LVGO beats on the bottom and top lines. And it raises guidance for the next quarter and full year modestly. No real surprises after the recent update. It looks like it’s dropping a couple dollars after hours after the recent run up.
Personally, I’m very happy with the results. I am hopeful that LVGO will continue to beat the raised guidance.
Their members increased by 105,300 QoQ! From 222,700 to 328,000. That’s by far the largest QoQ increase they’ve ever had and 3,546 members shy of what they added in TOTAL all of last year! That’s not to mention their client count increased 44% QoQ!
Very upbeat conference call. One question was (paraphrased): Guidance only +4m QoQ compared to +8 last time. Why? Answer: Well YoY that’s 74% growth and we think that’s great. There could be covid headwinds so we’ve factored that into our guidance. But they spent a lot of the call pointing out that covid has been a bit of a boost to the business. They mentioned that if you have diabetes you’re more at risk should you get the covid virus; that their at-home monitoring means you might not need to go to the hospital, etc.
I added today during regular hours even though it was up and glad I did after hearing the “bright future” conference call.
Livongo is in a fabulous position:
- Diabetes is also a pandemic, with worse outcomes. LVGO are fighting back.
- Their customers (users) are spending someone else’s money (insurance co)
- The insurance co sees the expense as saving money
One of our better choices.
Thanks and regards to all
report looks even better than their pre-announcement a few weeks ago…
this is the right stock for this time… revenue growth accelerating due to pandemic, bottomline getting better and best, it is not outrageously priced even after this rally… the expansion of multiples is what drives majority of capital gains and LVGO should see that happening over rest of 2020…
Their members increased by 105,300 QoQ! From 222,700 to 328,000.
Thanks for posting this, Richard! It got me to take a quick look (even during the AYX frenzy) at the LVGO report. I couldn’t figure out why it didn’t spike immediately on such a report, so I grabbed some shares. (I had actually owned LVGO previously – I sold a couple months ago at roughly half the price I bought it back for. My portfolio is up a lot since then so I’m not too bummed missing out.)
LVGO keeps proving the hyper-growth can continue, so I’m slightly more comfortable with it than I was before. Still a small position for me (about 3%) but I think I’ll keep it this time! I continue to see it as a lower conviction position, despite great results, just because it’s not quite as clean of a business model as some of our others. But all congrats to the LVGO team – they’re definitely doing some good and they might just be “what the doctor ordered” (no pun intended) for these times we’re in.
No problem, I added some more today as well. For perspective, here are their QoQ numbers:
QoQ member adds:
Q1 2018: +14678
Q1 2019: +50314
Q1 2020: +105,300
So they usually experience a spike in Q1 because of all the new contracts launching that time but this quarter was especially prominent. Their second quarter guidance implies 83% growth. They have 328k diabetes members and charge an average $75 PMPM. 328k*$75*3 months=74M, right at the midpoint of their guidance. That’s without taking into account their other services and that’s without taking into account all the additional members they sign up next quarter, keep in mind that 35% of their Q1 EVA is expected to convert to revenue in the next 4 quarters so that’s an additional $7.8M.
So 83% growth at 74.5% gross margins and EBITDA profitability at current P/S of ~24.5
Wow what a strong report that was. Im very bullish on LVGO. Still room to run, not like other SaaS.
Whats Sauls view on LVGO? Cant find anything.
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:
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).
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.
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
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
Finally, the market is so large - there is room for a competitor or two.
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.
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.
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.
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.