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No. of Recommendations: 86
BroadwayDan,

Let me start by stating that there are 34 million diagnosed diabetics in the US with 500k new diagnoses each year. At present, LVGO manages just 328k of those (<1%). Those are domestic numbers, not international.

This seems like common sense to me, but from reading your post you’ve self-proclaimed as not medically savvy, so I’m going to explain it from a medical point of view. None of what I say is meant to be condescending and I want to state that I am grateful for stumbling upon this board. It’s given me 63% returns YTD. Better than any year I’ve ever had in my 6 year investing career. Thank you Saul and community.

Diabetes is a disease that requires tight control of one’s blood glucose. If HgbA1C rises above 7%, long term damage and irreparable changes occur to the vascular system of the body. This affects the heart, kidneys, carotids, retinas, peripheral vasculature, and reproductive organs. Often a way to scare a male diabetic patient straight is to inform them that they may be unable to obtain an erection if they let their diabetes go unchecked. I’ve personally witnessed countless diabetics be hospitalized for infections (bacteria love glucose), surgical amputation of gangrenous or necrotic extremities (due to loss of blood supply), and diabetic keto-acidosis (requiring mechanical ventilation and intensive care measures including hourly monitored/adjusted insulin infusions. These patients can die easily due to metabolic changes and electrolyte shifts between their cells and plasma which can ultimately results in dysrhythmias and cardiac arrest.)

It’s no wonder diabetes is the single worst comorbidity for those with a COVID infection!! I’d be concerned if I was obese, diabetic, and hypertensive. Yet, those are the THREE most common co-morbidities I see on a DAILY basis as an anesthesia provider. It is common place in my line of work. Just another “day-in-the-life”.

Healthcare has been SLOWLY transitioning from a reactive entity to a proactive entity. With good reason too. The money is in treatment. Hospitals make much more money to react to a problem or perform surgery than to prevent a problem. Surgery is where the money is. I’m surprised insurance companies haven’t pushed harder for preventative measures. It would save them money!

As for Muji, here is his LVGO analysis:

LVGO - Q120

PR: https://ir.livongo.com/news-releases/news-release-details/li......
Fool take (Crumly): https://www.fool.com/premium/coverage/investing/2020/05/08/c......
BreakerForce recap: https://boards.fool.com/livongo-q1-review-34497163.aspx
Buynholdisdead recap: https://boards.fool.com/lvgo-q120-34522030.aspx
Saul's take and buy: https://boards.fool.com/why-i-took-a-position-in-livingo-thi......
CC transcript: https://www.fool.com/earnings/call-transcripts/2020/05/07/li......
Digized on seq adds spiking in Q1: https://boards.fool.com/no-problem-i-added-some-more-today-a......
gmcnatt take: https://boards.fool.com/matt-already-pointed-out-but-worth-r......
AnalogKid take: https://boards.fool.com/i-own-a-large-chunk-of-lvgo-it39s-ac......
AnalogKid on moat: https://boards.fool.com/quotwhat-exactly-is-livongo39s-compe...... [under-rated post!]

Revenue 68.8M +114.6%, +27% seq !!
EVA (Est Value of Agreements) 89M +85%
Adj Op Inc 2.5M (vs -8M) swung pos
... margin +3.7% (vs -28.9%) !! +3260 bps
Adj Gross Margin 74.4% +330bps, -548bps seq
Adj EBITA 3.8M (vs -9.2M) swung pos
Adj EPS 0.03 (vs -0.49) swung pos
Opex 57.5M +50%
... 23% of rev -2100bps !!
CFFO -10.4M (vs -25.2M)
FCF -13.5M (vs -26.8M)
... margin -19.6% (vs -83.6%)
Cash 368M
Custs 1252 +77% !!, +44% seq
- Diabetes Members 328K +100% !!, +32% seq
$NER 110%

* 18% of clients have >1 solution
* services are more vital under COVID-19 pandemic, as chronic disease sufferers are so at risk (78% of COVID-19 ICU visits were from those having pre-existing or chronic conditions)
* added new solutions for Diabetes Prevention and Behavioral Health
* new modules for to manage stress & anxiety from COVID-19 only 3% of BH content but driving 25% of member views
* partnered with Dexcom to hook into their G6 glucose monitor https://www2.livongo.com/news/livongo-and-dexcom-partner-to-......
* partnered with Prognos Health to aggregate clinical lab data (opt-in program over members in partner labs) https://ir.livongo.com/news-releases/news-release-details/li......
* first provider selected into new curated healthcare platform Welltok from the Health Transformation Alliance (HTA) https://www.prnewswire.com/news-releases/the-health-transfor......
* major new cust Kaiser Permanente, signed up for Behavioral Health
* major new cust Govt Empl Health Assoc non-profit provider, signed multi-condition contract (largest ever) to cover their 2M members
* FDA granted emergency period for in-patient facilities to use LVGO's diabetes meter

Investor slide deck: https://ir.livongo.com/static-files/9d0d9694-2ab8-4699-be48-......
*328k diabetes members, vs 31.4M total
* 500k new diabetes diagnoses per yr
* 1252 clients +44% QoQ
* Q120 rev 68.8M +115%
* $NER 110%

My stance: I now own Livongo. This is not a biotech hinging on a binary outcome -- this is a med-tech company using hardware and ML/AI to improve lives, by managing a user's existing health condition on their ever growing "Applied Health Signals" platform. They are gaining customers at a huge rate, likely due to their heavy focus on proving ROI for companies and healthcare providers. I had them on watch list a while but am always drawn to those pesky enterprise SaaS providers over it. However, these numbers from the current Q are too good to pass up. I wish I would have acted faster (before the massive rise over past few weeks), but there is no better time than now to buy in to their continued execution from here.

[I'd really like to thank Saul's teachings for this shift in my investing behavior. As a contrast, my typical reaction to a price rocketing up after stellar earnings is "I'll just wait til it has a FUD price stumble and get in then" -- which then is a moment that never comes (or does and I'm not paying attn).]

Look at top line revenue growth in tandem with the massive drop in opex as a % of rev, as a perfect example of what we call OPERATIONAL LEVERAGE. The company is massively ramping top line, while drastically reducing the expenses needed to generate that hugely increasing revenue. I like seeing this very, very much -- so much so that I cannot put off owning this company any longer. This leverage then leads to all the bottom line metrics swinging positive last Q and this Q. Op and Cash flow margins all trending the right way.

It's a smallish position, as ultimately I am not sure how far LVGO can go (customer-wise), and unlike enterprise SaaS providers, scaling up covered members has its limits with its platform. There is a process involved, so they have to SLOW the on-boarding of new members in order to temper it's own platform growth! [If that is the extent of its "problems" here ... sign me up.] So far, their game plan (of getting more and more customers that are covering their members) has been stellar. More diseases & conditions can be added from here, and every bit of data they are collecting only strengthens the ML-driven system's power. It's not much of a moat (others can and are capturing their members' data and building ML engines over it), but their experience in this and first-mover advantage has really created a nice core platform that can only expand from here as they become the go-to market leader in this new frontier.

CEO: In particular, we believe remote monitoring is rapidly becoming the new standard in health and care. Livongo's connected technology allows our members to track vital signs of interest in maintaining health. ... There is no question in our mind that this pandemic has accelerated a more extensive virtual care delivery model. Remote monitoring is here to stay, and we expect it to become the standard of care for the most vulnerable and expensive populations.

I expect lumpiness from here, as customer sign-ups & member on-boarding waxes and wanes. If they show signs of expanding into new conditions to cover, I would likely increase my position from here. Clearly it's a new reality from this pandemic, and the populace has now had a sea change in their options of 'tele-health' vs in-person visits. This is a great trend, and LVGO is at the forefront. I like that, tech-wise, the sky is the limit in what they can cover to help members manage their own health. And I expect this company to continue tying their platform into more and more to smart-watch and medical monitoring devices from here.


-muji
long LVGO 3.5% (so far)

——————

END MUJI’s review


NEVERMIND that they just raised Q2 guidance from $73-75 million to $86-87 million! 113% revenue growth vs 83% revenue growth previously forecasted

COVID caused an acceleration of many things. Cloud adoption, remote work, and telehealth. Why go through the pain in the ass of getting hospitalized if you can avoid it? Though, admittedly I’ve taken care of patients who just enjoy the attention and turkey sandwiches and sprite we can provide at the hospital. Yum!

What exactly is a whole person platform? The term is laughable.
This is a common term in healthcare. Just google doctor of osteopathy (DO). What I take them to mean by this is they offer solutions for diabetes, hypertension, and mental health.

Not really even sure "behavioral health" is a term with any actual meaning. Is there anyone left on planet Earth who doesn't know we should sleep 8 hours, drink water, eat lean proteins, veggies, work out and spend time in nature? In a video on their site they talk about treating the whole person and mention that they could be dealing with "socio-economic" factors. So if a person is out of work, has marital difficulties and lives in a high crime area with limited health resources, the Livongo "whole person platform" does exactly what?

Yikes okay. Behavioral health is common terminology in healthcare and encompasses mental as well as physical health. Especially mental health which is an underserved population. If behavioral health was such common sense, we wouldn’t have as much of a homeless population, people on selective serotonin re-uptake inhibitors, or people committing suicide. We would have far lower obesity and diabetes rates because people would do the right thing and eat the right thing.

Individuals perform better when they are held accountable. THIS is common sense. Why has Peloton done so well? People haven’t been able to go to health clubs and gyms where there’s a social aspect and they’re held accountable by their peers. Instead they’re now held accountable by their peers and lifestyle coaches with the added bonus of doing it from home. Oh wait, this also sounds like Livongo.



I won’t pretend to know the tactics of Livongo’s sales team or the future or the end result of Livongo’s game, but it sounds way less far-fetched than you are making it out to be. If they do “badger” clients, it is probably with some good reason as I’ve described above.

I don't doubt Livongo's ability to sell to companies and jack revenue for now and maybe in the next few years. I doubt their ability to help masses of people actually improve their behavior. Modifying human behavior is incredibly difficult. Shockingly so. For example, I listened to the founder of Duck Duck Go on the Invest Like the Best podcast and thought it a no-brainer to have more privacy in my searches. But til I actually downloaded the app and started using it took forever. And it was literally the easiest thing to do in the world.

This is the most sensible point you made in this post. It is EXTREMELY hard to modify behavior. We are prone to the status quo and we fall into habits. We are inclined to do what requires the least effort. (Thank Jesus this board is NOT like that). Look at Apple watches and FitBit’s. Those things alert you if you haven’t moved enough, essentially modifying behavior. Everyone’s talking about “getting their steps in”.

I am intrigued by LVGO based solely on the TAM of diabetes and their <1% crack into the TAM thus far. They save employers and insurers money and ultimately should reduce healthcare costs in general. It is the long-term effects of obesity, diabetes, and hypertension that tax the healthcare system the greatest.


Respectfully,

HugoStocklitz…
Long LVGO since $27 (it has organically become my largest holding)
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