Livongo posts 'good enough' first earnings since IPO, but stock tanks

Dive Brief:

Livongo Health on Thursday announced its revenues rose 156% to nearly $41 million during the second quarter, its first earnings report since raising $355 million in an IPO in July. But GAAP earnings per share were a loss of 76 cents, 16 cents lower than analysts had expected.
The digital health company, one of a few to recently go public after a more than two-year IPO drought for the sector, has created a chronic disease management platform incorporating connected devices, AI technology and personalized coaching to assist users with diabetes, prediabetes, hypertension, weight management and behavioral health needs.
Livongo Executive Chairman Glen Tullman said the Livongo for Diabetes product will continue to serve as the company's primary revenue driver in the near term. Management expects full-year revenue to fall between $159 million and $162 million, well over double its revenue of $68.4 million in 2018.

Dive Insight:

Livongo pitches its Applied Health Signals platform and services to employers as a way to reduce healthcare costs incurred by individuals living with common chronic diseases. A 10,000-participant Journal of Medical Economics study funded by an Eli Lilly-Livongo research collaboration found access to the platform saved $88 per diabetes member per month.

As of June 30, the company had 720 clients, up from the 679 it reported in its S-1 filing. Most clients are Fortune 500 companies, management said. Total contract value is currently worth $74.2 million, an increase of almost $50 million from last year. Most contracts last one to three years.

Prior to investors sending Livongo's share price down more than 20% in morning trading, SVB Leerink's Daniel Grosslight wrote in a note that while "this is by no means a blow-out quarter," the firm sees Livongo's quarter as "good enough" in light of an "unwarranted" 30% stock reversal since July 31.

"[W]e are encouraged by the strong revenue guidance and have further conviction that LVGO will be able to hit its substantial growth ramp communicated during the IPO roadshow," Grosslight wrote.

Members using the diabetes program totaled nearly 193,000, a 140% year-over-year increase, Livongo reported. Tullman said the company believes it currently penetrates under 1% of the U.S. diabetes market. Executives highlighted the fact that Livongo's subscription model means adoption of its platform is not tied to a benefits cycle, allowing for initiation of new revenue streams year round.