LVGO Earnings Surprise

Up after hours after beating earnings and revenue. Guiding above estimates too.

Q4 Non gaap eps of .02 (beat of .07)

2019 Revenue of 170.2 million (up 149% yoy)

Q4 rev 50.2 million (up 137% yoy) beat of 1.09 million.

2020 rev guidance 280-290 million.

222,700 livongo for diabetes members (up 96% yoy)

More to come after cc


Not sure how much longer this company can fly under the radar so to speak!

You have a company growing triple digits, recurring revenue, almost 80% margins, and plenty of people with chronic conditions (40% have multiple) that they can target (and hopefully help them along the way)!

They will easily do $300 million in revenue this year - all with a $2.5 bln or so market cap.

I’ve added more in AH.



Is all of that growth organic? Didn’t they make an acquisition a while back?

Strong numbers. They sounded very enthusiastic on the call about their pipeline and upcoming deals for Q1. Increased gross margins, positive net income for the quarter. OPEX has also dropped substantially this quarter to 47.1 / 72% YOY.

FYI, they mentioned their last lockup is coming up next week on March 11.


Is all of that growth organic? Didn’t they make an acquisition a while back?

I think this is all organic… i dont believe they acquired any business, specially any with sizable revenue…

And their guidance is impressive…

The way their revenue grows is in two steps - sign up new clients(insurers) and then sign up individual members… so each new client takes almost 12 months to build sizable revenue and it still grows as they gain more % of members for each account over a 2 to 3 years.

Looking at their new client almost doubled in 2019, they should 2020 growing at-least 80% over 2019… may be more!

After the lockup expiry, I built it up to 5% position and its looking promising…


They acquired MyStrength in Jan 2019 to build out their platform offerings. The app offers modules that users can work through on cognitive behavioral therapy, mindfulness, etc. I don’t think the acquisition offered any material impact on revenue growth.


the numbers all seemed pretty fantastic. I don’t know if they have a sustainable advantage but currently the narrative of a large TAM seems to match the numbers

more notes from the call

  • Gross margin in the fourth quarter was 78.2% on a GAAP basis and 79.2% on a non-GAAP basis

(Me: Adj gross margin improved yoy from 67.47% to 79.21%.)

  • Turning now to operating margins. For the fourth quarter, operating margin was minus 15.3% on a GAAP basis, but a positive 1.2% on a non-GAAP basis compared to negative 61.9% on a GAAP basis and minus 50.1% on a non-GAAP basis , respectively, in the same period last year.

  • In the fourth quarter, we experienced a net loss on a GAAP basis of $6 million or minus $0.06 per diluted share, while attaining net income of $2.3 million on a non-GAAP basis or $0.02 per diluted share.

  • I want to stress that even after adjusting for the accounting related items outlined earlier, we have been able to drive meaningful margin improvements throughout this year as we have scaled the business. We expect to drive further margin improvements in 2020, along with rapid revenue growth and continue to invest in the business, as Zane noted earlier, in light of the massive market opportunity in front of us.

  • Let me spend a minute giving you an update on our lockup . In December, we conducted a secondary offering that resulted in the orderly sale of 2.8 million shares ahead of the IPO lockup release and also resulted in the extending the lockup of a number of our larger shareholders into March. After the secondary, effectively 32 million shares came off the IPO lockup on January 21 and another 45 million shares will come off on March 11 . Please note that our largest holders are very supportive of the company and has been previously disclosed were buyers in the IPO.

  • For the first quarter of 2020 revenue is expected to be in the range of $60 million to $62 million, representing growth of 90% to 93% year-over-year.

  • On Coronavirus

Robert Jones

Understood. No, that’s helpful. I guess just a quick follow-up because we have been getting this question, I am sure others have as well. Anything we should be concerned or thinking about around the Coronavirus impact on potentially supply of the strips, cuffs or devices?

Zane Burke

No. We have a varied supply chain across the world and we are prepared. You may see in our balance sheet. Overall, we had invested in inventory at the end of the year. And frankly, that was more of a hedge against the trade challenges that may bee some of those that may be disrupted there. But we don’t expect any challenges around that. And we have got quite a nice stock to prepare for both our large number of launches as well as protect against any kind of issues from a trade perspective.

  • On Gross margin

So thank you for the question. We expect that our margins will be in the same range that we spoke to previously in our long term operating model in kind of that low to kind of 72%, 73% range. And that would be consistent with what we achieved in 2019 from a gross margin standpoint. The gross margin in the fourth quarter, being as high as it was on a GAAP basis around 78.2%, as I mentioned, benefited from some one-time adjustments. About three points of that margin came from those adjustments of $1.9 million. But we would been somewhere in the range of 73% to 74% without it.

  • So the investments that we are making are in people for the most part. We are going to be hiring additional sales and marketing folks to help drive our expansion into new markets. In addition, will be hiring individuals in our R&D team as well as data scientists. And so those costs, we are in the process of hiring now. You won’t see kind of the full impact of those salaries into later quarters. And so that’s why it will manifest more later in this year. And that will become part of our run rate in terms of some of those areas as we go into 2021.

The great thing is, is that revenue is going to accelerate much faster than those expenses. And so we will see operating margin improvement throughout the year and that will continue in 2021. Profitability is still what we have said is adjusted EBITDA profitable on a sustained basis for 2021.

(long 3% postion for me personally)


Gene Tullman, Livongo’s brilliant Executive Chairman and Founder, will be interviewed on Mad Money with Jim Cramer tonight.

Wish Tullman attended conference calls.

I am adding LVGO shares on this sell off.

Livongo looks like an unusual buying opportunity to me.

Rapidly growing, rising high margins with a drive towards profitability, newly emerging with expanding markets and products, very well led, young SAAS subscription based, under the radar and low price relative to it growth, with accounts in the pipeline that converts into highly predictable revenue projections several quarters in advance, and endorsed by one of our more respected gurus, Bert Hochfeld. And that mouth full is understated, IMO.

Looking for an offsetting variable, the retention rate is in the 90%+ range which is nothing to write home about by the standards of our subscription hyper growth companies.

Why this stock price is anchored here, IDK and would very much welcome hearing what i might be missing.


Excuse me, two more things on LVGO. A lock up expiration is coming up next week which was discussed in the CC and may be contributing to uneasy investors.

OTOH, one more point in the stock’s favor is that management has met or exceeded every commitment that i know about.

1 Like

Looking for an offsetting variable, the retention rate is in the 90%+ range which is nothing to write home about by the standards of our subscription hyper growth companies.

I just want to make sure we’re not getting retention rate (which LVGO reportrs) mixed up with net expansion rate (which our Saas companies report). Retention is the # of customers who stay, so it can never be above 100%. NER is the amount of money the remaining customers spend compared to the year before (which is usually well above 100% for the companies that we follow on this board).

I think a 90+ retention rate is fantastic.



It’s a strange reaction to a report that looks pretty good with improving losses and raised guidance.

EV value of a little over $2bil for $300mil of forward revenues. Gives forward EV/S of 6.xx for triple digit growth. What am I missing?

1 Like

i think people may be confused on EVA… turned out to be a less in last Q compared to one before… (see slide 8 of the presentation)

This was a question on conf call as well.

EVA (Expected Value of Agreement) is really about new clients booked with some minimum guaranteed value (this is my interpretation)… their new EVA add in Q418 was also lower than Q318… seems like this has some seasonality as you can expect, such agreements discussions are lengthy and may not be focus during Q4 and Q1 when insurers are focused on negotiating and renewing their clients and getting the year going with new members. So it makes sense that LVGO has better EVA closure in Q2 and Q3 and slows down in Q4 and Q1…

However, people confuse EVA with SAAS metrics like RPO and or calculated billings both of which are more reflective of total future revenue…

EVA on the other hand is strictly about brand new revenue to be added in next two years.

Based on the explanation of the call, here is what I think the scenario is:

  1. Base revenue at $50M (that was Q4-2019)… with some churn (its 25 to 3% but lets take it at 5%), annual revenue should get to $200-$10=$190M
  2. Add 50% of EVA of Q3 and Q4 of 2019 = 50% of $160M+ = $80M
  3. Some add from EVA of 1H of 2019 and more new revenue coming in from 1H of 2020…= say at-least $30M

If you add them up, it should get to $300M which I think is minimum we will see in 2020… it can actually go higher… why because if you listen to the call, they kept hammering that in the first two months of 2020 they have accelerated launches of clients (which to me means clients getting up and running - i.e. converting into revenue)… specifically 424 clients compared to 231 in all of Q1 in 2018… this means earlier revenue ramp for these clients for 2020.

All in all, it seems to me that 2020 is set up for at-least $300M with some upside to that number… and this is probably why they are confident on $280M number so they can beat it comfortably.


Agreed, the quarter was solid across most of the metrics and outlook is strong. I noticed the share count increased quite significantly from 72.2M (Q3) to 94.3M (Q4). So, while the TTM revenue jumped 20%, shares outstanding jumped 30%. Personally, and in the long run, I think their consistent performance and strong outlook outweigh the dilution, but I wonder if this is one of the reasons why the stock is down today.


This was already known information.


Rubenslash, I believe the public offering you’ve referenced did not lead to any dilution as it was stockholders who were making the offering, rather than LVGO. Regardless, that offering was for 2,777,327 shares + 416,598 (potentially) to the underwriters. The dilution I’m seeing is closer to 22M. Please let me know if I’m missing something.


1 Like

My notes from the call and analysis:

tldr; great quarter - was up AH yesterday during cc. Started up today 8% finished down 9% though because of the general market turmoil. I don’t often agree with Jim Cramer, but he said as much during this interview with executive chair Glen Tullman which happened earlier tonight:

revenue analysis

revenues (millions) Quarterly Sequential Growth YOY growth
Q42019 $50.3 7% 140%
Q32019 $47 15% 147%
Q22019 $41 28% 156%
Q12019 $32 52% 167%
Q42018 $21 11% n/a
Q32018 $19 19% n/a
Q22018 $16 33% n/a
Q12018 $12 n/a n/a

As you can see above, yoy rev growth is decelerating slightly (understandable when growing at a very fast clip around 150%). There is also seasonality in the numbers - we see that Q4 has shown the weakest growth sequentially. I think they alluded to this during the call - Companies tend to sign up for livongo in Q1 as oppposed to Q4.

Net income
Q4 2019 ($5.9) -71% -51%
Q3 2019 ($20) 43% 82%
Q2 2019 ($14) -7% 133%
Q1 2019 ($15) 25% 275%
Q4 2018 ($12) 9% n/a
Q3 2018 ($11) 83% n/a
Q2 2018 ($6) 50% n/a
Q1 2018 ($4) n/a n/a

The trend with net income is that it is slowly getting worse (except in this most recent quarter), but I would argue that in general it is manageably bad. Seems under control mostly.

My cc highlights/snippets:

-Flagship offering Livongo for Diabetes members increased 96% year over year to 222,700.
Vinegar101: quick googling reveals over 34 million people in the U.S. have diabetes and 1.5 million people get diagnosed with it each year. They have much more runway in this segment alone.

-Strength from our other conditions, as Zane noted, was evident with over 48,000 members enrolled at year end in either Livongo for Hypertension, Pre-diabetes and/or Weight Management.

-we grew enrollments in behavioral health from approximately 200,000 in 2018 to approximately 300,000 in 2019.

-Moreover, with more than 147 million Americans living with a chronic condition and 40% living with more than one, we have plenty of room to grow our addressable market.

-Record signings in the fourth quarter, and expanding our reach to over 30% of Fortune 500 companies

-14% of our clients having more than one Livongo offering at the end of 2019, compared to 4% at the end of 2018.

-Average monthly attrition is 2-3%, mostly due to people leaving their employers

-CEO: I also feel confident reaffirming our commitment to profitability in 2021 on an adjusted EBITDA basis.

Vinegar101: Also, I found a graphic from livongo that explains what EVA (estimated value of agreements) is. Per Livongo:
“Estimated value of agreements is: a) New client signings in the quarter and b) Expansion of existing clients in the quarter.
While we sell all year long, the growth of EVA tends to skew towards the second half of the year, the point at which many clients determine their following year’s benefit package”.


So much to love here, I also thought this was the surprise stock Saul was considering. Very high revenue growth, great margins, great guidance (most companies sand bag, if these guys are sandbagging they will hit it out of the park) accelerating customer growth, market cap of only 2.3B, plenty of runway -expanding TAM, unique use of AI, their services are growing and paid for by third parties because they save these companies money high ROI. This is a very high conviction stock for me, due your own due diligence.



Q3 share count of 72M was average over the quarter… there was a big jump from Q2 to Q3 with IPO.
With all the convertible and new shares sold at IPO, ~94.5M shares outstanding at the end of Q3 and that hasnt materially changed at the end of Q4.

I dont know what to expect in future but I certainly dont expect 72M to 94M size of jump even in a year, forget a quarter.
I would bet that they barely see dilution to 105M by end of 2020… most likely much below that.


I noticed the share count increased quite significantly from 72.2M (Q3) to 94.3M (Q4). So, while the TTM revenue jumped 20%, shares outstanding jumped 30%. Personally, and in the long run, I think their consistent performance and strong outlook outweigh the dilution, but I wonder if this is one of the reasons why the stock is down today.

I noticed the stock jump as well, but you should remember that the share count that all companies give is an average for the quarter. Given that LVGO went public in their Q3, their Q3 didn’t show all the shares that were outstanding at the time, but merely an average for the quarter.

From their S-1, I got that LVGO had about 89M shares outstanding after their IPO, which increased to 94.3M in Q4, as you stated above. Still a large increase, but much more reasonable. Hopefully share dilution slows down from their point onwards.



Nilvest and CloudAtlas,

Thanks for your insight, this makes much more sense to me now. It’s great to see they’ve actually kept the dilution to a minimum.


1 Like