business, which is 50% of also these U.S. sales, is my understanding, and so the new patients are significantly down for the next few quarters? Is that basically the flow?
Back to the same idea about the model. Biggest impact in Q2, small recovery in Q3, getting back to sort of normal sales in Q4. I would say on NPI versus EOS, we've seen a more dramatic impact on the NPI, the new patient implants, and a slight decrease in the end of service. Again, very much impacted by differences in what people considered elective. The U.K. and Germany, for example, just listed last week that battery replacements are an essential surgery. We're monitoring this country by country, state by state.
Okay, understood. Sorry, just last clarification. Your revenue framework is outlining potential for down 17% sales. I'm not sure I understand that in the context of your biggest business, cardiovascular being, let's say, mid-single digit. It seems to me that, or even mid to high single digit, that wouldn't make sense given the commentary of 10%-15% neuromodulation decline. Are you essentially saying that the most likely scenario is the low end of the range? I just want to understand that.
Scott, it's Matt. No, what we did, if you look at the growth rates we gave by the major businesses, you're going to fall in the middle of that -7% to 17%. We just wanted to have a slightly wider range given all the uncertainty right now. We're not encouraging you to go right to the worst part of the range.
Okay, understood. Encouraging that you see things returning to more normalized volume in Q4. Of course, we know crystal ball, but that seems a sensible assumption to me. As we think about 2021, and I think this is more of a relevant number to look at, can you at least give us some sense of where you think you can recover the business to according to your sort of mid-term plan? Should we expect an earnings number that's at or above 2019? I mean, is that a good sense actually as to how this business trajectory recovers over the next 12- 24 months?
Yeah. I would say it's a bit premature to predict 2021 at this point. I do think that, again, depending on kind of how, whether it's a V-shaped recovery or U-shape or a W, we just don't know at this point, Scott. Again, we are going to take every action that we can to firm up the business to ensure that we're making both short and long-term decisions to get this thing back to where it should be, whether it's the previous 2019 results or the previous guidance on 2020, we just don't know at this point.
Okay. Last question then, please, from me. Again, congratulate you for extending the terms of your covenants. I wanted to understand a little bit better the concept of equity or equity-linked debt. Obviously, LivaNova shares are broadly trading where they were when you merged in 2015. I would argue your shares are not really in a position of strength. Why would it make sense to consider equity when debt is cheap and you have headroom in your covenants? More importantly, has this experience where debt has got a little bit ahead of where you would like it, changed your thoughts on acquiring loss-making developmental assets, or the very high levels of internal investment you make, which are artificially compressing your margins? Thank you.
Great question, and you're absolutely right. It's how we see it as well. We have this balance of what is kind of the right kind of facilities that could help us as LivaNova, where we're trading today, looking at our relative valuation, looking at the various tools in the market, and how is the market developing for these tools as well. We're trying to balance a little bit of equity, a little bit of debt, but try to find the right kind of thing to address kind of short and long-term capital needs. We haven't decided, and again, we're exploring options. We just wanted to highlight that today. You're absolutely right. I think we would also think very carefully about doing future M&A, especially dilutive deals. The TandemLife deals or accretive immediately accelerate growth.
Those are the types of acquisitions that we would obviously be keen on continuing to do.
Okay. Thanks so much, guys.
Thank you.
Ladies and gentlemen, this concludes our Q&A portion of today's conference. I would now like to turn the call back over to Matthew Dodds for any further closing remarks.
Okay. Well, Demetrius, thanks very much. Thank you for everyone for joining us, and we look forward to a continued conversation and reporting on our shareholder value creation as we move forward. Be safe, everyone.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.