I own a large chunk of LVGO. It’s actually my largest holding right now bc my cost basis is $25 and I bought a pretty large amount to start. I sold August $50 covered calls against half my shares to lock in some $, so I will probably be cut in half in a few months.
A few thoughts on the company and the earnings call:
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Meets all the criteria for a “Moon Shot” - small size, huge market, visionary leadership, winners win. The TAM just for the US is huge. There are 31,400,000 people in the US with Diabetes and 500,000 people are newly diagnosed with it each year. LVGO currently has 328,000 members. They could grow 10x and still only have 10% of the US market. THEN they can grow internationally. THEN they can add other chronic conditions (they already have services for hypertension, weight management, and mental health).
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Moat - the moat does not seem like it is super strong to me. But in this economy, potential competitors may not want to invest in trying to disrupt them right now bc of lack of funds and they will be focused on addressing their own issues for now.
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Also, LVGO is getting pretty large - and they have products for all 4 categories of chronic conditions - it will be hard for another competitor to come in and disrupt that - so they have a big First Mover Advantage
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They do also have lots of data / studies to prove efficacy of their program - this will be very hard for another company to replicate and it will take years to develop the evidence that LVGO already has
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Finally, the market is so large - there is room for a competitor or two.
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Very strong financial position - able to invest in other adjacencies (other conditions or geographic regions) - optionality. They have $370M cash and only about $20M debt.
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Customers (end users) like it - it solves a problem. One interesting statistic I read recently is that 1 out of every 7 dollars in the US is spent on diabetes related care. LVGO has lots of evidence to show that their program helps save money by helping people better manage their diabetes and thereby reduce their diabetes related health care expenses. Companies like it because it saves them money on employee health expenses.
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It saves money for the company and the individual. Individuals save money bc they no longer need to buy the glucose meter strips. I’m not sure, but I think the strips cost around $.50 each and most people use at least 3 per day - so that is $45 a month that is saved.
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One interesting question that came up in the ER conference call -
“You touched a little bit on how scale is an advantage right now. And I was just wondering if you’ve seen any changes in the competitive landscape, maybe any opportunities for M&A as some of the smaller players in the marketplace start to face liquidity issues.”
Zane Burke Answer -
“Well, I think it’s a great question. That, obviously, our scale allows us to sell to clients like GEHA. So first off, in the marketplace, I think people are going to have a flight to safety. And we’re viewed as a safe choice. And because of our virtuous business model, our clients don’t just like us, they love us. We deliver strong clinical outcomes and a hard financial ROI. And that’s exactly what the market is looking for, but they’re looking for a safe choice. And I was on the phone with one HR Benefits Director recently, and they said, “You don’t get fired for buying Livongo.” And obviously, we have great scale across the ecosystem that’s different than others. And that allows us to weather storms in some of these different markets that may be a little bit choppier than others in terms of the short term. But in the long run, this really gives us the opportunity, both from our capital position, our market position, the value that we provide to really accelerate on the backside.”
“You don’t get fired for buying Livongo”… I liked that quote.
One thing they highlighted more in previous calls is that their business has a lot of visibility and predictability into growth for the next year. They are signing up new clients in 2020, but the roll-out for those customers often does not happen until the following calendar year. HR departments make decisions on programs one year, but they don’t get rolled out to their employees until the next year.
Finally, 3 of the biggest risk factors for severe COVID cases are diabetes, obesity, and high blood pressure. LVGO has programs for all 3 of these conditions. I do not think there are any competitors that can say that. Many of LVGO’s current customers are only buying the diabetes module - so it should be a relatively easy up-sell to get many of them to add on the other programs. So that is another catalyst for growth.
I would love to know if anyone on this board has any personal experience with LVGO and what your opinion is of the service.