LVGO - Livongo

[tchalla]

LVGO

What do they do?

In their own words -
We use smart, connected devices, personalized digital guidance, and 24x7x365 access to health professionals to make it easier for people with chronic conditions to stay healthier.

They are a health platform company the supply smart devices to help patients manage their diabetes, hypertension, weight loss, mental health and potentially other conditions down the line.

They do this through a web based software platform and AI which support patients primarily via smartphones. More here https://www.livongo.com/program.html#Technology

Their AI tech is called Applied Health Signals: https://www.livongo.com/applied-health-signals/

Their customers are mainly large self-funded employers looking to better manage their chronic disease costs. The company’s growth plan includes the use of its channel partners (Express Scripts, CVS, Health Care Service Corporation, Anthem, and Highmark, which represented 59 percent of the company’s revenues in the first three months) of 2019,and new engagement methods to open up new distribution and marketing avenues for Livongo products, as well as upselling existing customers into new verticals.

There is potentially a significant risk if they were to lose a channel partner to a competitor

How good is the product?
Well, the growth metrics are good, and there is some published data to support it
https://www.tandfonline.com/doi/full/10.1080/13696998.2019.1…

but it is also very reasonable to query the quality of the study
https://validationinstitute.com/the-livongo-study-cora-pro-i…

Some background info pre IPO here

https://medcitynews.com/2019/06/five-tidbits-and-takeaways-f…

https://news.crunchbase.com/news/healthtech-startup-livongo-…

They are a small cap with an EV <$2billion at the time of writing

Growth and operational metrics from todays ER

Rev Growth YoY 156% (accelerating)
Non GAAP Op Margins -21% (improving )
Modified Rule of 40 Score 135
Non GAAP Gross Margins 69%
Estimated Year Sales 162
Analyst estimates for growth rate in 2020: 70%

Second Quarter Fiscal 2019 Client and Member Metrics:
•192,934 enrolled Livongo for Diabetes Members, up approximately 140% year-over-year.
•720 Clients, up 92% year-over-year organically.
•Total Contract Value of $74.2 million, up from $24.8 million in the second quarter of 2018.

Glassdoor reviews skew positive
https://www.glassdoor.co.uk/Reviews/Livongo-Health-Reviews-E…

The founder, Glen Tullman, is now the executive Chairman

Executive Chairman
Glen Tullman former Chief Executive Officer of Allscripts, the leading provider of Electronic Health Records, Practice Management and Electronic Prescribing systems.

CEO
Zane Burke is the Chief Executive Officer of Livongo. Burke previously spent five years as president of Cerner Corporation

LVGO IPO’d in July 2019 at a price of $28, above expected range. They drifted down towards $30, and took a beating after their ER on 5th Sept, to a price of $24 with an EV of circa 1.9B

I’m still digging into this one, but the prelim screen looks interesting and the current beat down might suggest a reasonable risk/reward ratio with a medium term horizon. I don’t yet have a clear idea of competition but I’ve added a small starter position while I look further.

Grateful for any other input

[LifeOfDreamer]

nice write-up, thanks!

I am seeing more of these health-related companies that are leveraging a business model of preventative actions/recommendations based on data. HCAT and CATS are two others, although HCAT seems much more mature.

One of my previous thoughts/questions had been on why you couldn’t just leverage existing data analytics solutions, and why a health-specific one is even needed; data is data.

But LVGO seems to squash that by leading with the device that collects the data.
So it is slightly hardware, but the software is really more important.
Ironically, the hardware may help supply the moat though.

Seems like they are not a 1-trick pony, so some optionality, which I like. Doesn’t have to be just diabetes, and then they can leverage existing clients to use them for other things, and in general their TAM expands with more use cases.

On the watchlist!

Dreamer

[tchalla]

cc transcript for today’s ER is here

https://seekingalpha.com/article/4289929-livongo-health-inc-…

a few snippets from first glance

We also had a great first half of 2019 cross-selling, our other solutions such as Livongo for hypertension, and we believe this is an indication of the market embracing our whole person strategy. Second quarter revenue growth was also very strong. We reported Q2 revenue of $40.9 million, up 156% year-over-year and 28% sequentially.

Despite our rapid growth, we believe we barely scratch the surface of our addressable market. Our efficient go-to-market model enables us to sell directly to large self-insured companies, government entities, labor unions or to sell-through health plans, health systems or pharmacy benefit managers. We continue to expand our reach in these areas with a number of clients on our platform growing 92% organically year-over-year and another 120 added through acquisition of MyStrength, bringing our total to 720 clients.

We now reach over 20% of the Fortune 500 companies for the seven largest health plans and work closely with the two leading pharmacy benefit plan managers in the country. In the quarter, we also want a sizable contract that we look forward to communicating more on in the future. We believe this further demonstrates the broad interest in our platform and the momentum in our business.

Over 70% of people with diabetes also suffer from hypertension and over 40% of Americans have more than one chronic condition. Therefore Livongo is designed to be a unified platform, one tech stack and one app where members can manage multiple chronic conditions seamlessly. In addition to Livongo for Diabetes, we offer Livongo for hypertension, Livongo for pre-diabetes and weight management and Livongo for behavioral health.

In short, Livongo wins because we built the platform focused on the consumer experience and one that makes a real difference in our members lives. I’m excited about the opportunity ahead. We barely scratched the surface in the diabetes market alone with less than 1% penetration in the U.S. And I’m even more excited to have such an experienced leadership team to drive execution. Zane brings over two decades of healthcare IT leadership and is the perfect person to take the company to the next level, while leading Livongo through this period of rapid expansion.

Will take a few quarters to figure out the sustainable growth rate, but napkin math is ok with this one

Napkin maths seems ok with this one. Here are some estimates for the next 2 years. Choose a conservative multiple that you are comfortable with

https://www.marketscreener.com/LIVONGO-HEALTH-INC-62465357/f…

[tchalla]

There is an interesting presentation by the exec team here
https://www2.livongo.com/news/Livongo_to_Present_at_Morgan_S…

Enormous market, enormous, spending
Feel biggest competition is inertia
Competitor companies have not got similar scale
Moat is down to patient first design, platform approach, user enthusiasm and high NPS, Improvement in outcomes, saving HR department easier and clear ROI
Multiple levers to increase revenue
Retention is 93-94% (75% of churn is due to people leaving their job)
Dollar-based net expansion rate for clients > one year was 114%
Total contract value up 200% last ER
They work within the ecosystem - being incorporated and recommended at multiple levels
Expecting +ve EBITDA in 2021

LTM grow rates in the sub 350M range for comparison are here https://koyfin.com/s/QZTsDG1wDG

[tchalla]

There didn’t seem to be much interest in LVGO on the board, but they have just released Q3 results which look great with improved operating margins, higher gross margins, and raised guidance.

Third quarter Total Revenue of $46.7 million, up 148% year-over-year
207,815 enrolled Livongo for Diabetes Members, up 118% year-over-year
2019 revenue guidance range raised to between $168.5 million and $169.0 million

MOUNTAIN VIEW, Calif., Nov. 06, 2019 (GLOBE NEWSWIRE) – Livongo Health, Inc. (NASDAQ: LVGO), a leading Applied Health Signals company empowering people with chronic conditions to live better and healthier lives, today announced financial results for its third quarter ended September 30, 2019.

“We continue to the drive adoption of our Applied Health Signals platform beyond commercial and into the government and fully insured markets,” said Zane Burke, Chief Executive Officer of Livongo. “In addition to being awarded our largest contract in history to bring Livongo for Diabetes to eligible members covered by the Federal Employees Health Benefits Program (FEHBP), we expanded our relationship with Blue Cross and Blue Shield Kansas City to its fully insured book of business, furthering our momentum in the fully insured market.”

Third Quarter Fiscal 2019 Financial Highlights:

Revenue: Total revenue for the quarter was $46.7 million, up 148% year-over-year, driven by the continued adoption of our Applied Health Signals platform.

Gross Margin: GAAP gross margin of 73.9% and non-GAAP gross margin of 75.0%.

Net Loss: GAAP net loss of $19.7 million, and net loss per share attributable to common stockholders of ($0.27) on a diluted basis; and non-GAAP net loss of $3.4 million, and non-GAAP net loss per share attributable to common stockholders of ($0.05) on a diluted basis.

Adjusted EBITDA: ($3.9) million in the third quarter of 2019.
“Livongo is focused on serving the whole person across multiple chronic conditions by seamlessly combining connected technology, actionable data science, and always available human monitoring and care on our platform,” said Livongo President, Dr. Jennifer Schneider, MD., M.S. “Simply put, we make it easier for our Members to stay healthy.”

Third Quarter Fiscal 2019 Client and Member Metrics:

207,815 enrolled Livongo for Diabetes Members, up approximately 118% year-over-year.
771 Clients, up 121% year-over-year.
Estimated Value of Agreements of $85.5 million, up from $62.3 million in the third quarter of 2018. This represents the estimated value of agreements signed in the quarter and was previously referred to as the Total Contract Value (TCV) in Livongo’s previous filings with the Securities and Exchange Commission. It consists of agreements entered into with new clients or expansion opportunities entered into with existing clients.
“We are pleased with our third quarter performance,” commented Lee Shapiro, Livongo’s Chief Financial Officer. “We continue to see rapid year-over-year revenue and member growth while we further extend into new markets as well as expand Client adoption of multiple solutions.”

Fourth Quarter and Fiscal 2019 Outlook

For the fourth quarter, the company expects revenue in the range of $49.0 million and $49.5 million, and adjusted EBITDA in the range of ($5.5) million and ($5.0) million.
For 2019, the company expects revenue in the range of $168.5 million and $169.0 million, and adjusted EBITDA in the range of ($26.7) million and ($26.1) million.

[XMFfuma102]

Still seems intriguing and I was waiting for a few quarters to see how it played out. Curious why Q to Q growth, while still doing really well, seems to be slowing.

Talked about Livongo over on biotech boards, might be easier to get into OT big picture discussion on it over there:

https://discussion.fool.com/livongo-34258696.aspx?sort=whole#342…

[freshpaint]

Thanks Tchalla, for initially bringing this to the board. I dug in after your post in September and ended up starting a 4% position about a month ago. I really like the company and think they have a huge runway ahead of them. Although they have competition within individual conditions (diabetes for example), it seems no one else is really providing this ‘whole person approach’ to chronic conditions at scale.

Fuma, to answer your QoQ growth slowing, they speak to this in the call. Their clients determine the following year’s benefit package in Q3 / Q4, so they don’t usually start seeing that revenue until Q1 when those bookings begin to launch. Here’s part of Lee Shapiro’s answer from an analyst question on this: So to give you some generalized guidance, I’d say Q1, you start to see revenue conversion towards the tail end of Q2 from those agreements, and then Q2 sales towards the end of Q3. But then as you get into Q3, you see more of it going into the following year.

A few of my notes from the call:

Members seem to love their service and it also drives healthcare costs down.

For example, from the relationship we announced with Abbott Libre over a year-ago from watches like Apple, Samsung and from Fitbit. Essentially, we take this aggregated data and interpret the data to generate actionable, personalized and timely signals. We then apply those signals to our members at just the right time and on the right process by meeting our member where they are and integrating into their life flow. We then iterate in order to build improvements based on what we learned. This four step process empowers our members to make sustainable behavior changes that lead to better outcomes, and lower costs.

Record contracts in Quarter
Big wins with CVS, Blue Cross, VSP Vision Care
*An answer to an analyst question about CVS’ call alluded to the possibility of more to come with the CVS partnership:

Q: So on CVS’s call this morning, they mentioned expanded services into chronic disease management in a more coordinated way. I wanted to know if this, how you guys are working with Minute Clinic to maybe help enable this or help them in their efforts?
A: I think you’re safe to assume that the expanded services that we’re talking about our reflection of the expanded offering to our whole person platform that we’ve talked about, and that we mentioned that Zane mentioned in the call without, I don’t think at this point we go into more detail, but I expect those to show up in a variety of areas across CVS
That sounds fairly significant to me…

Total Contract Value metric has been revamped to Estimated Value of Agreements (EVA)
This figure does not include renewals (only new customers and expansions)
Seems to be quite transparent with communicating future numbers
111% Annual increase 2018 vs 2019 YTD growth
20% of EVA from other conditions than diabetes (expansion into other conditions)
Gross Margin increase to 75% from 69% last quarter
AIAI engine has improved efficiency
device costs expensed upfront, benefit of subscription services
Moving to ASC 606 (less variable margins)
Big improvements in EPS
Expected profitability in 2021
Expansion to telehealth services (Jan 2020)
As they sell more multiple condition agreements, selling costs go down
70% of diabetes patients with hypertension / bundling services
Margins vary based on condition
Coaching - getting much more efficient with tools that provide health nudges (no human interaction)
New feature - food logging
Q3/Q4 agreements don’t launch until Q1
Q1 see rev conversion in Q2

–

A concern is opex rising 130% YOY but S+M and Admin are going down a bit from last Qtr. R+D jumped significantly but I’d be very happy to see them continue to expand their platform into new conditions, as they’ve been doing. Yesterday’s close put them at a $2B marketcap and if I have my numbers right, a P/S of 14.2 and EVSO of 1.86. Dirt cheap for roughly 150% growth these last 3 quarters.

[tchalla]

https://www2.livongo.com/news/livongo-and-dexcom-partner-to-…

Livongo (Nasdaq: LVGO), a leading Applied Health Signals company empowering people with chronic conditions to live better and healthier lives, has partnered with Dexcom, Inc. (NASDAQ: DXCM), a leader in continuous glucose monitoring (CGM), to offer Livongo Members the ability to synch data from their Dexcom G6 Continuous Glucose Monitoring System with the Livongo platform, providing access to key insights and Health Nudges™ from Livongo’s Applied Health Signals platform based on their CGM data.

I think that the range of healthcare partnerships will enhance product distribution vs competitors and will continue to be a source of competitive advantage for Livongo.

Like many companies tracked here, it has started 2020 well.

Note that the EV/S for 2020 revenue estimates is still around 8 despite tripe digit revenue growth in 2019 to date…

https://www.marketscreener.com/LIVONGO-HEALTH-INC-62465357/f…

[foodles]

Thanks for bringing this one to the board, tchalla, I started building my position in it over the past couple weeks, good (lucky) timing so far! I like the company and what they do.

I like the triple digit growers.

Got in on EXAS when it was triple digit growth, and it’s stock price has tripled since then.

Jumped in on STNE when someone brought it to the board with triple digit growth at the time, and it’s been a near double and I’m expecting much more.

Also got into TNDM which has been range bound since I’ve built my position, but I fully expect it to pop out of that soon, as it’s still sporting triple digit growth.

[tchalla]

No problem foodles

There is a great write up here on SA

https://seekingalpha.com/article/4316581?source=ansh

[SteppenWulf]

Citi provides Livongo as part of its health plan. I used the blood sugar monitor - the strips are free with no copay if you use it - so it is a no-brainer for Citi employees.

The physical device is excellent - better than any other I have tried - uses a miniscule drop of blood, so I can use the lowest pressure needle and there is no pain when drawing blood for a test.

Every time you take a test, it automatically uploads the result to its server. Livongo identifies risks and it helps you avoid incidents, which saves my health, and also saves a lot of money for the insurance company/Citi. My doctors can also automatically get the results, which makes for a much more thorough understanding of my blood sugar for the doctor, without me having to play around with logs and apps.

Personally I loved the service and it is a win/win/win/win for the employer/insurance/doctor/patient. In fact I am looking into continue using it, even though I am no longer at Citi. I do wish they could sell it to insurance companies so it isn’t based on my employer.

I have had Livongo on my watch list for some time, since its numbers are good and I love the service. For some reason, I haven’t been watching it - maybe my watchlist needs to be renamed. Anyway, I’m glad about this thread as it has brought it back to top of mind, and I will be looking at it closely for a probable starting position soon.

[qazulight]

My wife and I have gotten into the Keto thing.

Part of it is intermittent fasting. The idea behind keto and intermittent fasting is to lower average insulin levels.

The idea put forth in Dr. Fung’s “The Obesity Code” is that calories do not make one fat. Insulin makes you fat. So, if you lower insulin, you lower your BMI.

Dr. Ann Bosworth, “Dr. Boz” wrote in her book “Any way you can” that you cannot easily measure insulin levels directly. However, if you can measure the glucose and the ketones you can get a proxy for insulin levels and that can be done quite inexpensively using glucose and ketone strips. Dr. Boz uses a simple ratio: glucose divided by ketones. A ratio below 100 is good, below 70 is weight loss and below 30 is autophagy. This lowest level is used to help with cancer treatments.

We actually have two meters, one set up for ketones, one for glucose, a single prick and we get enough blood to get both readings.

It would be really cool to be able to get both readings on the same strip. (I am sure the chemist are shaking their heads) If this were to be aggregated in a large database it would have a significant impact on world health.

Cheers
Qazulight

[12x]

Express Scripts appears to be coming out with a competing product. Express Scripts is owned by Cigna.

https://finance.yahoo.com/news/express-scripts-launches-new-…

This may be why Livongo can’t sell to insurers directly. They could create a competing solution on their own. It is still up to Livongo to maintain it’s first mover advantage.

The other thing I was concerned about was them getting squeezed by the device makers (insulin monitoring and insulin pump makers) who could collect data and put it on the cloud much like Livongo is doing. It appears that some of these device makers are offering cloud related services.

[12x]

Actually, looking into this more, I see that Express Scripts is partnering with Livongo on their new digital formulary.

https://www.globenewswire.com/news-release/2019/12/12/195992…

Not sure of the financial impact of this partnership, it appears Livongo was already working with Express Scripts as early as 2015. But there truly does seem to be some cost savings that would be beneficial to insurance.

As demonstrated in a 2019 study conducted by Express Scripts1, people actively using Livongo between 3 and 12 months had a range of 5.0 percent to 6.4 percent higher medication adherence, respectively, compared to matched controls. In addition, to date, Express Scripts clients using the Livongo for Diabetes solution experienced an average 24 percent reduction in medical costs after using the program for one year.

Livongo initially partnered with Express Scripts in October 2015 to offer the Livongo for Diabetes solution to joint clients. Since that time, the partnership has expanded to serve people with diabetes, hypertension, and diabetes prevention. Livongo also will have preferred status within Express Scripts Health Connect 360 solution, which is the industry’s first outcomes-based model that centers on engaging people in their care.

[addedupon]

“I see that Express Scripts is partnering with Livongo”

Yeah, they discussed their partnerships with Express Scrips and DXCM in the JPM presentation the other day. Also, DXCM CEO and Cramer hyped that deal on Mad Money earlier this week.

Seems like Livongo has something important and unique that is attracting major device companies to flock to it.

I have taken a close look at LVGO founder Glen Tullman and believe him to be a potential giant. Recently he was awarded the prestigious Robert F. Kennedy 2019 RippleofHope Laureate by the Kennedy family. He’s in pretty big company there.

Very long LVGO since December. Thanks to the posters here who caused me to take a look.

[tchalla]

The mighty Bert has published a SA article on LVGO

TLDR

He feels it is worthy of a consideration for a portfolio add

Can Livongo Health Provide Long-Term Benefits For Your Portfolio https://seekingalpha.com/article/4318038?source=ansh $LVGO

[draj]

I read Bert’s article this AM. It supported nalready strong conviction

[draj]

I read Bert’s article this AM. It supported an already strong conviction despite a few caveats. So I raised my stake from 2% to 3% of my TMF holdings. Time will tell.

[Citibeach44]

Nice. The power of the boards and Bert combo.

Someone on here introduced LVGO to the board. I did a bit of research but wanted Bert’s opinion. I emailed him and asked if it was worth looking at. He emailed me back and said he would take a look. Less then a week later Bert shares his thoughts.

Nice to have all these resources to help find investments.

Thank you Saul and Bert.

TMB

[remmdawg]

Someone on here introduced LVGO to the board. I did a bit of research but wanted Bert’s opinion. I emailed him and asked if it was worth looking at. He emailed me back and said he would take a look. Less then a week later Bert shares his thoughts.

Thanks for bringing it to Bert’s attention! I had opened a small position after the mention here and my own research but increased it after Bert weighed in. Livongo has a massive opportunity, perhaps a $50 billion TAM or even larger. It seems to be making all the right moves with strategic partnering. Competitive threats are still not a significant issue but this may change. And government involvement in the health care market can be problematic. But it seems to be worth a bet.

I am in medicine and this is one of the most exciting stocks I’ve looked at in awhile.